December 17, 2009

UPDATE: Because of the huge public outcry, Blue Cross has backed off on the policy.

As I think I've pointed out before, most of the Blues are considered to be "non-profit" in order to get certain privileges. But they are usually just parent companies for dozens of for-profit subsidiaries - with whom they contract over-priced services to earn nice, hefty profits.

We can expect more abuses (and more price inflation) if the insurance exchange makes the same mistake and treats them as actual non-profits:

One of the worst abuses of the private insurance industry is known as recission, where insurers decide to revoke the coverage of their customers for frivolous reasons. The Los Angeles Times reports today that one of the nation’s largest insurers, Blue Cross of California, has “notified [its] policyholders” that their coverage could be “immediately dropped” if they miss even a single payment:

Amid a national debate on how to make the healthcare system friendlier and more accessible, and as millions of people grapple with the loss of jobs and homes, what does insurance heavyweight Blue Shield of California do? It decides to take a key benefit away.

The company has notified individual policyholders that their coverage could be immediately dropped if they miss a single payment — or so it seems. Blue Shield says in a letter to customers that they can reapply for insurance, but with potentially higher premiums and stricter conditions.

Thankfully, a California law that mandates minimum grace periods and a decision by the company that will allow for a 28-day grace period will keep Blue Cross from immediately dropping people from coverage, as their letter threatens. The LA Times goes on to note that the the company’s pronouncement comes “after last year’s announcement that Blue Shield and Anthem Blue Cross agreed to pay a total of $13 million in fines after cancelling the policies of more than 2,000 Californians after they became ill.”

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