The State of California's Department of Managed Health Care has reached an agreement with two of the larger Health Insurance Companies in California, Blue Cross and Blue Shield, to resolve complaints investigated by the Department about the Companies' alleged "post-claims underwriting" practices. Lisa Girion, "California Fines Two Health Plans $13 Million" (Los Angeles Times Online, Friday, July 18, 2008). By those practices the Health Insurance Companies allegedly attempted to rescind Health Insurance Policies for supposed misrepresentations made in the application at the beginning of the underwriting process, after the Policyholder made a claim for a lot of Health Insurance Benefits under the Policy. The agreement includes these features:
1. Payment of a fine. The two Health Insurance Companies together agreed to pay $13,000,000.00 or $13 Million in fines, $10 Million by Blue Cross and $3 Million by Blue Shield.
2. Payment of amounts which most lawyers would view as "consequential damages" or money for damages that are a consequence of the alleged unlawful actions. No amount was reported, but instead a "process" was agreed to by which former Policyholders could "recover medical expenses they paid out of pocket after they were dropped as well as other damages, such as homes or businesses that were lost because unpaid medical debts ruined the former members' [i.e., Policyholders'] creditworthiness."
3. Offer of new policies. Both Blue Cross and Blue Shield agreed to offer new policies to certain of their Policyholders whom they canceled since 2004.
4. Finally, both Companies agreed to write new application forms that would somehow be "easier for consumers to understand."
The Director of the California Department of Managed Health Care is quoted in the article as saying that the fine is a record. On the other hand, the Director of healthcare policy for "Consumer Watchdog" is also quoted in the article as saying that the agreement is "'obstructing justice'".
In related developments, the Los Angeles City Attorney is pursuing his own previously filed lawsuit based on accusations of false advertising, unfair practices, and using intentionally misleading application forms, also reported by Lisa Girion, "Blue Shield Sued for Allegedly Lying About its Coverage" (Los Angeles Times Online, Thursday, July 17, 2008). The president of the California Medical Association and the president-elect of the Los Angeles County Medical Association are both identified in this article as praising the efforts represented by this lawsuit against these alleged rescission practices directed at Health Insurance Policies. On the other hand, a spokesperson for Blue Shield announced that it has 400,000 "individual policyholders," that Blue Shield has paid "nearly $4 billion in claims for those policyholders" since 2002, that Blue Shield's application forms "were reviewed and approved by two state regulators," and that its investigative and underwriting practices are in essence top notch, which he said, "'is why we have rescinded a fraction of 1% of individual and family policies.'"
Not to be outdone, perhaps, the United States Congress has reportedly scheduled hearings on the accusations that Health Insurance Companies engage in post-claims underwriting or rescission of certain Health Insurance Policies. Avram Goldstein, "U.S. to Probe Health Plans That Cancel Sick Members (Update 3)" (Bloomberg.com, Thursday, July 17, 2008). It is noteworthy that, according to this article, the Health Insurance Policies that are the alleged targets of rescission are only Health Insurance Policies issued to individual persons.
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