Calif. Ignores $1M Fine Of Health Insurer

Regulators Failed To Collect Against Blue Cross Because They Believed They'd Lose In Court

(AP)  California regulators admitted Thursday that for more than a year they didn't even try to enforce a million-dollar fine against health insurer Anthem Blue Cross because it feared they would be outgunned in court.

In early 2007, the Department of Managed Health Care pledged to fine the state's largest insurer for "routinely rescinding health insurance policies in violation of state law."

But they never did.

The department's director, Cindy Ehnes, told The Associated Press on Thursday that, when it comes to rescissions, the agency has had success in forcing smaller insurers to reinstate illegally canceled policies and pay fines, but Blue Cross is too powerful to take on.

"In each and every one of those rescissions, (Blue Cross has) the right to contest each, and that could tie us up in court forever," Ehnes said of the approximately 1,770 Blue Cross rescissions between Jan. 1, 2004, and now.

"They have the largest number of rescissions, so as a practical matter for the department it does present some practical challenges that are different from a Health Net (of California) or a PacifiCare," referring to providers who, along with Kaiser Permanente, have made settlements with the state to reinstate health care coverage.

That means that although Anthem Blue Cross has the highest number of alleged illegal rescissions, it may face the least regulatory consequence simply because of its sheer size, and aggressive legal defense.

Anthem Blue Cross, a unit of Indianapolis-based WellPoint Inc., acknowledged in a statement Thursday that it had seen the March 22, 2007, announcement of the $1 million fine, but noted that "Anthem Blue Cross has not been fined by the DMHC."

The statement went on to say that the insurer is "currently in the midst of settlement discussions."

However, the agency's top enforcement officer, Amy Dobberteen, told the AP on Thursday that after more than a year at the table, negotiations to get patient policies reinstated had failed, and "we are pursuing vigorous enforcement now."

The agency had warning of what it was up against when it issued a $200,000 fine against Anthem Blue Cross for a single rescission in 2006. Dobberteen said the insurer engaged in an exhausting back-and-forth that made it clear that addressing the larger number of rescissions would mean "a very large fight."

The state agency is not the only group to go after Anthem Blue Cross for its rescission practices.

In April, Los Angeles City Attorney Rocky Delgadillo filed a lawsuit that charged the insurer with deceptive practices and unlawful termination of policies. The insurer denied the allegations, saying that it had tried to meet with Delgadillo, but was rebuffed.

City lawyers countered that the insurer had tried to deeply limit the scope of the meetings, so they went ahead and filed suit.

Delgadillo spokesman Frank Mateljan said Thursday that there is no court date set in the suit, and city attorneys have been mired in legal filings since April.

The DMHC fine announcement came on the heels of Gov. Arnold Schwarzenegger's announced comprehensive health care proposal in January 2007, according to gubernatorial adviser Daniel Zingale. Schwarzenegger has spoken out sharply against the practice of rescission, which drops enrollees when they try to make claims on health insurance policies.

"Blue Cross, what they've done is terrible by refusing to go along with these negotiations," said Zingale. "When a company stands outside the fold, then they end up getting the fine and the law."

The governor's proposal failed, the fine remained just a long-ago announcement, and some critics say that's no coincidence.

"This is a fraud on the people of California," said Jerry Flanagan, health advocate for Consumer Watchdog, a Santa Monica-based consumer advocacy group.

"The governor's top regulator talks tough about collecting big fines and then never bothers to ask the company to pay up. In the mind of the governor, it's the best of both worlds: he gets the splashy headlines he likes but he keeps his insurance company pals close."

Anthem Blue Cross, another subsidiary called Arcus Enterprises and their parent company have given the Schwarzenegger campaign more than $256,600 in campaign contributions, according to Consumer Watchdog.

Ehnes and Zingale said the governor had no hand in the failure to enforce the fine.

"I don't go out and do things because it presents some good show," said Ehnes. "To be able to defend the citizens of this state, I have to be able to win in court. I have to make sure that we have defensible positions and we're getting the wins we need for enrollees."

The state's Department of Managed Health Care is the only stand-alone HMO regulatory body in the country, and is tasked with ensuring fair practice for more than 21 million enrollees.

[caliengineer]

But, we the people can use word of mouth, and us small businessmen can "vote with our dollars"- don''t insure with them!

