LOS ANGELES, CA — California health insurance regulators are scrutinizing 1,770 patient policies canceled by Anthem Blue Cross to see if they can impose a penalty stiffer than a $1 million fine they announced but never enforced last year.

Each case of a canceled policy carries the possibility of a $200,000 maximum fine against the state’s largest insurer, which could dwarf the now-abandoned 2007 fine.

"The terrible practice of rescissions has caused irreparable harm to consumers by making some individuals responsible for large medical bills and hindering their ability to get and keep health coverage," said Cindy Ehnes, head of the Department of Managed Health Care. "Our goal is to fight for the consumer in each and every case and to use all enforcement authority available under state law."

In addition, Ehnes told The Associated Press on Monday that the state’s regulatory agency will also re-evaluate about 400 Blue Shield of California rescissions.

The renewed enforcement effort comes after the AP reported last week that the state didn’t pursue the announced fine against Anthem Blue Cross because it was intimidated by the insurer’s legal resources.

"The fines that were discussed several months ago, they really should only view those as a down payment on penalties for illegally taking people’s coverage away from them," said Daniel Zingale, an adviser to Gov. Arnold Schwarzenegger and former head of the regulatory agency.

The governor has spoken out sharply against rescissions, a practice that drops patients from their insurance policies when they try to make claims.

After announcing a million-dollar fine against Anthem Blue Cross in March 2007, regulators instead tried reach a negotiated settlement to reinstate health insurance policies but failed.

"We can bring the full force of fines, penalties and all enforcement powers of the state to protect the patients that (insurers) refused to voluntarily do right by," said Zingale.

Anthem Blue Cross and Blue Shield of California have joined forces in other states, but they are separate entities that have never partnered in California, said David Seldin, a spokesman for Blue Shield of California.

However, they struck similar notes in statements issued Monday, both calling for independent third parties to take a hand in deciding rescission cases.

In a statement, Anthem Blue Cross noted that during negotiations with the regulator they’d previously offered "at (the insurer’s) expense, expedited independent third-party reviews."

Similarly, Blue Shield of California’s statement said, "We support stronger consumer protections, including the right to appeal every rescission to an independent third party."

But state regulators should not to cede their power to those "kangaroo courts" because they too frequently side with insurers, said Jerry Flanagan, health advocate for Consumer Watchdog, a Santa Monica-based consumer advocacy group.

"We’ve been very critical of those closed-door proceedings, because the patient has to prove that the denied medical treatment was medically necessary, which is difficult for a lay person because there’s no medical expert that’s called in," Flanagan said.

Additionally, Anthem Blue Cross’ statement said the insurer had previously offered to reinstate health coverage for seven individuals.

"Announcing possible fines without knowing the facts or having the legal authority is regulatory grandstanding that accomplishes nothing for consumers," Blue Shield of California said in its statement.

The state department has reached agreements with Health Net of California, PacifiCare and Kaiser Permanente to restore coverage to consumers who were previously stripped of coverage.

But University of Pennsylvania professor of insurance law Tom Baker said, absent of comprehensive federal laws, state regulators regularly find themselves overmatched by the wealth and resources of companies that "are really national, if not global."

"California has one of the top insurance departments in the country. It’s large, it’s well-staffed, and it’s got a good reputation as being very professional," said Baker.

But some state regulators say increased federal oversight won’t help states be responsive.

"Because we are state-based, we have our hands on the pulse of what’s happening with our own consumers," said Kim Holland, the Oklahoma insurance commissioner and an executive committee member for the National Association of Insurance Commissioners.

Holland added that California’s problem with rescissions is "really not an issue in other states."

"It could be simply because of volume," Holland said.

In 2007, Anthem Blue Cross had more than 4.1 million enrollees in full service health plans in California, and Blue Shield of California had more than 2.6 million enrollees.