Nonetheless, Blue Cross’ agreement to stop rescinding policies when applicants make honest mistakes and to consult with the applicants if any questions arise is likely to have a major indirect affect on the health insurance industry in California. Up to now, the insurance industry has maintained a united front and argued that companies had to have wide leeway in rescinding policies in order to deal with fraud. Blue Cross’ agreement to change its practice and rescind only if there is willful misrepresentation sends a message to other carriers in California.

California’s governor Arnold Schwarzenegger has voiced his disapproval of the industry practice, and the California insurance commission and the California Department of Managed Health Care have agreed with patient advocates that the practice is illegal under California law. It is very likely that other companies will soon join Blue Cross in voluntary compliance with the new rescission guidelines. Whether this consumer protection will be extended to other states depends on the patient advocates and state regulatory agencies in each state.

Some patient advocates in California don’t think Blue Cross’ new guidelines go far enough. Jerry Flanagan, from the Foundation for Consumer and Taxpayer Rights in Santa Monica told the Los Angeles Times that consumers will not be fully protected until the insurance companies are required to seek approval from state regulators to rescind policies. He believes that the burden should not be on the individual, who may be sick, to appeal the insurance company’s rescission decision to state regulatory agencies. The burden should be on the insurance company to prove misrepresentation.

Confused about Blue Cross Class Action Settlement. Know your rights before you participate in the class action. You may have an individual lawsuit which could award you more damages than the class action. Find out which is right for you. [Sponsored Link]