Blue Cross of California was fined $1 million for violating state law by systematically dropping policyholders after they became sick or pregnant. An investigation by the state Department of Managed Health Care found that California’s largest health insurer used computer programs and a dedicated department to rescind the policies of pregnant women and the chronically ill regardless of whether they intentionally lied on their applications, a standard required by state law for canceling individual policies.
Regulators examined 90 cases randomly selected from the roughly 2,000 policies Blue Cross canceled in 2004 and 2005, and found violations in each one. "Rescinding healthcare coverage is a serious action, placing the enrollee at financial risk for the full amount of billed medical charges and potentially rendering the enrollee uninsurable," the department said in its report.
Blue Cross, a unit of Indianapolis-based WellPoint, disputed the findings in a detailed response filed with the department. The insurer reiterated that it follows "a rigorous and thoughtful" review process and that the vast majority of its cancellations "are unquestionably proper under any criteria."
Blue Cross is already appealing a $200,000 fine the department imposed in September 2006 for illegally canceling one member’s coverage, the first in an individual rescission case. The department said it plans to launch similar investigations into Kaiser Permanente next month and, then later, Blue Shield of California, Health Net and PacifiCare Health Systems.