Blue Shield of CA sued over cancellation

In a suit bringing more attention to an already-hot legal battle, Blue Shield of California has been sued by a college student whose coverage was dropped after he was hospitalized. The student has asked a Los Angeles judge to issue an injunction making the health plan stop canceling policies after people get sick and submit claims, as well as reinstate his coverage. In filing his complaint, the student only adds another stone to the pile falling on health insurers in California, many of whom have been accused of following a policy euphemistically known as "post-claims underwriting."

While consumers who obtain coverage through larger groups don't typically face revocation, consumers who buy individual policies are at far greater risk. Critics say many of the state's health plans are revoking individual policies on extremely shaky grounds, such as canceling policies for unintentional mistakes on an application form. Dozens of suits have been filed against Blue Shield and other California plans arguing that the plans are using flimsy pretexts to drop higher-cost policyholders.

Concerned about the possibility that plans are acting illegally, state Insurance Commissioner Steve Poizner has gone public with the news that his office is reviewing Blue Shield's cancellation practices. Both Blue Shield and Blue Cross, meanwhile, stand by their claim that revocations are justified when policyholders leave out information on preexisting conditions--intentionally or otherwise. They're taking this position despite the fact that Cindy Ehnes, director of the state's Department of Managed Health Care, recently made public statements emphasizing that health plans may only revoke policies if a policyholder intentionally lied on their application.

To get more detail on the revocation issue:
- check out this piece in the Los Angeles Times