[tbbaot]

California the smorgasboard of leftism proves once again why they are the polar opposite of the rest of the country

[txgrouch2006]

The headline should read

CALIFORNIA HEALTH INSURER IGNORES $1M FINE

Here''s an idea - WHY NOT REVOKE THEIR LICENSE OPERATE, and act like a REGULATOR instead of a CORPORATE LAPDOG...

[lorinkundert]

Outgunned my A$$ the fine was already levied, no court would have tossed it out. this is about some under the table deal.

[dakotaclark]

Hmmm...

Regardless of how big the offender, I believe there should be a compelling principle to do what is right.

Insurance companies that routinely cancel customers should be informed they are no longer welcome to conduct business in that particular state.

It sounds like State of California regulators need to grow a spine and get busy with some of the court actions, while finding a way to evict this particular insurer.

Furthermore, the governor should be leading the charge on this. This is happening on his watch!

What in the hell is the matter with him?

[randynason]

It''s pathetic that our political appointees don''t act because they are afraid they will be outgunned. They shold act anyway, as a show of intent and to draw attention to the problem. To do nothing is nothing short of giving permission.

[randynason]

The "greatest nation in the world" cannot enforce a simple law, when the company flexes its'' corporate arm and the courts knuckle under to political influence. What sets us apart from any other second-rate dictatorship?

[txgrouch2006]

RandyNason wrote
The "greatest nation in the world" cannot enforce a simple law
---------------
When a state has rendered itself unable to enforce its own regulations because its own laws have made the state subject to case-by-case lawsuits, then

THAT STATE HAS SCREWED UP ITS OWN LAWS and effectively neutered itself.

[txgrouch2006]

Arnold Schwarzenegger: born 1947
Hillary Clinton: born 1947
George W Bush: born 1946
Bill Clinton: born 1946
Joseph Hazelwood: born 1946
60% of Congress: born 1946-1964

BABY BOOMERS ON PARADE!

[duffyn]

Well, under bush and by the natural process of get bigger or be eaten, corps obviously have too much power. This has happened b4 snf they (the corporations) will be reined in. But first they have to get away with rediculous things such that we see here.

[txgrouch2006]

duffynight wrote
get bigger or be eaten
--------------
Sounds JUST like being a "little kid" around a bunch of BABY BOOMERS.

Get rid of the boomers, and many problems go away...

[csmith1948]

txgrouch2006
"Get rid of the boomers, and many problems go away..."

Maybe I missed something but what do baby boomers have to do with it? This is about an insurance company dropping coverage when claims are filed.

[cyberus-2009]

----
The governor''s top regulator talks tough about collecting big fines and then never bothers to ask the company to pay up. In the mind of the governor, it''s the best of both worlds: he gets the splashy headlines he likes but he keeps his insurance company pals close
----

A Republican administration talking tough with a mallet in one hand hold holding hands under the table?

Who would ever believe that? (sarcasm intended)

[cyberus-2009]

----
"In each and every one of those rescissions, (Blue Cross has) the right to contest each, and that could tie us up in court forever,"
----

Step One: Pass a Cost of Litigation Appeal Recovery Act.
Step Two: Let them appeal each and every case, if the company loses the appeal (most likely) they must pay the governments legal costs before they can appeal the next case.

My bet is the fine will get paid,

[txgrouch2006]

cyberus wrote
My bet is the fine will get paid,
----------------------
How about do what MOST OTHER REGULATORY AGENCIES DO - an enforcement action is NOT GROUNDS FOR A LAWSUIT in the first place, at least not until exhausting all appeals within the agency. And the agency can call for audits that make appeals VERY EXPENSIVE.

Or, if the cases do make it to court, combine them together into only ONE LAWSUIT.

It is utterly Californian (and aberrant) to allow EACH ENFORCEMENT ACTION to become a SEPARATE LAWSUIT.

[txgrouch2006]

cyberus wrote
In the mind of the governor, it''''s the best of both worlds: he gets the splashy headlines he likes but he keeps his insurance company pals close
---------------
WHO''S the governor of California?

Arnold Schwarzenegger: born 1947
Hillary Clinton: born 1947
George W Bush: born 1946
Bill Clinton: born 1946
Joseph Hazelwood: born 1946
60% of Congress: born 1946-1964

BABY BOOMERS ON PARADE!

