Blue Shield Hit With Suit Seeking To Bar Policy Cancellations
Blue Shield of California is facing an lawsuit seeking to bar the insurer from canceling individual policies after members submit treatment claims, the Los Angeles Times reports. The suit, filed on Thursday, is noteworthy in that it goes beyond seeking compensation for a member losing coverage and petitions for an injunction that could affect other insurers' practices.
Unlike group health insurance coverage, individual policies are issued based on an applicant's medical history.
Blue Shield acknowledges having cancelled about 300 policies over the past two years. Company representatives say the cancellations are permitted under California law, noting that state law permits insurers to rescind policies regardless of whether information left off applications is intentional or inadvertent.
Plaintiff's attorney William Shernoff said an injunction is appropriate because Blue Shield's actions are not consistent with recent statements by Department of Managed Health Care Director Cindy Ehnes that cancellations are justified only when an insurer can show that a member intentionally withheld or misrepresented information on an application for coverage.
The case arises from Blue Shield canceling a member's coverage when he submitted a claim for $9,000 after he was hospitalized for dehydration and gastroenteritis. Plaintiff's lawyers say that the hospital claim included a medical history indicating that the former member had experienced periods of diarrhea in the past, information he had not included in his coverage application.
Blue Shield cited the omission in its cancellation of the policy.
The filing of the case coincided with Insurance Commissioner Steve Poizner (R) for the first time announcing that his agency is reviewing Blue Shield's practices and that the insurance department would penalize any wrongdoing it uncovered.
A similar agency investigation of Blue Cross of California is pending.
Blue Shield spokespersons said that the review was routine and maintained that the insurance agency would not find any wrongdoing (Girion, Los Angeles Times, 2/16).