Blue Shield of California is paying $2 million to settle allegations that it improperly stopped covering members when they became sick and required expensive treatment.
The insurer decided to settle a 2008 suit, in which the Los Angeles City Attorney's Office alleged Blue Shield's recission practices led to more than 1,000 members losing their coverage to avoid the continuing litigation costs, the Los Angeles Times reports.
Under the settlement, Blue Shield is banned from rescinding coverage unless it can prove someone committed fraud or misrepresented health facts on an insurance application. It also bans Blue Shield rescission investigators from receiving commissions based on the number of rescissions they issue. Reviewers still can receive bonuses for efficient investigations, according to the Contra Costa Times.
The settlement also requires Blue Shield to submit a revised health insurance application form that includes specific language, the LA Times notes.
Blue Shield noted that, despite settling the lawsuit, it accepts no blame or wrongdoing related to the recission accusations, reports the Associated Press.
"Our process meets or exceeds all legal and regulatory requirements," Blue Shield spokesperson Steve Shivinsky said. "In every instance, we provide immediate notice, ensure multiple layers of review, involve a medical director in the decision, give members an opportunity to provide additional information before we take any action, and follow the guidance of an independent third party review."