LOS ANGELES, CA — Though state regulators fined Blue Cross $1 million last year for improperly dropping policyholders after they fell ill, they stopped short of helping patients get their coverage back.
Now, consumer advocates are urging state regulators to force Blue Cross to reinstate at least 90 patients. They also are challenging regulators to show legal justification if they refuse to do so.
Wrongful Cancellations
In 2007, when state regulators investigated Blue Cross, they randomly selected 90 cases from 1,000 complaints. All 90 were deemed wrongful cancellations.
One year later, those 90 patients – and the thousands more who complain Blue Cross illegally dropped them – are still waiting for the reinstatement of their medical coverage.
In a letter Thursday, advocacy group Consumer Watchdog asked the state Department of Managed Health Care, which regulates HMOs, to force Blue Cross to reinstate the 90 patients it decided were wrongfully dropped.
Although the department fined Blue Cross $1 million last year for the 90 violations, it stopped short of offering any individual relief to patients. Blue Cross is in the process of appealing that fine.
This month, the company also changed its name from Blue Cross of California to Anthem Blue Cross, advertising itself as "an old friend with a new name." Despite the switch, the company’s legal woes continue.
Rocky Steps In
Today, City Attorney Rocky Delgadillo is expected to announce he is suing Blue Cross for a slew of violations relating to policy cancellations.
In addition, two major class actions against Blue Cross over rescissions, which partly spurred investigations of the company in the first place, are the subject of new settlement negotiations this week.
The push to reinstate consumers who had their coverage revoked is the latest tussle between advocates for tougher sanctions on HMOs and state regulators.
Jerry Flanagan, health policy director of Consumer Watchdog, said the Department of Managed Health Care is legally obligated to intervene.
"Not only is the rescinded patient left uninsured and often hundreds of thousands of dollars in medical debt, but he is also virtually uninsurable in the individual market," Flanagan wrote in a letter to the department’s director, Cindy Ehnes.
"If your decision is to not order immediate reinstatement, please respond by providing specific statutory authority for that decision," Flanagan wrote. He has given the department 10 days to respond.
Some key state lawmakers said they also were dismayed at regulators for dragging their feet.
"I have deep concerns about the department not acting," said Sen. Sheila Kuehl, D-Santa Monica, who sits on the Senate’s Health Committee. "They have the authority to reinstate the people whose rescissions they found to be illegal. I think they should immediately do that."
Lynne Randolph, a spokeswoman for the Department of Managed Health Care, said in an interview this week that regulators can only reinstate patients if they petition as individuals. That was not the purpose of the 2007 investigation of Blue Cross, she said.
"That type of in-depth, individual investigation into the details of each case – the department never said that was the focus," Randolph said.
She said regulators had been focusing instead on system-wide rescission violations and would in coming weeks release their final report, which would include recommendations for patients who have lost their medical coverage.
Randolph refused to comment on whether the department is obligated to help reinstate dropped patients.
Peggy Hinz, a spokeswoman for Blue Cross, said the company did not believe the 90 cases were illegal rescissions. Hinz also said she was "not aware of a recent push to reinstate the 90 members."
Such a move would be nearly unprecedented.
The department has forced an HMO to reinstate a rescinded patient only once before in recent years.
In October 2006, Amy Dobberteen, deputy director of the Department of Managed Health Care, ordered Kaiser Permanente to return medical coverage to a woman whose policy was wrongly rescinded in 2004. As authority, Dobberteen cited provisions of the Knox-Keene Health Care Service Plan Act.
But the push by advocates to reinstate Blue Cross members has inspired new legal debate over whether the department’s authority should extend over such a widespread basis.
Talk of reinstatement comes in the same week that attorneys behind two major class actions against Blue Cross for improper rescissions are meeting behind closed doors to renegotiate a settlement. An earlier agreement apparently dissolved. Lawyers for Blue Cross in January filed a motion to dismiss the settlement. Other plaintiffs’ lawyers had slammed the settlement for not mentioning reinstatement.
William M. Shernoff, managing partner at Shernoff Bidart & Darras in Claremont who had negotiated the settlement, said he now plans to demand strict reinstatement for all members of the class.
Recent appellate court rulings, including Hailey v. Blue Shield and Ticconi v. Blue Shield, as well as a $9.36 million arbitration award Shernoff won for a Health Net policyholder in February, indicate the tables have turned, he said.
"We are going to be pushing reinstatement for everybody who has had their health insurance canceled improperly and we understand that includes more than 6,000 people," Shernoff said.
He and other lawyers involved said reinstatement should be dealt with by litigation, not piecemeal efforts by the Department of Managed Health Care.
"The problem I see is, if the regulators stop at 90 [policyholders], are they implying that the others were validly rescinded?" Shernoff said.
Robert S. Gianelli of Gianelli & Morris in Los Angeles, who is handling the other class action against Blue Cross, said he would not consider settling the case unless it had sharper teeth than the one negotiated by Shernoff last year.
"It is going to be difficult to sell any settlement unless they [Blue Cross] acknowledge that there will be some sort of reinstatement," Gianelli said. "We are looking for a much richer package."
Settlement talks involving the two class actions, as well as a handful of related rescission cases, began on Tuesday and are continuing today before Los Angeles County Superior Court Judge Peter D. Lichtman.
