Blue Cross slapped on the wrist for cancelling policies

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Blue Cross slapped on the wrist for cancelling policies

Friday March 23, 9:06 AM EDT

LOS ANGELES (AP) — State regulators fined California's largest health insurance provider $1 million for violating state law, saying an investigation found that the company systematically dropped policyholders after they became sick or pregnant.

Officials with the Department of Managed Health Care said they hoped the fine would prompt changes at Blue Cross of California, and they plan similar investigations into other health insurance providers in the state, the Los Angeles Times reported Friday.

The department's findings could expose Blue Cross to legal liability in dozens of lawsuits filed by consumers who allege their policies were illegally canceled.

The investigation found that Blue Cross used computer programs and a dedicated department to cancel the policies of pregnant women and the chronically ill regardless of whether they lied on their applications about pre-existing medical conditions — a standard required by state law.


Regulators examined 90 randomly selected policy cancellations, out of about 1,000 a year in California, and found violations in each one.

Blue Cross already is appealing a $200,000 fine the department imposed in September for rescinding one person's policy, the first in an individual rescission case.

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WellPoint Inc., Blue Cross' Indianapolis-based parent company, disputed the findings in a detailed response filed with the department.

"Blue Cross has a rigorous and thoughtful process it follows in every case where rescission review occurs because health insurance is so critically important to each and every one of our members," the company said in a statement Thursday.

Consumer advocates praised the state for its report but questioned whether the fine was substantial enough to affect WellPoint, which earned $3.09 billion in net profit last year on revenues of $56.95 billion.

"A $1 million fine for 100 cases makes business sense for Blue Cross because of the profit levels of the company," said Jerry Flanagan, a patient advocate with the Foundation for Consumer and Taxpayer Rights. "Blue Cross is reaping millions in savings by not paying for care."

At issue are individual policies for people not covered through employers or other group plans. Insurers cannot deny coverage to members of group plans, but state law allows individual policies to be denied for pre-existing medical conditions.


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The state investigation was fueled by a series of stories in the Los Angeles Times. The articles disclosed that Blue Cross, along with other insurers such as Blue Shield of California and Kaiser Permanente, routinely canceled coverage of individual policyholders whose medical care resulted in large claims, prompting some to lose their homes or suffer other hardships.


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