Blue Shield of California's Recission Case
The L.A. Times has another chapter in the continuing saga of health insurance rescissions in California. This time it is Blue Shield of California that is under the magnifying glass.
Steven and Cindy Hailey were left with medical bills of over $450,000 when Steven was badly injured in a car accident in 2001. Then Blue Shield took a closer look at Cindy's representations about Steven's health on their application for health insurance submitted a few months before the accident. It found that Cindy failed to accurately list on the application that Steven's weight was 285, not 240 as she stated. Together with omitting any reference to his headaches and hypertension, Blue Shield argued the misstatements gave it the right to rescind the policy and that's what it did.
The crux of the case is whether Blue Shield has any obligation to demonstrate that an applicant's erroneous representations are more than innocent misstatements before it can rescind. The insurer's position is that any misstatement, whether intentionally made or not, gives Blue Shield, and other California health insurers, the right to revoke coverage at a later date.
The trial court ruled in favor of Blue Shield and ordered the Hailey's to repay over $100,000 that Blue Shield paid out before it rescinded. The case is now pending on appeal and the appellate court has invited consumer groups, industry representatives and government regulators to provide amicus curiae briefs to assist the court in knowing the subtleties and ramifications of its ruling.
In the meantime, the Hailey's have moved to Oklahoma to be closer to family that can help in dealing with Steven's injuries. He is completely disabled. Cindy struggles to make ends meet with her take home pay of $1,714. That's what's left after taxes and the $680 a month Blue Shield garnishes from her wages to repay the $100,000 they paid to the healthcare providers before the rescission.