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WellPoint unit settles class-action suit in California

May 14, 2007
Indianapolis-based WellPoint Inc.'s subsidiary in California-facing a state fine for retroactively canceling health insurance policies-agreed Friday to a class-action settlement with 6,000 policyholders, according to USA Today.

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.
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