Blue Shield of California has been fined $12.6 million by the California Insurance commissioner for alleged violations of policy cancellation rules and irresponsible claims processing, including failing to pay claims on a timely basis and mishandling consumer appeals.
The actions stem from a market conduct exam of the not-for-profit insurer by the insurance commissioner's office using data from 2004 and 2005. The inquiry showed more than 1,200 violations of the law, half of which were related to improper rescissions, or canceling individual policies.
In a strongly worded statement, Duncan Ross, president of Blue Shield of California Life & Health Insurance Co., called the actions a radical departure from the departments widely accepted and long-standing interpretation of the law. He added that the insurer would vigorously fight the excessive penalties.
The San Francisco-based insurer, with 3.2 million members, has already refunded $1 million in claims, according to the commissioner's office.
"Blue Shield committed serious violations that completely undermine the public trust in our healthcare delivery system," California Insurance Commissioner Steve Poizner said in a written statement. "Let this be a message to all health insurers that we will not tolerate irresponsible rescissions and shoddy claims handling." -- by Rebecca Vesely