Insurance fraud ends in a $1 million fine by the California Department of Managed Health Care.

Insurance fraud ends in a $1 million fine by the California Department of Managed Health Care.

San Francisco, CA: (May-14-07) The state brought charges against Indianapolis-based WellPoint Inc.'s subsidiary in California, Blue Cross, alleging that the insurer retroactively canceled health insurance policies of more than 6,000 policyholders. 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. The class action suit ended in a settlement where Blue Cross pledged not to retroactively cancel coverage unless policyholders intentionally misrepresented information on their applications, and to make sharp changes in its practices. It was fined $1 million by the California Department of Managed Health Care. [IBJ: WELLPOINT INSURANCE]