California Hospitals Sue Blue Cross over Canceled Policies

October 16, 2006

Blue Cross of California was accused in a lawsuit of routinely violating state law by refusing to pay hundreds of hospitals statewide for patient care it authorized.

The class-action lawsuit was filed Friday in Los Angeles County Superior Court on behalf of all California hospitals.

The suit claims Blue Cross canceled the individual health insurance of sick policyholders, sometimes sticking patients with huge medical bills. Blue Cross says the cancellations are justified partly to crack down on fraud, but consumer advocates and policyholders say some policies are voided simply as a way for the insurer to avoid paying expensive claims.

The suit seeks payment for all treatment the state’s largest health insurer authorized for canceled patients over the last four years, as well as interest and punitive damages. It also asks the court to order Blue Cross to stop the alleged scheme.

Shannon Troughton, a spokeswoman for Blue Cross’ parent company, Indianapolis-based WellPoint Inc., said Blue Cross had not yet been served with the suit but was confident that its payment practices complied with the law.

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