State Faults Blue Cross Cancellation Policies; Fine Planned
Blue Cross of California improperly canceled individual health insurance policies after some members became pregnant or sought medical treatment for chronic conditions, an investigation by the Department of Managed Health Care concluded, the Los Angeles Times reports. DMHC on Thursday notified Blue Cross of the agency's intent to file an accusation against the insurer and issue a $1 million fine in the case.
Under California law, insurers must show that policyholders intentionally misrepresented their medical history on their applications for coverage to cancel policies.
State investigators reviewed 90 cases from 2004 to 2006 in which Blue Cross rescinded health insurance coverage for individual members and found that the company had breached the law in each case. The report found that Blue Cross used computer programs and maintained a dedicated department to review policies of people with chronic illnesses and women who become pregnant to consider whether coverage could be canceled.
Blue Cross cancels about 1,000 policies annually in California.
WellPoint, Blue Cross' parent company, said the state report is based on "factual errors" and asserted that the "vast majority" of Blue Cross' policy cancellations are proper. Moreover, the company says it does not agree with DMHC's interpretation of the law on individual cancellations.
In addition, Shannon Troughton, a spokesperson for WellPoint, said the agency indicated that Blue Cross would have an opportunity to respond to the allegations before the accusation and fine are filed formally.
Department officials also are considering several individual complaints against Blue Cross, with fines and mandated coverage reinstatements possible in each of those cases.
In addition, DMHC Secretary Cindy Ehnes said the department is planning to open similar investigations of Kaiser Permanente, Blue Shield of California, HealthNet and PacifiCare (Girion, Los Angeles Times, 3/23).