California Fines Health Insurer Blue Shield $12.6 Million

December 14, 2007

California Insurance Commissioner Steve Poizner is seeking $12.6 million in fines and penalties against health insurer Blue Shield for violations regarding healthcare rescissions and irresponsible claims processing.

The commissioner’s actions follow a market conduct exam of Blue Shield by the California Department of Insurance that revealed more than 1,200 violations of the law, half of which were related to improper rescissions. The exam, which gathered data from 2004 and 2005, uncovered what CDI called “alarming practices” at the health insurer.

“Blue Shield committed serious violations that completely undermine the public trust in our healthcare delivery system,” Poizner said. “Rescissions can be devastating to sick patients. Let this be a message to all health insurers that we will not tolerate irresponsible rescissions and shoddy claims handling. We will target this behavior on an industry-wide basis and continue to take appropriate action as needed.”

Other issues uncovered include:
*Failure to pay claims on a timely basis;
*Failure to provide required information when denying a claim;
*Failure to complete medical underwriting upon receipt of the application;
*Failure to attach the application to the contract;
*Failure to pay interest on a claims where required;
*Mishandling of member appeals;
*Inaccurate or incomplete Explanations of Benefits provided to claimants;
*Requests for information not necessary to handle the claim;
*Requests for information already in the company’s possession;
*Lack of documentation in the claims files regarding the investigation; and
*Reference to ERISA standards when not applicable.

As a result of the market conduct exam, Blue Shield has agreed to improve its claims processing services, as well as enhance training of its representatives. In addition to the $12.6 million fine sought by the Commissioner, Blue Shield has refunded $1 million in claims at CDI’s request.

A copy of the market conduct exam can be found at

Source: CDI

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