Blue Shield Of California Faces Lawsuit Over Cancellation Of Individual Health Insurance Policies

Main Category: Health Insurance / Medical Insurance
Also Included In: Litigation / Medical Malpractice
Article Date: 21 Feb 2007 - 3:00 PDT

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Blue Shield of California faces a lawsuit that seeks to prevent the cancellation of individual health insurance policies after members who become ill and submit claims for treatment, the Los Angeles Times reports. According to the Times, the lawsuit, filed on Thursday, is "unusual" because "it seeks to force Blue Shield to stop the practice, rather than demand compensation for a policyholder who lost coverage." The lawsuit might "have a wide effect if it succeeds because Blue Shield alone has acknowledged canceling about 300 policies in the last two years," and the "outcome also could influence other insurers that collectively have revoked thousands of policies in recent years," the Times reports. The state insurance department is investigating the cancellation practices of Blue Shield and also Blue Cross of California. Individual health insurance policies differ from group policies because health insurers typically issue individual policies based on the health status of applicants and their disclosure of pre-existing medical conditions. According to the Times, Blue Shield and Blue Cross officials argue that cancellations of coverage are justified if policyholders omit information about pre-existing conditions in their coverage applications. Blue Shield officials said that California law allows health insurers to cancel individual health insurance policies regardless of whether information omitted from applications is intentional or not. However, according to plaintiff attorney William Shernoff, the cancellations are not consistent with recent statements by California Department of Managed Health Care Director Cindy Ehnes that health insurers must first prove members intentionally omitted information from applications (Girion, Los Angeles Times, 2/16).

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