As expected, Insurance Commissioner Steve Poizner (R) on Thursday announced that he would seek a record $12.6 million fine against Blue Shield Life & Health for improper cancellations of individual health insurance policies, the Sacramento Bee reports (Chan, Sacramento Bee, 12/14).
Poizner said, "Let this be a message to all health insurers that we will not tolerate irresponsible rescission and shoddy claims handling. We will target this behavior on an industrywide basis and continue to take appropriate action as needed" (Colliver, San Francisco Chronicle, 12/14).
Based on an audit of claims from 2004 and 2005, Poizner maintains that the Blue Shield unit committed more than 1,200 violations of state law, resulting in about 200 people having their health insurance coverage canceled (Sacramento Bee, 12/14).
The audit also faulted Blue Shield Life & Health for its claims handling processes, including:
- Failing to pay interest owed on claims;
- Mishandling member appeals; and
- Delaying payments (California Healthline, 12/13).
The case marks the Department of Insurance's first action related to individual policy cancellations (Veiga,
AP/San Diego Union-Tribune, 12/14).
Reaction, Next Steps
Blue Shield Life & Health President Duncan Ross said the charges are "not justified by the facts, and we will fight them vigorously."
The company acknowledged unintentional errors uncovered in the audit and said that it already has taken corrective action.
According to the Department of Insurance, the Blue Shield unit has agreed to make changes to its claims processing process and employee training procedures.
Jason Kimbrough, a spokesperson for the Department of Insurance, said that if Blue Shield Life & Health disputes the fine, it could seek to negotiate a settlement or pursue a hearing before an administrative law judge (San Francisco Chronicle, 12/14).