Calif. to seek fines against Blue Cross, Shield

Each case of an improperly canceled policy carries the possibility of a $200,000 maximum fine against the state's largest insurer. The potential $354 million total would dwarf the now-abandoned 2007 fine.

"The terrible practice of rescissions has caused irreparable harm to consumers by making some individuals responsible for large medical bills and hindering their ability to get and keep health coverage," said Cindy Ehnes, head of the Department of Managed Health Care. "Our goal is to fight for the consumer in each and every case and to use all enforcement authority available under state law."

Ehnes said Monday that the state's regulatory agency will also re-evaluate about 400 Blue Shield of California rescissions. At issue is whether the insurers systematically canceled patients' policies when they became pregnant or chronically ill or made large claims.

The renewed enforcement effort comes after The Associated Press reported last week that the state didn't pursue the announced fine against Anthem Blue Cross because it was intimidated by the insurer's legal resources.

After announcing the million-dollar fine against Anthem Blue Cross in March 2007, regulators instead tried reach a negotiated settlement to reinstate health insurance policies but failed.

"We can bring the full force of fines, penalties and all enforcement powers of the state to protect the patients that (insurers) refused to voluntarily do right by," said Daniel Zingale, an adviser to Gov. Arnold Schwarzenegger and former head of the regulatory agency.

In separate but similar statements Monday, Anthem Blue Cross and Blue Shield of California both called for independent third parties to take a hand in deciding rescission cases.

Anthem Blue Cross noted that during negotiations with the regulator, they previously offered "at (the insurer's) expense, expedited independent third-party reviews."

But such reviews too frequently side with insurers, said Jerry Flanagan, health advocate for Consumer Watchdog, a Santa Monica-based consumer advocacy group.