L.A. city attorney sues insurer over health policy cancellations
Delgadillo's suit contends Blue Shield of California has illegally rescinded the coverage of more than 850 policyholders since 2002.
When Blue Shield of California learned that Ana Maria Simoes needed emergency surgery to remove her gall bladder, the company OKd the operation but also turned the case over to its investigative unit, according to corporate records disclosed Wednesday.
A Blue Shield investigator scrutinized Ana Maria's medical records and compared them to the application she filled out for coverage, the investigator's notes show. Ultimately, the investigator scribbled "unable to prove" in her notes, and then opened an investigation into Ana Maria's husband, Augustine.
This time, the investigator concluded the Chino dairy farmer had failed to disclose that he had high cholesterol, and the omission was used to justify canceling the couple's coverage.
The cancellation was highlighted by Los Angeles City Attorney Rocky Delgadillo as an example of the allegedly abusive practices at the heart of a lawsuit he filed Wednesday on behalf of the residents of Los Angeles against Blue Shield. The suit contends that Blue Shield has illegally canceled the coverage of more than 850 policyholders including people like the Simoeses since 2002.
Blue Shield spokesman Tom Epstein defended the cancellation of the Simoes' coverage and called the suit "a cheap political stunt" that was "totally without merit."
In the past, Blue Shield has said that it cancels policies rarely and that the practice is a legal and necessary tool to combat fraud.
The Blue Shield suit is similar to those Delgadillo filed earlier this year against insurers Anthem Blue Cross and Health Net. Like Blue Shield, those companies have denied wrongdoing and say they rescind coverage only when necessary.
The latest suit accuses Blue Shield, a nonprofit company based in San Francisco, of using complex and confusing applications for coverage to trick individuals into making mistakes that can later be used against them. The suit seeks fines and penalties of more than $1 billion.
"For decades, health insurers have gamed the system and reaped billions," Delgadillo said. "The time has come to . . . set things right."
The suit also accuses Blue Shield of falsely advertising its coverage, alleging that the company often reneges when its members need substantial medical care.
Dr. Richard Frankenstein, president of the California Medical Assn., and Dr. Robert Bitonte, president-elect of the Los Angeles County Medical Assn., praised Delgadillo's efforts to stop the practice known as rescission.
