That situation has recently changed. As reported in the L.A. Times, the Department of Managed Health Care began investigations into both Blue Cross and Blue Shield, the two largest health insurance companies in California, after several high-profile lawsuits were filed against them in 2005 claiming they were wrongfully canceling policies. Lynn Randolph, spokeswoman for the Department, said on September15, 2006 that the Department had concluded that Blue Cross has systematically violated the law and the Department would take swift action. The spokeswoman did not say if old cases would be reopened. The investigation into the practices of Blue Shield continues.

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The Department took its first action against Blue Cross on September 22nd, fining the company $200,000 for canceling a policy of a woman who had not revealed corrective surgery she had 23 years before her application for coverage. The director of the Department, Cindy Ehnes, said this was just the first of possible actions against Blue Cross. California Governor, Arnold Schwarzenegger, issued a statement in support of the Department’s decision, as reported in an L.A. Times article dated September 22nd. He said, "Californians — who make the right decision to have health insurance as security for themselves and their families — should not be afraid that if they use it, they will lose it because of confusing applications."

Blue Cross objected to the fine, claiming that it was taking steps to correct its cancellation practices. Jerry Flanagan, from the Foundation for Taxpayer and Consumer Rights, located in Santa Monica, criticized the action, arguing that the fine was too small to influence the actions of a company as big as Blue Cross. Blue Cross has the right to dispute the fine.

If you are a Blue Cross or Blue Shield policyholder and believe your policy was unfairly cancelled, see Blue Cross Lawsuits: Have You Been Victimized by Post-Claim Underwriting?

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