California doctors look to join suit accusing insurer of rescinding coverage

Blue Cross says the practice is legal when patients misrepresent their medical history.

By Amy Lynn Sorrel, AMNews staff. Jan. 29, 2007.

The California Medical Assn. is joining patients and hospitals in taking the state's largest insurer to task for what they believe amounts to the company inappropriately abrogating patients' individual health coverage and then skipping out on the bills for authorized medical care.

Physicians are asking to join a class-action lawsuit that the state's hospitals filed against Blue Cross of California last October, not long after patients filed a separate class-action suit in May 2006.

The medical community and patients accuse Blue Cross of digging for supposed misstatements or omissions on patients' policy applications after they have been granted coverage, and then retroactively cancelling patients' benefits to avoid paying steep claims.

The lawsuits underscore doctors' ongoing frustrations with managed care practices that undercut reimbursement at the expense of patient care.

The lawsuits rely on California law that prohibits insurers from repealing health coverage unless patients fraudulently misrepresent their medical history. State insurance regulations also forbid health plans from denying payment for medical treatment given in good faith after it was approved.

"The whole health care system depends on doctors and hospitals and patients being able to rely on the representations of health plans as to patients' coverage, and people make decisions what to do based on those representations," said Catherine I. Hanson, CMA vice president and general counsel. "It's absolutely unworkable to be forced to constantly wonder whether the authorization is meaningful or not."