Monday, September 18, 2006

More on Blue Cross of California's Retroactive Cancellations

The Los Angeles Times has followed up on the story of Wellpoint Blue Cross health plans allegedly retroactively denying insurance after patients run up big medical bills. (See previous post here.)

In a prototypic case, a person (or family) applies for and gets an individual insurance policy (i.e., not an insurance policy obtained through employment.) After the policy is obtained, the policy-holder develops a new, and very expensive medical condition. Once major bills are incurred, the insurance company cancels the policy, claiming that there were errors or omissions on the application.

For example, the Times reported this case, involving Blue Cross of California, which is owned by WellPoint Inc.,
When Steve and Leslie Shaeffer's daughter, Selah, was diagnosed at age 4 with a potentially fatal tumor in her jaw, they figured their health insurance would cover the bulk of her treatment costs.

Instead, almost two years later, the Murrieta, Calif., couple face more than $60,000 in medical bills and fear the loss of their dream home.

Shortly after Selah's medical bills hit $20,000, Blue Cross stopped covering them and eventually canceled her coverage retroactively, refusing to pay for treatment, including surgery the insurer had authorized in advance.

The company accused the Shaeffers of failing to disclose in their coverage application an undiagnosed bump on Selah's chin and physician visits for croup. Had that been disclosed, the company said in a letter, it would not have insured Selah.

The Shaeffers say they weren't trying to hide anything. When they applied for coverage, Selah did not have a tumor, at least as far as they — or any physician — knew. The doctor visits occurred after Leslie filled out the paperwork, and they seemed routine, the Shaeffers say.

The company is facing a number of lawsuits from policy-holders whose policies it retroactively canceled. "The suits accuse health plans of dumping sick policyholders without evidence that the consumers intentionally omitted information about their medical condition or history. They also accuse insurers of using applications that are vague and confusing by design, trapping consumers into making mistakes that can be used to cancel their coverage later."

The article noted that a Blue Cross "employee said in a deposition last year that a special department considers as many as 1,500 cases for cancellation each week in California alone. A consumer lawyer who saw Blue Cross' cancellation tally sheets described the department as a rescission factory."

According to other depositions,
The health plans routinely scrutinize medical records, back 10 years or more, when subscribers submit claims for certain conditions within two years of signing up for coverage.

If the health plans find information in the records that was absent from the application, they cancel, often without finding out whether the discrepancy was an intentional lie or an honest mistake, according to the depositions.
Furthermore, Blue Cross is now in trouble with regulators. "Late Friday, a spokeswoman for the Department of Managed Health Care said the agency could take action against Blue Cross as early as this week. The agency has concluded that the company systematically violated the law by improperly canceling policies and failing to verify medical information on applications before issuing coverage."

Furthermore, "Amy Dobberteen, enforcement chief for the Department of Managed Health Care, said the law was clear. Health plans 'are not supposed to be waiting until they get a huge claim and then trying to find a way out of it,' she said. After a claim comes in, they may cancel only for 'willful misrepresentation. Those words are plucked right out of the statute.'"

Insurance that is liable to be canceled any time a policy-holder makes a big claim is hardly deserving of the name. So what should one call what Blue Cross of California is selling to individuals?

ADDENDUM (20 September, 2006) - The Los Angeles Times reported today that Blue Cross responded to the issues above,
Blue Cross of California said Tuesday that it would change some of its procedures for canceling individual health insurance policies, after allegations that it illegally dumped sick policyholders to avoid expensive claims.

The state's largest health insurer said it would make the changes — including creating an ombudsman and revising its appeal process — but maintained that it had done nothing wrong.

'The vast majority of rescissions to date are unquestionably proper under any criteria,' said Blue Cross Chief Executive Dave Helwig. 'But we are taking these major steps to minimize the possibility of errors.'
Critics were only partially mollified.
'I'm underwhelmed,' said Bryan Liang, executive director of the Health Law Institute at California Western School of Law in San Diego. 'The fundamental issue still is that they are not addressing these policies according to California law. Once they issue the policy, unless there is actual fraud, they cannot rescind. So despite whatever window dressing they put in place, they are still violating the law.'
On the other hand, William Shernoff, a lawyer representing several plaintiffs in a suit against Blue Cross, said
The major breakthrough is when you get a large corporation like this that says they are going to change their ways. But we'll see if these changes are going to be significant and real. The devil's in the details.


Anonymous said...

This conduct is probably about as outrageous as it gets in the health insurance industry. It's no wonder that so many people hate these companies. How would the people who make these decisions and the executives who approve them feel if they were treated this way? How hard could it be to treat people the way you would like (and expect) to be treated if circumstances were reversed?

Mike Ryan said...

To insure the healthy and cancel those that end up using the benefits they paid and signed up for, make for profits that are also under investigation........

Anonymous said...

I am in the same situation as those in the story except the company that cancelled my policy was Pacificare of California. It's sickening that Pacificare's parent company has a CEO with 1.6 Billion in stock options while they cancel the policy of a cancer patient in his early thirties and attempt to ruin his life.

Since they refused to pay or even acknowledge that I even needed a second surgery, they have sent me a cancellation notice but did not rescind the policy yet.

Instead, they sent me a HIPPA notice that is absolutely worthless in my situation. A week after the HIPPA notice, I received my September premium bill which I paid and they cashed as soon as they got it in their hands.

Last week, I received a Notice of Eligable Prescription Drug Coverage that should allow me to avoid the 1% penalty when I apply for Medicare Plan D coverage 31 years from now.

I am informed that I need to keep this document in a safe place because it is so important. What would I do without them? I must remember to thank them in 2037 if I survive that long without health insurance and don't forget where I saved this letter if I get Alzheimers.

Terence said...

Dr Poses
No one is more disturbed with the conduct of Blue Cross CA than I.
Hundreds of cases I have handled--they do not properly process claims.

I need some additional information about the four year old child and the tumor prior to making a determination.

These events happened.

Put them in date order.

Agent contacted.
Policy applied for.
Policy issued.
Dr sees child and for first time suspects jaw condition.


parents note lump in jaw
parents visit dr who suggests MRI
parents call agent
parents get coverage
child has MRI


child has good-health exam by dr in March
Policy issued in August
Child seen December for tonsils, and , for the FIRST TIME, a jaw problem is picked up on exam

What were the order of the events?

The application is not that difficult.
Who is your doctor?
What do you weigh?
When did you last see a dr?
For what?
Have you diabetes or high blood pressure?

Who could not answer these questions?

Look at he application. Investigate the sequence of events
If you can see an obvious misrepresentation on the application, then this is a RESCISSION.
A child's tumor or a truck driver's bunions. A claim for either condition would the same PREEX investigation. But the tumor is better press, is it not?

The parents are innocent or any wrong doing because the symptoms did not arise until many months after the effective date of the policy, and the diagnosis was not made until 3 weeks after the symptoms were brought to a dr.
The parents failed to disclose the true health condition of their child.

What insurance coverage had this child covered in past 50 months, prior to surgery? What were the circumstance of health insurance absence when child was three?
Unemployed? Job change? Or did this family go without insurance for the past 50 months without any coverage? Then, they saved $800 a month, or about $40,000 !!

Rushing to judgement because this is a tumor in a child , without fully investigation, is acting the same way Blue Cross acts---decisions on suppositions and cloudy facts.

Terence said...

When did the child's tumor manifest to the parents ? To the dr? When was the policy applied for?