[hawksprings]

There''s not enough information in this story to have an informed opinion.
The details are very vague.
And I''m sure this story has been written that way to make Blue Cross the bad, evil corporation.
Some of these rescissions could have been because the applicants lied on thier application. But that would not fit the template of the story.

Maybe we should be giving kudos to Blue Cross for not allowing the People''s Republic of California to shake them down.

[cdfoxtrot]

Maybe we should be giving kudos to Blue Cross for not allowing the People''''s Republic of California to shake them down.

Posted by HawkSprings

Are you for real??? Or are you some a$$wipe who works for BlueCross?

[o_nolan1]

This issue proves exactly why private health insurance does not work. Isn''t the health of citizens a right and not a privilege? This should not be an issue based on profit. The profits these companies make on the backs of the sick and defenceless is disgusting. These companies have a focus on denying care to save money. It is even worse that the government of California thinks money is an issue in fighting for what is right. Even more disgusting.

[rudy654-2009]

When oh when are we finally going to be free of corporate control, manipulation and corruption??? Certainly not under don''t-say-anything-or-do-anything Bush.

[rudy654-2009]

Posted by o_nolan1 at 12:29 AM

Excellent post. You should know that Hannity and Limbaugh have publicly stated that health care is not a right, regardless what you pay.

[rudy654-2009]

Posted by HawkSprings at 09:43 PM

Soon, we are going to have national health care, and it is my hope that you will be the recipient of some badly needed mental health intervention.

[prairiefox1]

SIMPLE! HAVE THEM PAY THE FINE AND IF NOT THEN FORBID THEM FROM DOING BUSINESS IN THAT STATE!
THERE ARE OTHER INSURANCE COMPANIES!

[prairiefox1]

SIMPLE! HAVE THEM PAY THE FINE AND IF NOT THEN FORBID THEM FROM DOING BUSINESS IN THAT STATE!
THERE ARE OTHER INSURANCE COMPANIES!

[drivelphobe]

Blue Cross doesn''t just rescind policies without a good reason. The implications are disastrous, like they were with disability claim denials of Provident Life and Accident/UNUM.

Rescissions are usually based on applicant/agent misstatements, lies or fraud. The companies have every right to protect themselves from wrongful claims.

Insurance is not a right. It''s for those who qualify and can afford it.

[tngreen]

I tell you what: if you failed to pay your state income taxes, I''ll bet that California could figure out how to get their money. Why don''t they take it straight from Blue Cross'' bank account? I''m not buying the Department of Managed Health Care''s excuses.

[anonymous101-2009]

It''s the people''s ignorance why Blue Cross is getting away with this. We all know that national health care is not the solution either. -- People fail to educate themselves in health care when there are so many loop holes out there. Instead they shop for their health insurance based on price when it''s far more complicated than that. Blue Cross would rather take your money than go through your application and actually do what is called "underwriting" before giving you a policy, which is "ILLEGAL". So when there is a major claim filed, they go back to that application and state, "oh we found something on your medical records so therefore, we will drop you". Yes! Blue Cross drops your policy when you need it the most! So yes, this is the main point of this article. So the next time you decide on looking for health insurance, you should be weary about filling out an application without anyone guiding you through it because it will bite you in the a$$ when it''s time for you to file a major claim. People only know how their insurance coverage works when it''s time to use it. Otherwise, they will keep taking your money until a major illness or accident happens to you. Then it''s a rude awakening and you find yourself either bankrupt or uninsurable due to some major pre-existing condition, and you can''t get any other insurance company to insure you because you are sick.

[edintex]

California should advertise for top notch law firms to bid on representing them against Blue Cross. The same firm could also start a class action on behalf of the affected people. Blue Cross has deep pockets. You KNOW there are large law firms out there that are fully capable and willing to take on Blue Cross and win.
At the same time, California could pull Blue Cross license to do business in California if they dont pay.

[okthatsit]

Looks like it''s time to create laws that will throw who''s responsible in jail, instead of a fine. 3 strikes you''re out?

LABOR laws are also rigged, giving the rich companies the edge. These corporations do the numbers. They know they make more money breaking the law. The fine is so low, they''re laughing to the bank.

[jon2012-2009]

Even when you have, and can afford, health insurance, the predatory practices of health care insurers--in the form of service denials and policy cancellations--render suspect the claim we don''t have health care rationing in the U.S. The universal coverage citizens enjoy in other industrialized countries doesn''t provide care for elective procedures without long waits but they get it in the end.