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Jan 30, 2012 by |

California Blues will pay Los Angeles $2 million to settle rescission lawsuit

California Blues will pay Los Angeles $2 million to settle rescission lawsuit

American Medical News

Health system reform made rescinding coverage illegal except in cases of fraud. The company has not admitted wrongdoing.

The Blue Shield of California insurance company has agreed to pay $2 million to the city and county of Los Angeles in a settlement. Blue Shield and other insurers were sued by the Los Angeles city attorney’s office in 2008 with allegations that Blue Shield improperly rescinded and denied coverage to hundreds of its members before 2008. Rocky Delgadillo, City Attorney at the time, claims that Blue Shield retroactively canceled covers for members who became seriously ill to save the cost of paying those members’ medical bills.

In August 2010, California law including the Patient Protection and Affordable Care Act made it illegal for insurance providers to rescind coverage to their members except in cases of intentional fraud.

Blue Shield has not admitted to wrongdoing in this case, but say they are settling “to avoid the cost and distraction of litigation.” The Los Angeles City Attorney’s office also sued Health Net and Anthem Blue Cross of California for similar rescission and coverage denial allegations.

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