A 2001 car accident that left Steven Hailey badly injured was the beginning of his continuing medical and financial calamity.
While Hailey was still recovering in his Cypress home and with medical bills topping $450,000, Blue Shield of California suddenly canceled his coverage. That forced the former self-employed machinist to wait so long for surgery to repair an injured urethra, he says in a lawsuit against Blue Shield, that his bladder stopped working. Since then, he has depended on an implanted catheter that drains his urine into a bag strapped to his body.
Now, Hailey says, he and his wife, Cindy, can't afford the care he needs because Blue Shield began garnisheeing her wages to recoup more than $104,000 it had paid for Steven's medical care before canceling him.
The outcome of the Haileys' case against Blue Shield could change the way insurers do business in California and influence reform efforts by state regulators and lawmakers. As the first case of its kind to reach an appellate court in California, it will test the legality of retroactive health policy cancellations, a controversial industrywide practice that has driven canceled consumers into debt and forced them to forgo needed medical treatment.
Blue Shield contends it was within its rights to cancel the Haileys because they failed to disclose Steven's true weight and full medical history when the couple applied for coverage nearly seven years ago.
Blue Shield says it would not have covered Steven in the first place had it known that his weight was 285 pounds, not the 240 listed on the application, or that he had been treated for headaches, hypertension and other conditions.
The Haileys say that Cindy made an honest mistake when she filled out the application and that state law bans the rescission of health coverage without evidence that the policyholder intentionally misrepresented his or her medical history. Blue Shield disagrees, saying the law allows it to cancel policies for any misrepresentation, even inadvertent ones.
Whatever the 4th District Court of Appeal in Santa Ana decides could affect hundreds of suits challenging such cancellations as illegal and unfair.
Such retroactive rescissions have come under scrutiny in recent months because of the hardships they create for patients. A Los Angeles Times article detailed the turmoil of a Murrieta family whose daughter had an aggressive cancer-like tumor, a Riverside couple who sold their home to pay off medical debts and a Van Nuys small-business owner who was maxing out credit cards to get therapy for his disabled infant twins.
