Maternity Exclusions in the Waiting Room Over Legality Issue

After learning that she was pregnant in early 1993, Dottie Pickett was surprised when her health insurer refused to cover her prenatal and hospital expenses. Her policy had a 10-month “waiting period” for certain maternity coverage.

Now the Orange County woman is suing her insurer, Blue Cross of California, saying the company’s maternity policies are illegal and discriminatory against women. Pickett, 34, said she got stuck with more than $4,000 in hospital and other bills after her daughter, Carlton, was born in August 1993.

Officials at Blue Cross, one of the state’s biggest health insurers, contend that their policies are legal. And they note that other insurers have had similar maternity coverage restrictions in place for years.

However, such policies may be a thing of the past after a top California regulator said earlier this month that maternity exclusions violate state law.

Blue Cross is one of several California health plans with policies that impose waiting periods of up to one year, or extra deductible payments, for maternity benefits for people who buy individual health plans.

The maternity exclusion affects about 8 million Californians who must buy their own health insurance because they do not have coverage through an employer or government program such as Medicare or Medi-Cal.

Others with such maternity-exclusion policies include Blue Shield of California and FHP/TakeCare. Two big health insurers that do not have such exclusions are Foundation Health Corp. and Kaiser Permanente.

The state Department of Corporations began reviewing the issue after receiving a letter from John Ramey, executive director of the California Managed Risk Medical Insurance Board, a state agency that provides low-cost insurance to pregnant women without medical coverage. Ramey said it was his agency’s opinion that such maternity exclusions were unlawful and that it was unfair that some insurers were imposing waiting periods for the benefits while others were not.

In a letter to Ramey dated Jan. 2, Corporations Commissioner Gary Mendoza said such waiting periods are in violation of state law and that certain health plans had been advised of “compliance problems.” On Wednesday, Mendoza declined to elaborate on the letter, except to say that he will issue an official policy statement on the matter soon. Several health insurers said they have been told by his office that the maternity exclusions will no longer be permitted.

Executives at Blue Cross, Blue Shield and FHP said they don’t believe they have been doing anything illegal and noted that the Department of Corporations, which regulates health maintenance organizations, has approved policies with the maternity exclusions in the past.

“Our one-year waiting period was something the Department of Corporations was aware of, and it has been in effect for a number of years,” said Mike Odom, a spokesman for San Francisco-based Blue Shield. “It’s simply a matter of a new interpretation” by the state.

But a spokesman for an HMO that does not have the maternity exclusion said his company interpreted the state law differently.

“We believe there is some potential legal liability for companies that denied these benefits to women over a period of time, and we didn’t want to expose ourselves to regulatory sanctions or lawsuits,” said the spokesman, who did not want to be identified.

Frank Ettin, a Blue Cross vice president and general counsel, said Mendoza’s agency has incorrectly interpreted the law and that maternity benefit exclusions are permissible under state law. Woodland Hills-Blue Cross is the state’s biggest issuer of individual health policies, with more than 807,000 members.

Such policy exclusions are a “pretty important” method of reducing medical costs and ensuring that individual plans remain affordable, Ettin said. Blue Cross and other insurers said the waiting periods are intended to discourage people from signing up for health coverage only to get maternity benefits.

“The concern is people who buy the coverage primarily as a way to finance starting a family and then don’t continue with the coverage,” Ettin said.

FHP and Blue Shield said they will comply with Mendoza’s decision. Blue Cross’ Ettin declined to say what the company’s response would be.

Meanwhile, Blue Cross faces a lawsuit filed on behalf of Pickett and other Blue Cross members that alleges that the insurers’ actions were unlawful and discriminated against women. Filed Jan. 18 in Los Angeles County Superior Court, the suit seeks certification as a class action and more than $200 million in pregnancy-related benefits from Blue Cross.

The suit, filed by Los Angeles attorneys Robert H. McNeill Jr. and Jay R. Taylor, accuses Blue Cross of a “pattern of intentionally targeting pregnant women and their unborn and newborn children for unlawful exclusion and reduction in health coverage.”

Blue Cross officials declined to comment on the suit.