California's top insurance regulator has accused Blue Shield, one of the state's largest health plans, of 1,262 violations of claims-handling laws and regulations that resulted in more than 200 people losing their medical coverage.
Calling the allegations "serious violations that completely undermine the public's trust in our healthcare delivery system and are potentially devastating to patients," Insurance Commissioner Steve Poizner said he would announce today that he would seek a $12.6-million fine.
Blue Shield called the charges "grossly unfair" and vowed to vigorously contest them and the proposed fine.
In a statement issued to The Times on Wednesday, Duncan Ross, president of Blue Shield of California Life & Health Insurance Co., said "we are outraged by the excessive penalties for nonsubstantive issues," and called the actions "a radical departure from the [Department of Insurance's] widely accepted and long-standing interpretation of the law."
"The department's position penalizes practices that have previously been approved by the department and have been followed for years by all health insurers," Ross said.
The company has long maintained that its cancellation practices follow the law and are an important guard against insurance fraud. In any event, the company has said, only a small portion of its policies are affected.
The enforcement action is based on an investigation of Blue Shield of California Life & Health, which covers about 167,000 people in individual and group policies licensed by the Department of Insurance.
The action does not include another Blue Shield unit that has about 2.3 million members in health maintenance organizations overseen by the Department of Managed Health Care. The state's HMO regulator is conducting a separate investigation of the company's cancellation practices that is expected to be completed early next year.
Wednesday's enforcement action was the toughest yet by state insurance and HMO regulators who have been critical of the way health plans cancel individual policies after receiving claims for costly medical care.
The department's action against Blue Shield is the latest example of regulators closing ranks on the cancellation issue. Both agencies are seeking regulations aimed at curtailing cancellations, also known as rescissions. And both are investigating the way these are handled at the state's biggest health plans.
