THE SAN FRANCISCO CHRONICLE
State regulators have fined Blue Cross of California $200,000 for illegally dropping a member who failed to disclose surgery performed more than 20 years before.
The case shows how Blue Cross and other insurers sometimes improperly determine that people concealed health information and then rescind coverage to avoid paying claims, said Cindy Ehnes, director of the state Department of Managed Health Care, which regulates health maintenance organizations.
“Consumers have to have the peace of mind their health coverage won’t be rescinded when they make a claim,” Ehnes said. “Many patients who are wrongly rescinded can’t obtain coverage because of the black eye on their record.”
Blue Cross officials denied wrongdoing and said they were disappointed by the agency’s action on Thursday. They added they are trying to resolve the case that prompted the fine.
“This action is based solely on an individual case and is not indicative of our usual processes,” said Robert Alaniz, a spokesman for Blue Cross. “We maintain the vast majority of rescissions to date are proper.”
The state HMO regulator said legislative changes may be necessary to protect consumers from having their insurance policies canceled without evidence they knowingly withheld important health information. Insurers stress that they need to be able to rescind policies to protect against fraud.
The managed health care department is also investigating Kaiser Permanente and Blue Shield of California to determine whether they committed similar violations. Ehnes did not rule out additional fines against Blue Cross or other companies.
Earlier this week, Blue Cross said it would change the way it handles health applications and disputes over rescission cases. The insurer has been the subject of consumer complaints and lawsuits accusing it of illegally dumping patients, leaving them with thousands of dollars in medical bills.
The lawsuits, filed in recent months, all involve people with individual rather than group coverage. Individual policies are subject to medical underwriting, meaning applicants must disclose their health history to be accepted for coverage. State officials said many applications are confusing and require people to remember insignificant health details.
In modifying its practices on pre-existing health conditions, Blue Cross will simplify applications, revise its appeal process and appoint a staff ombudsman to represent consumers in disputes.
In the case that led to Thursday’s fine, Blue Cross dropped an unidentified Southern Californian woman in 2005 for failing to disclose she had had surgery for acid reflux disease 23 years before.
After being diagnosed with a kidney dysfunction, Blue Cross reviewed the patient’s history and revoked her coverage for failing to disclose the acid reflux procedure. The patient’s doctor said the surgery had no bearing on her current condition.
Some consumer advocacy groups were underwhelmed by the state’s actions.
“A single fine of $200,000 to a company that made $185 million in profit in just one quarter this year is chump change and not enough to bring about the type of systemic reform we need,” said Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights.
