California appeals court rules against insurer's rescission practices

Meanwhile, doctors, patients and insurance regulators are challenging other health plans.

By Amy Lynn Sorrel, AMNews staff. Feb. 11, 2008.

A California appeals court dealt another blow to health plans over their policy cancellation tactics.

The 4th District Court of Appeal unanimously said insurers have a responsibility to make sure patients' policy applications are complete and accurate before issuing coverage -- not after expensive claims come in the door. Judges said plans cannot revoke patients' policies unless they fully investigate pre-enrollment forms up front or insurers show patients intentionally misled them.

The Dec. 24, 2007, ruling allows a family to sue Blue Shield of California for dropping its coverage after approving more than $450,000 in medical care. Blue Shield denies any wrongdoing and is asking the court to reconsider.

The decision comes at a time when state insurance regulators, physicians and patients are casting a wary eye on health plans' rescission practices. It also could pave the way for similar lawsuits filed on behalf of doctors and patients affected by alleged illegal policy terminations.

The ruling closely followed a similar one against Blue Shield on Dec. 4, 2007. The 2nd District Court of Appeal unanimously ruled that the practice of reviewing individuals' applications after claims are submitted and then pulling the coverage based on alleged errors is prohibited unless insurers follow specific pre-enrollment criteria. That case is being reheard.

Doctors and lawyers involved in the issue are encouraged the courts are willing to take insurers to task.