Blue Shield has agreed to reissue medical coverage to nearly 700 Californians whose policies were canceled after they got sick and to make changes in the way it handles insurance bought by individuals, officials said Tuesday.
Blue Shield of California's Life & Health Insurance Co. also agreed to reimburse consumers whose coverage was canceled for medical expenses they paid out of pocket.
In turn, the state dropped its case against Blue Shield and declined to pursue $12.6 million in proposed fines.
It is the latest deal between regulators and insurers in a crackdown prompted by a series of articles in The Times examining rescission, the controversial practice of canceling policyholders' coverage after they get sick.
Most of the state's health insurers remain mired in litigation over the practice that has led to the cancellation of thousands of policies of sick patients, as well as financial losses for them, physicians and hospitals. In addition, Los Angeles City Atty. Rocky Delgadillo has sued Anthem Blue Cross, Blue Shield and Health Net, accusing all three of improperly dropping customers.
State Insurance Commissioner Steve Poizner said he hoped the settlement would "make whole" 678 consumers dropped by Blue Shield and "put an end to rescission practices that were hurting consumers."
"People pay their insurance premiums and expect to be taken care of," Poizner said. "Canceling someone's insurance can have devastating medical, emotional and financial impacts. I will continue to take action against those insurers who do not live up to their agreements."
In September, Poizner announced a similar settlement with Health Net Inc. of Woodland Hills, which agreed to offer new coverage to 926 people and pay $3.6 million in penalties.
Neither Blue Shield nor Health Net admitted wrongdoing.
The state Department of Managed Health Care, which supervises health maintenance organization coverage, struck similar deals last year with Anthem Blue Cross, Blue Shield and other major insurers.
Blue Shield President Duncan Ross said the company was pleased with the agreement.
"With this settlement, we can put these matters to rest and enter 2009 with new procedures in place to clarify the responsibilities of insurers and our customers in the future," he said in a statement.
