L.A. City Attorney Takes On Blue Shield of California for Rescissions
On Wednesday, Los Angeles City Attorney Rocky Delgadillo filed a lawsuit against Blue Shield of California alleging that the not-for-profit insurer has improperly rescinded coverage for more than 850 members since 2002, the Los Angeles Times reports.
The suit also charges Blue Shield with false advertising, arguing that the company often withdrew coverage when substantial care was needed (Girion, Los Angeles Times, 7/17).
Delgadillo alleges that Blue Shield maintained a secret business unit that worked to cancel coverage after members submitted claims for ongoing or particularly high expenses (Orlov, Los Angeles Daily News, 7/16).
The city attorney says the suit affects more than 400,000 people who bought Blue Shield policies because they were not told coverage could be canceled retroactively. Delgadillo estimates that fines and penalties could amount to more than $1 billion in the matter (George, Los Angeles Daily Journal, 7/17).
In addition, the suit seeks to require Blue Shield to reinstate coverage for all people whose Blue Shield coverage was canceled improperly (Los Angeles Daily News, 7/17).
William Shernoff, an attorney for plaintiffs in class-action suits against insurers, is collaborating with Delgadillo on the suit.
Delgadillo has filed similar actions against Anthem Blue Cross and Health Net.
Tom Epstein, a spokesperson for the insurer, described the suit as a "cheap political stunt" and said the case had no merit.
In addition, Epstein criticized Delgadillo for working with plaintiffs' attorneys on the case, adding that Delgadillo did not consult with anyone at Blue Shield on the matter or request any information from the insurer.
Epstein said that Blue Shield has "always been careful in our underwriting of health coverage policies and in our investigations of the rare contracts that are rescinded," noting that the company has rescinded fewer than 1% of individual and family policies (Los Angeles Times, 7/17).
In addition, Delgadillo criticized the Departments of Managed Health Care and Insurance for not taking stronger action on rescissions, saying, "The regulators are not standing up for the people, so we are" (Los Angeles Daily Journal, 7/17).
DMHC Director Cindy Ehnes rejected the criticism, pointing to agreements that the state has reached with insurers to reinstate coverage for more than 1,200 Californians (Los Angeles Times, 7/17).