HEALTHCARE - Insurer cited in policy rescissions - BC Life mishandled more than half the cases reviewed by the state. Critics say regulators have not done enough.
BC Life & Health revoked 1,880 individual health insurance policies in California in 2004 and 2005, and a state agency that examined a sampling says it found that more than half the cases it reviewed were improperly handled.
The Department of Insurance said it studied 83 sample cases and issued citations in 49 of them, alleging 67 violations of fair-claims handling laws.
In one case, the department contended that BC Life, a Blue Cross company, told a policyholder in a letter that it rescinded coverage because of an undisclosed medical condition, even though the condition was clearly stated on the individual's application.
In another case, the department alleged that BC Life improperly rescinded a policy after miscalculating the period of time between treatment and the effective date of coverage. BC Life declined to reinstate coverage even after the department brought the error to its attention, according to a report issued by the agency.
When coverage is rescinded, it is as if the policy never existed, leaving the policyholder and healthcare providers to settle outstanding charges.
The 67 citations could lead to fines of as much as $10,000 per sustained infraction, as well as follow-up examinations.
The report was posted on the department's website last week with little fanfare, even though it had been highly anticipated by consumer advocates and lawyers for policyholders who were suing BC Life and other insurers, challenging the rescissions as unfair and illegal.
The Department of Insurance launched an investigation last year when John Garamendi, now lieutenant governor, was the commissioner. The report marks one of the first occasions on which Insurance Commissioner Steve Poizner, who took office in January, has publicly weighed in on a health insurance issue.
"A rescission can be a financial death sentence when you're ill," Poizner said in an e-mail. "In my view, even one improper rescission is one too many. When it comes to rescissions, we are acutely aware that these are people's lives. They're not just numbers to us."
A series of articles in The Times over the last year exposed the common practice by insurers in California of canceling individual policies when patients submitted claims for serious illnesses. The practice does not apply to group policies.
A spokesman said that the department was looking at rescissions industrywide and that BC Life was one of several companies under the microscope. The others include Blue Shield, HealthNet, Cigna and Aetna.
