Santa Monica, CA — Governor Schwarzenegger and regulators announced a company-friendly settlement with Blue Shield today on the heels of a new lawsuit filed by the Los Angeles City Attorney that could cost the company $1 billion for retroactively canceling policies when patients got sick.  Today’s settlement would let the company off the hook with a $5 million penalty.

"The timing of today’s announcement is outrageous. The governor and regulators are obstructing justice by declaring the defendant ‘not guilty’ before the trial even begins," said Jerry Flanagan of Consumer Watchdog. "The governor said today that he needs the legislature’s help to stand up to the health insurance companies.  But he doesn’t need the legislature to tell him that no innocent patient should ever lose their health insurance again.  Its the governor’s health insurance buddies that want the politicians in Sacramento to write new law that vindicates the very practices the courts have found to be illegal."

Following several years of public and media scrutiny over retroactive policy cancellations — so called "rescissions" — that often leave patients uninsured, uninsurable and hundreds of thousands of dollars in medical debt, insurers have pushed for policy changes designed to shield them from future legal liability and make it difficult for patients to recover unpaid medical bills.  

Recent settlements announced recently by the Schwarzenegger Administration’s Department of Managed Health Care (DMHC) against Health Net, Kaiser, and PacifiCare purport to allow patients to recover unpaid medical bills but would allow insurers in many cases to evade any payment resulting from policy cancellations in closed-door arbitration proceedings where patients face steep odds against insurance company lawyers.

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