For Release: February 11, 2009
Insurance Commissioner Steve Poizner Announces $15 Million Settlement with Blue Cross Over Rescission
Practices
Every Affected Consumer to Receive Full Reimbursement for Medical Costs and Immediate Healthcare Coverage
Reinstatement
Insurance Commissioner Steve Poizner announced today that the California Department of Insurance has
reached an agreement with Anthem Blue Cross Life and Health Insurance Company to offer new health coverage
to more than 2,300 consumers whose policies were rescinded between January 1, 2004 and December 31,
2008. Blue Cross will also reimburse these consumers for out-of-pocket medical expenses, estimated to be $14
million, and pay a $1 million fine. The company will also implement significant changes in its underwriting and
claims practices.
"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," said
Commissioner Poizner. "The settlement is a significant step towards ending illegal rescission practices that can
devastate consumers already weakened in their battle against illness. I will continue to take strong action against
any insurer that does not honor its agreements with consumers and fails to comply with the law."
Under the terms of the settlement covering allegations of unfair claims handling and improper rescission
practices, Blue Cross will immediately offer coverage to 2,330 consumers whose individual or family health
insurance policies were previously terminated, without subjecting them to medical underwriting or exclusions for
pre-existing conditions. Any medical expenses that would have been covered under the rescinded policies that
are not covered by another source will be reimbursed or paid by Blue Cross. An expedited independent
arbitration process available at no cost to consumers has been established to resolve any disputes regarding
these expenses. Allegations of illegal rescission practices stem from the results of a 2007 CDI market conduct
examination.
As part of the settlement, Blue Cross has agreed to make significant changes to its application forms,
underwriting process, agent training, notification to consumers and providers of any investigation regarding
information in the application and oversight of its claims handling. It has already established an independent
third party review process for rescissions which will be subject to the Department's oversight. Blue Cross is
subject to up to an additional $2 million penalty if corrective actions are not implemented in the prescribed
timeline.
Blue Cross insures 50 percent of all Californians with individual health insurance policies. This settlement will
therefore help prevent future illegal rescissions for half of all California consumers with individually-purchased
health insurance policies. Blue Cross will be sending a notice containing the offers made available through this
settlement to eligible individuals. The reimbursement offer will remain open for impacted consumers for the next
six months.
Today's announced settlement is the latest action by Commissioner Poizner to end the practice of improper
rescissions and related claims handling violations. Since taking office, Commissioner Poizner has restored
health insurance coverage to nearly 4,000 consumers whose policies had been illegally rescinded, in addition to
establishing significant reforms to prevent future illegal rescissions for 85 percent of policyholders in the
individual health insurance marketplace.
In December 2008, Blue Shield agreed to restore health coverage for almost 700 consumers whose insurance
coverage had been rescinded. Future use of third party review was also secured in addition to significant
changes in the underwriting process.
In September 2008, Health Net agreed to restore health coverage for nearly 1,000 consumers whose insurance
coverage had been rescinded.
In January 2008, Commissioner Poizner announced an action against PacifiCare Life and Health Insurance
Company, a wholly owned subsidiary of United Health Group, in response to tens of thousands of alleged claims
handling violations.
Insurance Commissioner Steve Poizner Announces $15 Million Settlement with Blue Cross Over Rescission
Practices
Every Affected Consumer to Receive Full Reimbursement for Medical Costs and Immediate Healthcare Coverage
Reinstatement
Insurance Commissioner Steve Poizner announced today that the California Department of Insurance has
reached an agreement with Anthem Blue Cross Life and Health Insurance Company to offer new health coverage
to more than 2,300 consumers whose policies were rescinded between January 1, 2004 and December 31,
2008. Blue Cross will also reimburse these consumers for out-of-pocket medical expenses, estimated to be $14
million, and pay a $1 million fine. The company will also implement significant changes in its underwriting and
claims practices.
"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," said
Commissioner Poizner. "The settlement is a significant step towards ending illegal rescission practices that can
devastate consumers already weakened in their battle against illness. I will continue to take strong action against
any insurer that does not honor its agreements with consumers and fails to comply with the law."
Under the terms of the settlement covering allegations of unfair claims handling and improper rescission
practices, Blue Cross will immediately offer coverage to 2,330 consumers whose individual or family health
insurance policies were previously terminated, without subjecting them to medical underwriting or exclusions for
pre-existing conditions. Any medical expenses that would have been covered under the rescinded policies that
are not covered by another source will be reimbursed or paid by Blue Cross. An expedited independent
arbitration process available at no cost to consumers has been established to resolve any disputes regarding
these expenses. Allegations of illegal rescission practices stem from the results of a 2007 CDI market conduct
examination.
As part of the settlement, Blue Cross has agreed to make significant changes to its application forms,
underwriting process, agent training, notification to consumers and providers of any investigation regarding
information in the application and oversight of its claims handling. It has already established an independent
third party review process for rescissions which will be subject to the Department's oversight. Blue Cross is
subject to up to an additional $2 million penalty if corrective actions are not implemented in the prescribed
timeline.
Blue Cross insures 50 percent of all Californians with individual health insurance policies. This settlement will
therefore help prevent future illegal rescissions for half of all California consumers with individually-purchased
health insurance policies. Blue Cross will be sending a notice containing the offers made available through this
settlement to eligible individuals. The reimbursement offer will remain open for impacted consumers for the next
six months.
Today's announced settlement is the latest action by Commissioner Poizner to end the practice of improper
rescissions and related claims handling violations. Since taking office, Commissioner Poizner has restored
health insurance coverage to nearly 4,000 consumers whose policies had been illegally rescinded, in addition to
establishing significant reforms to prevent future illegal rescissions for 85 percent of policyholders in the
individual health insurance marketplace.
In December 2008, Blue Shield agreed to restore health coverage for almost 700 consumers whose insurance
coverage had been rescinded. Future use of third party review was also secured in addition to significant
changes in the underwriting process.
In September 2008, Health Net agreed to restore health coverage for nearly 1,000 consumers whose insurance
coverage had been rescinded.
In January 2008, Commissioner Poizner announced an action against PacifiCare Life and Health Insurance
Company, a wholly owned subsidiary of United Health Group, in response to tens of thousands of alleged claims
handling violations.
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