Spokeswoman Lynne Randolph said the agency's action "is not a consent agreement. It is not something we are working out with the plan to come to a negotiated settlement on. We will be bringing a fine and bringing an action against them for violating the law."
A spokesman for Blue Cross said the company had no comment because it had not been officially notified of the agency's plans.
The company has denied any wrongdoing, as has Blue Shield. The agency's investigation of complaints against Blue Shield is ongoing.
The companies won't talk about individual cases such as that of the Shaeffers. But they say that they cancel policies upon finding misrepresentations in applications and that such actions safeguard the integrity of the individual insurance market.
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The way Steve and Leslie Shaeffer saw it, their $498 monthly premium was the price of peace of mind. The self-employed tile installer and stay-at-home mother wanted to make sure that they and their two children got whatever care they needed and that the bills would never bury them.
Two years ago, they bought a family health policy from a Blue Cross affiliate, BC Life & Health. Only a couple of months later, Selah's diagnosis -- aggressive fibromatosis, an extremely rare and fast-growing tumor -- put that policy to the test.
Initially, Blue Cross paid for her care. But when the bills surpassed $20,000, it stopped. Then, after collecting the Shaeffers' premiums for most of a year, Blue Cross canceled Selah, saying her parents left key information out of their application for coverage.
The Shaeffers say that's not so. When Leslie filled out the application, the couple said, Selah was a healthy girl who hadn't seen a doctor in months. After submitting the document, Leslie said, she noticed a bump on Selah's chin, but doctors told her they didn't think it was serious.
It was not until doctors took a biopsy of the bump -- almost two months later and weeks after the Blue Cross policy had taken effect -- that the Shaeffers said they had any idea that Selah had something seriously wrong.
But the full scope of Selah's condition did not come into view for a few more weeks. That's when doctors, after nearly seven hours of surgery, told Steve and Leslie that the tumor had stealthily invaded much of the left side of Selah's mouth and jaw. Surgeons removed chunks of her jaw, mouth and throat wall in an effort to get it all and guard against a recurrence.
