Anthem Blue Cross and Blue Shield -- two of the state's biggest health plans -- agreed Thursday to pay a total of $13 million in fines and to offer new health coverage to more than 2,200 Californians the companies dropped after they became ill.
Neither company admitted to any wrongdoing in agreeing to pay the stiffest penalties yet in efforts by state authorities to curb what they view as an abusive practice of investigating and canceling policies after policyholders run up big medical bills.
Blue Cross, a unit of Indianapolis-based WellPoint Inc., will pay a $10-million fine to the state Department of Managed Health Care, and it will offer new coverage to 1,770 former members it canceled since 2004 -- no questions asked.
"The fine is a record in DMHC history and it sends the message that if you come into California and sell health insurance, you must play by the rules," department Director Cindy Ehnes said.
Competitor Blue Shield, a not-for-profit health plan based in San Francisco, will pay $3 million and offer new policies to 450 people whose coverage was rescinded over the last four years.
The insurers also agreed to establish a process for former members to recover medical expenses they paid out of pocket after they were dropped as well as other damages, such as homes or businesses that were lost because unpaid medical debts ruined the former members' creditworthiness.
The agreements bring to a close the department's industrywide investigation into the problems of rescission that were brought to light in a series of articles in The Times. The problem affects individual policies, the type of coverage consumers without access to employer-sponsored group health benefits purchase on their own. About 14 million Americans, including 3 million Californians, rely on this type of coverage.
Earlier this year, Kaiser Permanente, Health Net and PacifiCare all made similar agreements but paid smaller penalties that reflected their willingness to meet the department's terms, which, Ehnes said, made the restoration of coverage the highest priority.
"We've now restored coverage to 3,370 California enrollees who were impacted by the unfair practice of rescission," Ehnes said. "This concludes a long and significant enforcement action on the part of the department that has never wavered in our conviction to get health coverage for these Californians."
The health plans said they were glad to move on.
