In a surprising move, Blue Cross of California has agreed to settle a class action lawsuit that accuses it of canceling, or rescinding, healthcare policies after receiving expensive claims from policyholders. The class action consists of approximately 6,000 members and is comprised of people who purchased their own insurance with the company since 2001.

Class members claim that Blue Cross rescinded their policies leaving them to scramble for other insurance coverage and in many cases caused them extreme financial hardship or even bankruptcy.

Terms of the Blue Cross Settlement

The proposed settlement would allow policyholders to drop their rescission claims in exchange for $1,000 and have their cancellations examined. If the cancellations are reversed, Blue Cross would pay policyholders for any medical bills they incurred that would have been covered under the policy.

In addition, the settlement includes a new, individual health insurance application that may minimize mistakes in the future. Many policyholders have said that the old forms were confusing and led to errors that caused the insurer to drop them. In the past, Blue Cross did not contact policyholders when their application revealed a problem, something that will also change under the proposed settlement agreement.

The settlement must still be approved by the courts, but Blue Cross has agreed not to retroactively cancel coverage unless the company can prove that a policyholder has “intentionally misrepresented” information on his or her application. In the past, Blue Cross has allegedly canceled policies for minor, seemingly unintentional errors made by policyholders. The practice caused the California Department of Managed Health Care to fine Blue Cross $1 million in March – although the company is disputing that fine.

A Positive Step for Consumers

Industry experts are touting the move as a positive one for consumers and hope that other insurers in California and nationwide follow Blue Cross’s lead. Attorney Bob Scott, a partner with Advocate Law Group, commented on why this settlement is so important.

“Number one, it gives everybody a new look back at the policy that was rescinded. Number two, and most importantly, it’s going to clear up any confusion or argument from the insurance company that they couldn’t allege just an “honest” mistake or misunderstanding or negligence as a basis for rescinding your health care policy based on what you said on your application. They have to show that you intended to deceive them.”

What To Do if You Are Part of the Blue Cross Class Action

If you are part of the Blue Cross class action lawsuit, it’s important to know that you are automatically included in the action, and will be subject to the settlement terms unless you opt out of it. Opting out will allow you to pursue a separate claim of action against the company, including medical bills that were denied or never submitted, attorneys’ fees, economic harm, credit damage that resulted from the inability to pay bills, emotional distress and possible punitive damages. If you are not certain whether you should opt out, it is best to contact a qualified attorney to assess your case.