News: 2009 Press Release
For Release: February 11, 2009
Media Calls Only: 916-492-3566
Insurance Commissioner Steve Poizner Announces $15 Million Settlement with Blue Cross Over Rescission Practices
Every Affected Consumer to Receive Full Reimbursement for Medical Costs and Immediate Healthcare Coverage Reinstatement
Insurance Commissioner Steve Poizner announced today that the California Department of Insurance has reached an agreement with Anthem Blue Cross Life and Health Insurance Company to offer new health coverage to more than 2,300 consumers whose policies were rescinded between January 1, 2004 and December 31, 2008. Blue Cross will also reimburse these consumers for out-of-pocket medical expenses, estimated to be $14 million, and pay a $1 million fine. The company will also implement significant changes in its underwriting and claims practices.
"I am pleased that through this settlement, we have guaranteed reimbursement and restoration of coverage for the more than 2,300 people whose healthcare insurance was terminated without their consent," said Commissioner Poizner. "The settlement is a significant step towards ending illegal rescission practices that can devastate consumers already weakened in their battle against illness. I will continue to take strong action against any insurer that does not honor its agreements with consumers and fails to comply with the law."
Under the terms of the settlement covering allegations of unfair claims handling and improper rescission practices, Blue Cross will immediately offer coverage to 2,330 consumers whose individual or family health insurance policies were previously terminated, without subjecting them to medical underwriting or exclusions for pre-existing conditions. Any medical expenses that would have been covered under the rescinded policies that are not covered by another source will be reimbursed or paid by Blue Cross. An expedited independent arbitration process available at no cost to consumers has been established to resolve any disputes regarding these expenses. Allegations of illegal rescission practices stem from the results of a 2007 CDI market conduct examination.
As part of the settlement, Blue Cross has agreed to make significant changes to its application forms, underwriting process, agent training, notification to consumers and providers of any investigation regarding information in the application and oversight of its claims handling. It has already established an independent third party review process for rescissions which will be subject to the Department's oversight. Blue Cross is subject to up to an additional $2 million penalty if corrective actions are not implemented in the prescribed timeline.
Blue Cross insures 50 percent of all Californians with individual health insurance policies. This settlement will therefore help prevent future illegal rescissions for half of all California consumers with individually-purchased health insurance policies. Blue Cross will be sending a notice containing the offers made available through this settlement to eligible individuals. The reimbursement offer will remain open for impacted consumers for the next six months.
Today's announced settlement is the latest action by Commissioner Poizner to end the practice of improper rescissions and related claims handling violations. Since taking office, Commissioner Poizner has restored health insurance coverage to nearly 4,000 consumers whose policies had been illegally rescinded, in addition to establishing significant reforms to prevent future illegal rescissions for 85 percent of policyholders in the individual health insurance marketplace.
- In December 2008, Blue Shield agreed to restore health coverage for almost 700 consumers whose insurance coverage had been rescinded. Future use of third party review was also secured in addition to significant changes in the underwriting process.
- In September 2008, Health Net agreed to restore health coverage for nearly 1,000 consumers whose insurance coverage had been rescinded.
- In January 2008, Commissioner Poizner announced an action against PacifiCare Life and Health Insurance Company, a wholly owned subsidiary of United Health Group, in response to tens of thousands of alleged claims handling violations.
Click here to view the stipulation and waiver.
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