Anthem Blue Cross, the state's largest for-profit health insurer, has agreed to pay a $1-million fine and offer new coverage -- no questions asked -- to 2,330 people it dropped after they submitted bills for expensive medical care.
As part of a deal that the California Department of Insurance is set to announce today, Anthem also will offer to reimburse those people for medical expenses that they paid out of pocket after they were dropped. The company, a subsidiary of Indianapolis-based WellPoint Inc., estimated that those reimbursements could reach $14 million.
In exchange, the state agreed to drop its prosecution of its accusation that the company broke state laws in the way it rescinded members in preferred provider organization (PPO) policies between 2004 and 2008.
The settlement follows Anthem's agreement last year to pay a $10-million fine to settle similar charges involving 1,770 members in HMO-type policies overseen by the Department of Managed Health Care, another state regulator.
In both cases, Anthem agreed to make substantial changes in the way it sells and manages individual insurance coverage in California. Those changes, which include simplifying coverage applications, are expected to reduce the number of people who lose coverage through rescission.
The Anthem deal is the latest in a two-year effort by regulators to crack down on health insurers for dropping sick members on dubious grounds. It brings the last state rescission investigation to a close.
But insurers Anthem, Blue Shield of California and Health Net Inc. all remain targets of individual and class-action lawsuits alleging that they gamed insurance laws to dump sick people and avoid the costs of their care.
The only case to go to trial so far involved Health Net's rescission of a woman suffering from breast cancer. In that case, an arbitration judge awarded $9 million to Patsy Bates, a Gardena hair salon owner, after hearing her recount the fear she felt when she lost insurance and had to stop chemotherapy treatments.
"I am pleased that through this settlement, we have guaranteed reimbursement and restoration of coverage for the more than 2,300 people whose healthcare insurance was terminated without their consent," state Insurance Commissioner Steve Poizner said about the Anthem deal. "The settlement is a significant step towards ending rescission practices that can devastate consumers already weakened in their battle against illness."
