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May 11, 2007

Blue Cross and Canceled Policyholders Agree to Settlement

A major class action settlement has been reached with Blue Cross of California, a Wellpoint subsidiary, concerning the cancellation of health insurance policies that occur after a claim for pre-authorized medical treatment. From now on, Blue Cross has agreed that it will not retroactively cancel insureds' health insurance policies unless the insured "intentionally misrepresented" information on the insurance application. "This will stop the practice of canceling health insurance policies for honest mistakes, inadvertent errors, or other inconsistencies that often appear on health insurance applications," said William Shernoff of the Claremont law firm of Shernoff, Bidart & Darras, who represents a class of approximately 6,000 Blue Cross policyholders.

The settlement also includes a new individual health insurance application that is designed to minimize mistakes and new procedures to be followed at Blue Cross that will assure customers that cancellation of insurance policies will only take place upon a finding of "willful misrepresentation." Additionally, Shernoff said, "Even if a cancellation occurs upon such a finding, the insured will still have a right to appeal that decision to either the Department of Insurance or the Department of Managed Health Care."

Shernoff praised the Department of Managed Health Care and the Department of Insurance for becoming involved in the negotiations leading up to the settlement saying they "gave tremendous input and support to help this settlement become a reality." Both the Department of Managed Health Care and the Department of Insurance had representatives involved in the lengthy mediation process, presided over by former California Supreme Court Justice Edward Panelli.

"In addition to the new procedures that Blue Cross will put in place in the future to end most cancellations, the settlement also provides remedies for approximately 6,000 Blue Cross insureds that have already been cancelled under such circumstances," said Shernoff who called the settlement "a major breakthrough." "Blue Cross should be credited for recognizing this problem and their willingness to fix it." Shernoff said, "It will be interesting to see if other health insurance companies like Blue Shield, Health Net and others will follow suit."

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Posted by healthinsurance at May 11, 2007 02:29 PM