Canceled Policies Prompt Lawsuits

Times Staff Writer

In 13 lawsuits filed Thursday, former policyholders complained that two health plan operators systematically dumped members after receiving bills for their medical care.

The complaints, filed in Los Angeles, Ventura and Sonoma counties, join 10 lawsuits filed last month alleging that Blue Cross of California improperly canceled policies of sick members. All of the suits were filed by William M. Shernoff, a Claremont attorney who specializes in such litigation.

Three of the suits filed Thursday, however, accuse Blue Shield -- a not-for-profit health plan operator -- of similar conduct.


All of the allegations concern individual policies, not group or employer-sponsored coverage.

The lawsuits allege that once individual policyholders incurred medical expenses, the companies looked for ways to drop them to boost their bottom lines. The several former policyholders allege that they were dropped for trivial or inadvertent omissions on their applications.

Plaintiff Michael Norris, for instance, said he was stuck with $15,000 in bills when Blue Cross retroactively canceled his son’s coverage after a surgery.

“It’s outrageous that health insurers dump policyholders that cost them too much money,” Norris said. “Not only does this practice result in huge unpaid medical bills and financial hardship for patients when doctors and hospitals try to collect, it increases emotional stress on the patient and the family when they are most vulnerable.”

Blue Cross parent WellPoint Inc., the nation’s largest health plan operator, declined to discuss the lawsuits. But the company is “confident that we are acting appropriately and consistent with our legal obligations to our members,” spokesman Robert Alaniz said.

All insurers guard against policyholders who fail to disclose their medical history when applying for coverage, he said.


Blue Shield officials said they had not seen the lawsuits and could not comment.

Jerry Flanagan of Santa Monica-based Foundation for Taxpayer and Consumer Rights said it had received complaints about cancellations involving several companies.

“We suspect this is a much wider problem,” Flanagan said. “We’ve gotten calls from Nevada and West Virginia.”

The state Department of Insurance, which launched an investigation into the Blue Cross complaints last month, will hold a hearing June 1 in Los Angeles on the company’s profitability, which is three times the market average on some of the types of insurance it sells.

Commissioner John Garamendi said he wanted to find out whether there was any connection between the high profit and allegations that the company was systematically dumping sick members.

“This may be one of the reasons Blue Cross has such a very, very high profit margin on these products,” Garamendi said.

California Department of Managed Health Care spokeswoman Lynne Randolph said the agency would look into the new allegations as part of a larger probe into cancellation complaints.


The agency recently put a notice on its website in an effort to raise awareness among consumers that managed care plans are required to give policyholders 15 days’ notice of a cancellation, and policyholders can ask the agency for a review.