In the first sanction of its kind, California's top HMO regulator fined Blue Cross on Thursday for illegally canceling a woman's medical policy because she did not disclose corrective surgery she had 23 years earlier.
The $200,000 fine might not be the last resulting from the state's investigation of allegations that insurers dump sick policyholders to avoid paying claims, said Cindy Ehnes, director of the Department of Managed Health Care.
The agency is continuing to investigate a score of complaints from consumers who held individual policies, as well as allegations that Blue Cross, its rival Blue Shield, Kaiser and other insurers routinely cancel policies for inadvertent or irrelevant omissions on applications for coverage.
"This is the first penalty in an ongoing investigation in which the [department] is still assessing the full extent of harm to consumers," Ehnes said at a news conference in Sacramento.
She said she considered the fine "a very significant step to protect consumers from illegal rescissions of their health coverage."
Gov. Arnold Schwarzenegger, who appointed Ehnes in 2004, applauded the action.
"Californians -- who make the right decision to have health insurance as security for themselves and their families -- should not be afraid that if they use it, they will lose it because of confusing applications," he said in a statement.
The fine was criticized by Blue Cross, which could challenge it, and consumer advocates, who said it was not sufficient punishment.
The insurer, a subsidiary of Indianapolis-based WellPoint Inc., is the nation's largest health benefits company. Blue Cross said it was disappointed because the sanction came even as it was in discussions to resolve the woman's complaint and after the company announced steps aimed at reducing errant revocations.
WellPoint spokesman Robert Alaniz said the company had not yet been served with the fine and had not decided whether it would pay or dispute it.
Consumer advocates said the fine was a step in the right direction but too small to compel a company as large and profitable as Blue Cross to make meaningful changes.
"They are making so much money off these rescissions that $200,000 is just the cost of doing business," said Jerry Flanagan, a patient advocate with the Foundation for Taxpayer and Consumer Rights in Santa Monica.
