CA seeks $12.6 million fine for Blue Shield

The state of California's insurance chief is seeking a $12.6 million fine against Blue Shield of California, accusing it of 1,262 claims-handling law violations and regs and more than 200 improper policy cancellations. This follows a similar action earlier this year by the state's Department of Managed Health Care, which fined Blue Cross $1 million on similar allegations.

About half of the violations cited by the commissioner are for allegedly improper policy cancellation practices, under which the health plan retroactively rescinds individual policies (and refuses to pay filed claims) if it discovers what it considers misstatements on applications. The insurance authorities contend that rather than make these cancellations, Blue Shield must screen applications better before it issues the policies. The state also accuses Blue Shield of deliberately paying claims slowly, failing to pay interest owed on claims and mismanaging member appeals.

This issue, clearly, is not going away. Rather than changing their approach wholesale, plans like Blue Shield, Blue Cross and Health Net are digging in their heels and defending their (questionable) interpretation of cancellation rules. With so much at stake, and tensions mounting, expect some even higher drama on this topic in '08.

To find out more about this increasingly heated dispute:
- read this Los Angeles Times article

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Blue Cross of California settles plan-cancellation suits. Report
Kaiser pushes for policy cancellation rules. Report