Blue Cross Mobilizing to Address Accusations of Illegal Policy Cancellations

By Marianne Madden

Published on September 20, 2006

Blue Cross, the state’s largest health insurer, maintains it did nothing wrong. It promised to create an ombudsman, revise its appeal process, and simplify application forms.

Several lawsuits have been filed by consumers – against Blue Cross and also its rival, Blue Shield of California. The plaintiffs bought individual health insurance policies that were later canceled because they made honest mistakes on the application or omitted information they thought was irrelevant.

The company’s actions come in the wake of an announcement from the state’s top HMO regulator, who announced she was ready to take action against the Blue Cross after a probe found that the company had broken a state law that bans HMOs from canceling policies unless policyholders willfully lied on their applications.

Blue Cross has one million Californians on individual policies that allow the HMO to deny individual coverage or charge higher premiums based on a patient’s medical conditions and history. Blue Cross insisted that it needs the ability to cancel policies as a safeguard against consumers making fraudulent claims about their health to gain coverage. However, the issue of fraud was not part of the reasoning behind the changes Blue Cross publicized. The company said that if every cancellation had to be coupled with a fraud investigation, the expense would drive up the cost of premiums.

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