Blue Cross of California pledged not to retroactively cancel coverage unless policyholders "intentionally misrepresented" information on their applications-a sharp change in its practices.
In March, the California Department of Managed Health Care announced a $1 million fine against Blue Cross. The company is contesting the fine.
For decades, insurers have canceled a small percentage of policies when they found mistakes or omissions on application forms completed by policyholders. Insurers defend the practice, called "rescission," as a check against fraud.
Critics say insurers invoke when a policyholder files a large medical bill. The practice affects people who buy their own insurance, not those covered by employer-sponsored plans.