Calif. doctors support challenge of Blues rescissions

A case brought by the city of Los Angeles comes as federal lawmakers scrutinize insurer practices of canceling members' coverage.

By Amy Lynn Sorrel — Posted Sept. 8, 2009

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The Los Angeles City Attorney's lawsuit against Anthem Blue Cross of California over alleged illegal policy cancellations could help ensure relief to patients and physicians harmed by such rescission practices, according to a friend-of-the-court brief filed by the California Medical Assn. and Los Angeles County Medical Assn.

The case comes at a time when federal lawmakers, looking to shape health system reform, continue to scrutinize insurers' practices of rescinding members' coverage after they become sick and incur costly medical bills.

The physicians' brief, filed in July in the 2nd District Court of Appeal, was prompted by a March trial court ruling that rejected Blue Cross' claims that Los Angeles city officials did not have the authority to enforce a state law governing health plan regulation. The city invoked the statute in a lawsuit accusing Blue Cross of unfair business practices and false advertising for allegedly improperly rescinding members' valid policies.

Blue Cross appealed the Los Angeles County Superior Court decision, arguing that state law left it up to California's HMO regulator, the Dept. of Managed Health Care, to enforce insurance regulations. In 2008, Blue Cross agreed to a $10 million settlement with the DMHC over the rescissions. The company, while admitting no wrongdoing, also reinstated members' coverage.

But physicians say the DMHC's fines and settlements have done little to deter abusive insurance practices, and they want to see the lawsuit go forward.

"Blue Cross put patients at risk both financially and medically at a time when they were in the most need of their insurance," said Robert A. Bitonte, MD, the county association president. "Physicians and hospitals were left holding the bag for services rendered in good faith, often with prior authorization."

California physicians also are demanding stronger legislative action. A CMA-sponsored bill pending in the state Senate would subject health insurers to an independent external review before plans could deny or rescind members' coverage.

Blue Cross and other insurers have said that rescissions occur only when patients misrepresent their medical history on an application. The insurance industry also has said health system reform should include an individual insurance mandate and other changes that would make rescissions unnecessary.

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