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Blue Cross of California has agreed to a proposed settlement of a class action lawsuit that affects approximately 6,000 members who purchased individual healthcare policies since 2001. The Blue Cross settlement has many praising the company for doing the right thing, but will it lead Blue Cross and other insurers to do the same thing in other states? Many insurance experts think it’s possible.

The Blue Cross Class Action Settlement

The Blue Cross class action was filed after policyholders had their healthcare coverage rescinded by the company for discrepancies that were contained in their application forms. Many of the discrepancies concerned policyholder’s health conditions from years past that even they could not remember. Blue Cross often rescinded these policies without notice or cause, leaving policyholders to scramble for other insurance and left many to incur outrageous medical bills that they thought would be covered.

The proposed settlement would:

• Allow class members to receive $1,000 and have their rescission reviewed. If the rescission was in error, Blue Cross would cover any medical expenses incurred by the policyholder during the policy period.
• Require Blue Cross to contact policyholders about discrepancies in their application before rescinding their policy.
• Change the burden of proof for policyholders by requiring Blue Cross to prove that policyholders “intentionally misrepresented” information on their application.
• Create new application forms that are easier to complete and would minimize the risk of confusion in the future.

Impact to Healthcare Insurance Industry

According to experts, this settlement is a major victory for consumers - but is it really a sign of things to come? According to Attorney Bob Scott, a partner with Advocate Law Group, “The question is, would Blue Cross apply these same rules in all the other states in which they offer insurance - basically, the other forty-nine? I think there are still some battles to be fought here.”

But what does this really mean to the industry? Scott continues, “We still have to see this change instituted by Blue Shield, PacifiCare, Kaiser, Aetna, HealthNet and others; there’s a whole bunch of these carriers, big ones, which have not got on this train. There’s a lot more cars to hook onto this engine…”

Scott thinks that, due to a concerted effort, some of these cars actually may get hooked because, “…this isn’t just a push by plaintiff lawyers, but a push of the regulators, the Insurance Commissioner, the Department of Managed Health and the like – committed public servants that are pushing every day to get these companies to make changes. We don’t want to stop in California. This is something that has to sweep across the nation because folks in Nevada, Wyoming, New York and Florida should have the same rights under their policies that California residents do.

We’re talking about health care and there could be nothing more important to a family – especially when a major illness strikes – than to have this kind of coverage and not have it yanked away for a suspicious reason.”