12/13/07 – Steve Poizner, California’s Insurance Commissioner, announced today that he is seeking $12.6 million in fines and penalties from Blue Shield of California Life & Health Insurance Company, one of California’s largest insurance companies for over 1,200 violations.

Poizner’s announcement

Poizner’s announcement has stunned Blue Shield who, at Poizner’s request, recently refunded $1 million for claims that should have been paid. The $12.6 million fine stems from a 2004-2005 insurance exam that uncovered healthcare rescission violations and irresponsible claims processing. According to Poizner’s press release (www.insurance.ca.gov/0400-news/0100-press-releases/0060-2007/release126-07.cfm), Blue Shield’s violations 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
• Reference to ERISA standards when not applicable

Poizner’s comments

Poizner’s vigilance to go after California’s largest insurance companies for improper claim handling processes and bad faith insurance practices is a victory for consumers who often feel as though they have no recourse against such large companies. Poizner said:

Blue Shield committed serious violations that completely undermine the public trust in our healthcare delivery system. 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.

Blue Shield’s response

Duncan Ross, the president of Blue Shield, responded to Poizner’s allegations in his own press release (www.blueshieldca.com/bsc/newsroom/pr/CDIStatement_121307.jhtml) and said:

We are outraged by the excessive penalties for non-substantive issues. They are not justified by the facts and we will fight them vigorously. Today's allegations by the California Department of Insurance represent a radical departure from the department's widely accepted and longstanding interpretation of the law.

Insurers have a duty to treat their policyholders in good faith and deal with them fairly. Unfortunately, many do not. If you’re insurance company has acted in bad faith, contact an attorney whose practice focuses in this area of law to discuss your options. For a free consultation with an experienced attorney, please click here.