Amount is Less Than Total Blue Cross Political Contributions to Governor, Notes GroupÂ
Santa Monica, CA — Consumer advocates wrote inÂ lettersÂ sent todayÂ to state regulatorsÂ and insurance executivesÂ that a single $200,000 fine issuedÂ against Blue Cross for illegally canceling health insurance policies was far too little to discourage the industry from continuing the highly profitable anti-patient practice.Â The Foundation for Taxpayer and Consumers Rights (FTCR) estimated that illegal policy cancellations could easily number in the thousands.
In the letterÂ to regulators, FTCR wrote:
“Dumping patients after they had paid premiums and been approved for medical treatments makes a mockery of insurance and must be corrected.Â Â AÂ $200,000 fine is pocket change for a company that recorded a $185 million profit in the second quarter of 2006 alone. In addition to requiring fines for each of the illegal policy cancellations you must require all HMOs and health insurers to adopt specific policy changes necessary to protect California patients.”
FTCR said that regulators mustÂ demand restitution for all patients whose policies were wrongfully terminated, require insurers to pay fines for eachÂ inappropriately canceled policy,Â audit all cancellations completed to date, and make all information about theÂ cancellationsÂ available to the public.
Gov. ArnoldÂ Schwarzenegger, whose administration oversees the Department of Managed Health Care (DMHC), which announced the fine this morning, has received $255,800 in campaign contributions from Blue Cross, its corporate parent WellPoint andÂ top executives.Â Â FTCR’s letter to the DMHC is available at:Â http://www.ConsumerWatchdog.org/resources/EhnesRescissions.pdf.
According to depositions in previous cases against Blue Cross, 1,500 policies were reviewed each week by theÂ insurer’sÂ “retroactive review department.” FTCR said that the first step to determining appropriate fines and policy fixes is to make all information about the rescissions,Â including the number of policies canceled and the circumstances of each,Â available to the public.
In the letter, FTCR wrote:Â
“First and foremost, the public deserves to know how many policies were retroactively canceled.Â We know from court depositions that 1,500 policies were reviewed each week by Blue Cross‘s “retroactive review department” — that’s almost 80,000 per year.Â How many were rescinded? One quarter? Half? How many were, like those complaints under review, revoked without cause?”
In letters sent today to the DMHC and Blue Cross executives, FTCR called for the following:
1. Dismantling of “Retroactive Rescission Departments”
State law clearly bars insurers from revoking coverage after a policy has been sold based on information in a patient’s medical records or submitted on an enrollment application.Â Reviews of medical records must be reviewed prior to enrollment, not afterward. Yet, the so-called “retroactive rescission departments” at Blue Cross and other insurers are specifically designed to do just that.Â These departments must be dismantled immediately.
2. Independent Determination of “Willful Misrepresentation” and “Actual Intent to Deceive”
The key to determining if a retroactive cancellation is warranted is whether a patient intentionally meant to deceive an insurer.Â Neither Blue Cross, nor any other insurer, should be the arbiter of the patient’s intent given the significant financial incentive for insurers to deny as many cases as possible.Â Therefore, independent state regulators must review each case before rescissions are carried out.Â The Department of Managed Health Care must also audit all rescissions completed to date and demand restitution and require penalties for eachÂ inappropriately canceled policy. Information about these rescissions must be made available to the public.
3. Issuance of Clear & Understandable Applications
Blue Cross‘s applications are designed to deceive and confuse patients.Â Double-speak and overly broad clauses in these forms trap patients who often do not know what information is in their medical records, and could neither understand it nor accurately report it if they did.Â The forms themselves appear to be part of a strategy to invoke an omission on the enrollment form by requesting information over such a long period and in such a broad detail that no patient could be expected to remember or report it.Â State law already requires enrollment forms to be clear and understandable.Â This fix is long overdue.
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The Foundation for Taxpayer and Consumer Rights is California’s leading public interest watchdog.Â For more information visit us on the web at:Â http://www.ConsumerWatchdog.org.