Los Angeles City Attorney Expands Probe of Improperly Canceled Insurance Policies to Blue Cross of California
The Los Angeles city attorney's office last week sent a letter to Blue Cross of California inquiring about claims the company made in a Feb. 23 news release explaining changes the company had made to help avoid improperly canceling policies, the Los Angeles Times reports. The letter, sent by Assistant City Attorney James Colbert to Blue Cross President Leslie Margolin, stated that a special litigation unit was "investigating whether the rescission practices of Blue Cross may constitute violations of" the state's unfair competition and false advertising laws.
In the letter, Colbert asked Blue Cross to substantiate claims in a news release that the company in 2006 had taken steps to "strengthen and make more transparent our process for rescinding policies in order to further minimize the possibility of errors." According to the release, the steps included creating a simpler application for individual and family policies, establishing a new committee for rescission reviews and enhancing training.
Colbert wrote that the statements "appear intended to burnish the corporate image of Blue Cross of California, and of its insurance affiliate, in the eyes of consumers." He added that the California Supreme Court has held that "such statements are a form of commercial speech subject to the prohibitions against deceptive advertising" under two state laws. According to Colbert, if Blue Cross cannot defend its claims, his office might assume they were false or misleading, which could result in a consumer alert or legal action.
Shannon Troughton -- a spokesperson for WellPoint, Blue Cross' parent -- said the company was reviewing Colbert's letter and looked "forward to responding." In an e-mail, Troughton wrote, "We are following all business practices that were described in a recent press statement," adding, "Indeed, most have been shared with the public in the past and have been in place for well over a year. In addition, as described in the recent statement, we are actively in the development of a third-party review process for use on all potential rescissions."
The letter was sent two days after Los Angeles City Attorney Rocky Delgadillo filed a lawsuit against Health Net alleging that the company improperly canceled policies (Girlon, Los Angeles Times, 3/5).
