Blue Shield of California gets tough over late payments

Amid a national debate on how to make the healthcare system friendlier and more accessible, and as millions of people grapple with the loss of jobs and homes, what does insurance heavyweight Blue Shield of California do?

It decides to take a key benefit away.

The company has notified individual policyholders that their coverage could be immediately dropped if they miss a single payment -- or so it seems.

Blue Shield says in a letter to customers that they can reapply for insurance, but with potentially higher premiums and stricter conditions.

This represents a significant change from Blue Shield’s former practice of giving customers two special grace periods annually to make up for missed payments without any change to coverage or premiums.

West Los Angeles resident Pam Paige received one of the letters recently. She told me it looked as if Blue Shield was trying to get rid of her business.

“The only conclusion I can come to is that they’re trying to find ways to cull through their patients, and they’re using this as a way to go after people who are financially strapped and find out whether they’re sick or not,” Paige said.

That may indeed be the case. But the changes Blue Shield says will take effect Jan. 1 won’t be quite as dire as the notification letter indicates.

That’s partly because of a California law requiring minimum grace periods that the company neglected to tell customers about.

It’s also because Blue Shield will continue providing 28-day grace periods for customers who miss payments, although this too was omitted from the letter and an accompanying four-page excerpt from the company’s contract.

What customers are losing is an additional 15-day interval, offered twice a year, that would extend the grace period to 43 days.

None of this is made clear in Blue Shield’s letter or contract excerpt.

“Blue Shield will no longer reinstate policies that are canceled for nonpayment of premiums,” the letter says. “This means if your premiums are not paid in full and received by the due date, your policy will be canceled and you will need to re-apply for coverage.”

Jason Kimbrough, a spokesman for the California Department of Insurance, said that’s not just misleading -- it’s just plain wrong.

“California insurance code requires a grace period before an insurance policy is canceled for nonpayment,” he said. “It all depends on how the premiums are paid.”

Individual policies for which premiums are paid on a weekly basis require a minimum seven-day grace period, Kimbrough said. Policies paid on a monthly basis require a grace period of at least 10 days. And policies paid on an annual basis require at least 31 days.

Aron Ezra, a Blue Shield spokesman, said the policies affected by the contract change are paid monthly and thus require at least 10-day grace periods.

However, he said Blue Shield’s practice has been to give 28-day grace periods after a missed payment. That isn’t changing, he said.

What’s changing is the loss of the additional time.

Ezra said the company was aware that its letter caused “concern and confusion” among customers with individual insurance policies. He said new letters would be mailed out this week clarifying things.

“The new letter will specifically remind people that they have a grace period, as required by law,” Ezra said.

What it won’t do is explain why Blue Shield is taking away the additional 15-day intervals that it had previously offered.

Such leeway was no doubt much appreciated by individuals and families struggling to get by amid the worst economic downturn in decades. Many people are living paycheck to paycheck -- assuming they still have a paycheck.

So why is Blue Shield turning the screws?

“It’s meant to make everything uniform,” Ezra replied. He declined to elaborate.

Presumably that means Blue Shield, with more than 3.4 million customers, doesn’t want to be any more generous than most other private insurers. Anthem Blue Cross, for example, says it won’t offer any more than the state-mandated grace period.

Kaiser Permanente, on the other hand, offers an impressive 50 days’ grace period after a payment is missed before a policy will be canceled. Apparently Blue Shield doesn’t want to be uniform with them, or even close.

According to the contract excerpt mailed to customers, if you previously missed any payments within the time allowed (including the bonus 15 days), coverage would resume “without a change in premiums and without consideration of the medical condition of you or any dependent.”

The new contract language says that once the grace period lapses, “you and/or your dependent may be declined coverage . . . based upon your and/or your dependent’s medical condition.”

It also says that even if coverage is resumed, “different premiums may apply.”

Blue Shield, it should be noted, has positioned itself throughout the healthcare reform debate as the private insurer with a heart. Its chief exec, Bruce Bodaken, has been a prominent advocate of universal coverage (albeit offered by private insurers).

He testified before Congress last year that the growing number of uninsured people is a primary cause of problems throughout the healthcare system.

“Only by extending coverage to all Americans can we solve those problems,” Bodaken said. “It is good economics, and frankly, it is the right thing to do.”

The same could probably be said for giving people a little more wiggle room for paying bills at a time like this.

The yanking away of additional grace-period time follows Blue Shield being ousted in October from California’s high-risk medical insurance pool, which offers health coverage to people who can’t get insurance anywhere else. State officials decided that Blue Shield’s premiums were simply too high.

According to an analysis for the state compiled by consulting firm PricewaterhouseCoopers, Blue Shield’s proposed rates for next year would have been “1.5 to nearly 3 times higher than those of the other plans” in the high-risk program.

The grace-period change also comes after last year’s announcement that Blue Shield and Anthem Blue Cross agreed to pay a total of $13 million in fines after canceling the policies of more than 2,000 Californians after they became ill.

Neither company admitted any wrongdoing as part of the settlement.

Paige, the Blue Shield customer, said she didn’t know which was worse: that the company is making a customer-unfriendly change amid the healthcare reform debate, or that it’s doing so smack dab in the middle of the holiday season.

“There’s not even a pretense of compassionate service,” she said. “It’s like they’re just thumbing their nose at everyone.”

But at least they’re uniform.

David Lazarus’ column runs Wednesdays and Sundays. Send your tips or feedback to david.lazarus@latimes.com.