Blues stops asking doctors for rescission help

After revelations that it was asking physicians to help the company find reasons to cancel members' policies, WellPoint-owned Blue Cross of California in February said it would stop sending letters asking doctors to review patients' insurance applications.

But repercussions of its attempts to get physicians to cooperate in the plan's controversial attempts at insurance rescission are just beginning.

California State Assembly Member Hector De La Torre drafted legislation that would require health plans to gain final approval from the Dept. of Insurance or Dept. of Managed Care before cancelling policies. Later, Los Angeles City Attorney Rocky Delgadillo launched his department's own investigation into health insurers' practices, putting up a Web site (link) for consumers and physicians to send information about possible malfeasance.

The issue also caught the attention of Calif. Gov. Arnold Schwarzenegger, who said it was another indication of the need for comprehensive health system reform. "People who are not insured have to live in fear, and people who are insured have to live in fear," he said. "That is outrageous."

Shortly after the governor's remarks, Blue Cross announced that it would stop sending the letters, saying it had "determined this letter is no longer necessary, and in fact was creating a misimpression and causing some members and providers undue concern."

A copy of the letter obtained by AMNews said in part:

"We ask for your assistance to help identify medical omissions because you, being the primary care provider, will have first-hand knowledge of services provided and/or requested."

The letter encouraged doctors to look for evidence of preexisting conditions by reviewing the patient's health history questionnaires, requests for specialty care, and even the date of a member's last menstrual period before a pregnancy to ensure that it didn't predate the application for coverage.

Blue Cross of California spokesman Nick Garcia said the letters were sent to physicians who contracted with the plan under individual HMO capitated contracts. The letters went to those doctors because "that's the agreement we have with those medical groups," he said.

Garcia said the letters were sent out regarding fewer than 1,000 member applications for individual HMO coverage each month, out of 300,000 individual policy members added to Blue Cross' rolls each year.

"Blue Cross of California highly values the trust of its members and understands the personal relationship members have with their physicians and medical groups," he said in a statement. "It is our responsibility to ensure all member records are accurate and up to date both for the benefit of our members and the providers in our HMO network."

The letters had been sent out "for several years" without complaint, Garcia said.

American Medical Association Board of Trustees Chair Edward L. Langston, MD, a family physician from Lafayette, Ind., said patients would be less likely to share vital information with their doctors if they knew physicians were telling insurers about patients' health history.

"The foundation of the patient-physician relationship is trust, and for health insurers to implement policies forcing doctors to break this trust and police patients is wrong," he said in a statement. "The role of the physician is to care for the patient, not serve as an insurance agent."

California Medical Assn. President Richard Frankenstein, MD, said the organization welcomed Blue Cross' decision, and he was glad regulators were paying close attention to its activities. "We're happy that they're stopping, but we still see this as one piece of a pattern and practice to avoid paying bills," he said.

Steve McDermott, CEO of Hill Physicians, a 2,600-physician independent practice association in northern California, said, "A lot of our doctors reacted very negatively" to the letter. But he said insurance companies were in a "difficult situation" regarding individual plans because of a Dec. 24, 2007, appellate court ruling. It said Blue Shield had to "make reasonable efforts to ensure the subscriber's application was accurate and complete" and decide relatively quickly whether to insure a person, and couldn't retrospectively review an application after months or years had passed, or expensive claims prompted a review.

Blue Cross' decision to stop sending the requests for rescission assistance came less than a year after the WellPoint subsidiary was fined $1 million by the California Dept. of Managed Care for "routinely rescinding health insurance policies in violation of state law." It also was fined $200,000 in 2006 for similar allegations.

Blue Cross settled a class-action lawsuit involving 6,000 patients over its alleged improper policy cancellations in May 2007. The company denied wrongdoing but said it would cancel policies only if individuals "intentionally misrepresented" information such as preexisting conditions.

Other plans are under fire for rescissions in California.

Blue Shield is fighting a class-action lawsuit over the same types of allegations. It was fined $12.6 million in December 2007 by the California Dept. of Insurance over allegations that included improper rescissions. The plan is fighting that fine.

Last fall, Health Net agreed to pay a $1 million fine to the Dept. of Managed Health Care over rescission allegations. The company acknowledged it had failed to disclose one employee's incentive pay depended in part on her identifying policies that could be cancelled over omissions from coverage applications.

In October 2007 the Dept. of Managed Health Care and the Dept. of Insurance announced the two agencies would propose more stringent regulations to protect consumers from improper policy cancellations.

Draft versions of the new regulations are now in the hands of various stakeholders, Dept. of Managed Health Care spokeswoman Lynne Randolph said.

Those reviews were still informal in February, and a more formal rule-making process is expected to follow in the coming months, she said.

The new regulations do not require legislative action because they are interpretations of existing statute, she said.