Los Angeles City Attorney Rocky Delgadillo on Wednesday filed a complaint against Blue Shield, alleging the medical insurer unlawfully rescinds policies. In April, he filed a similar complaint against Blue Cross. The lawsuit coincides with California's effort to force Blue Shield and other insurers to reinstate coverage for thousands of customers tossed off their insurance rolls. KPCC's Frank Stoltze reports.
Frank Stoltze: The L.A. City Attorney alleges that Blue Cross approved applications from customers using intentionally misleading forms.
Rocky Delgadillo: They are essentially a trap that maximizes the possibility of innocent errors or omissions which Blue Shield can later use as a pretext for retroactively cancelling the insurance policy.
Stoltze: Delgadillo contends that when policyholders incurred big medical expenses, Blue Shield conducted investigations into their medical histories to find alleged discrepancies in the applications, and then rescinded their policies.
He said the company has illegally rescinded at least 850 policies in seven years. Jerry Flanagan is with Santa Monica-based Consumer Watchdog. He's studied Blue Shield and other insurers' applications and found broadly-worded and vaguely-designed questions designed to catch customers off guard.
Jerry Flanagan: For instance, a question might ask, "Have you ever had a symptom for which you have not sought treatment or an opinion from a doctor in the last 10 years?" Well, what does that mean? Is that a knee ache, a headache, or is it actually a disease, or treatment, or ailment? And, as a patient, how can you remember every time you've had a quote-unquote "symptom?"
Stoltze: Delgadillo pointed to the case of Ana and Gus Simoes, dairy farmers from Chino. He said Blue Cross illegally refused to pay Ana's medical bills and rescinded their policy after Gus inadvertently omitted from his application that he had high cholesterol.
Gus said he had thought he was taking medication to prevent high cholesterol. Ana Simoes said they've been left with tens of thousands of dollars in medical bills, and a lot of stress.
Ana Simoes: I had surgery, and when I came home, I was still recover, and we started getting letters in the mail from the doctors and the hospital, and they were saying that we were not covered. I got very upset, very nervous; we contact the agent, and then they try to contact the insurance, and they never respond.
Stoltze: A spokesman for Blue Shield said Delgadillo didn't have "a shred of evidence" that the company had acted improperly. He said the insurer's application forms have been approved by two state regulators, and that the company rescinds a fraction of one percent of individual and family policies.
The Blue Shield spokesman accused Delgadillo of seizing on a hot topic in an attempt to advance his political career. Some praised the City Attorney's complaint against Blue Shield.
Bryan Liang: I really applaud him for doing this because it's a real challenge to take on these big insurers.
Stoltze: Bryan Liang heads the Institute of Health Law Studies at California Western School of Law in San Diego. He said state regulators have fined insurance companies, but haven't always collected the fines, and they've been slow to force insurers to conduct complete medical background checks on people before they issue policies.
Liang: The problem isn't that the rules aren't there. The rules are there. The problem is enforcement of the law.
Stoltze: Delgadillo said his complaint seeks to force Blue Shield to reinstate the rescinded policies. It also asks for civil penalties of $2,500 for each violation of the Unfair Competition Law and False Advertising Law. That, he said, could add up to hundreds of millions of dollars.