Blue Cross Watch: California Hospitals Being Routinely Defrauded

Are your health insurance claims routinely not paid? This is the business model for the insurance industry. Deny your legitimate claim, and expect that you will give up, go away and pay it yourself.

All that stands between us, and the predatory and unregulated, take-your-premium then deny-your-claim insurance industry, is the legal system.

And yes, I deliberately used the word, defrauded in the title, because, that's what's happening. Blue Cross of California is defrauding you, me, and hospitals.

Like, everyone, you undoubtedly have medical or hospital claims which are routinely and illegally denied by your health insurance company, that is, if you are privileged to have insurance. This has become standard business practice for health insurers in the United States.

I recently had a diagnostic blood test--my insurance company refused to pay the $68.00 claim. I have two options. I can spend countless hours fighting them--to no avail probably--or I can simply pay the claim myself. The business model anticipates I will choose the latter course. It's a good business plan. I won't fight. Score an illegal denial, and $68.00 to my insurer.

What's the old saying? A million here, a million there, pretty soon you're talking real money.

Blue Cross of California however (its parent company is Wellpoint), is in a special class of evil. No, I take that back, they're all evil, the system is evil in the United States.

Last week, the Los Angeles Times reported that this miserable (may I say criminal?) company is routinely denying hospital claims across California.

You've got to believe that somewhere deep within the bowels of Wellpoint corporate headquarters, a group of executives is weighing the costs and benefits of this widespread fraud. They must think both federal and state regulatory apparatus is so lax, that there's a good chance they can get away with this crap. Of course, they'd be right to think this.

A class-action lawsuit filed Friday on behalf of all California hospitals accused Blue Cross of California of routinely violating state law by refusing to pay hundreds of hospitals statewide for patient care it authorized.

The suit is the latest salvo in a growing controversy over actions by Blue Cross to cancel the individual health insurance of sick policyholders, sometimes saddling canceled patients with huge medical bills. Although Blue Cross contends that the cancellations are justified partly to crack down on fraud, consumer advocates and policyholders say some revocations are carried out simply as a way for Blue Cross to avoid paying expensive claims.

This should outrage every last person who reads this. Today it's Blue Cross of California, and tomorrow it will be another equally corrupt and unregulated company like UnitedHealth.

At issue in the suit, filed in Los Angeles County Superior Court, is the cost of care for patients whose coverage Blue Cross later canceled. In many cases, canceled patients are unable to fully reimburse hospitals.

The suit seeks payment for all treatment the state's largest health insurer authorized for such 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.

The unpaid bills could be huge because Blue Cross cancellations often involve costly medical procedures for such ailments as tumors and spinal problems.

You see, Blue Cross authorized treatment, then brought in its retroactive review department and refused to pay for the care and services already rendered.

Imagine being sick, having very expensive surgery (approved by the insurance company, no less) then being told after the fact that the insurer is refusing to pay the bill.

If you'd like, you can read a couple of the diaries I've written on Daily Kos about the Blue Cross retroactive review department.

1. Blue Cross continues a vicious coverage-pulling campaign

2.Blue Cross of California terminates enrollees who file claims

Notice how this "business practice" is referred to as a "scheme"? Think Ponzi Scheme. Schemes are what con men pull on unsuspecting individuals.

"We're seeking payment for all those hospital claims," said Daron Tooch, a lawyer with Hooper, Lundy & Bookman in Los Angeles who is representing the hospitals. "We anticipate that to be a very large number."

. . .Hospitals don't know the full extent of the alleged scheme -- or exactly how much it has cost them -- because Blue Cross often denies payments with little explanation, Tooch said.

"We're going to be investigating what that number is," Tooch said. "A lot of times it's unclear whether Blue Cross has not paid a claim because it's retroactively rescinded or not. That's kept secret by Blue Cross."

. . .The suit alleges that, in many cases, such revocations are themselves illegal, triggered by a purported corporate policy to avoid expensive claims.

The suit alleges that when claims meet a certain dollar threshold, Blue Cross pulls the patient's past medical records and looks for reasons to revoke, including "any discrepancies in the member's application, no matter how vague or irrelevant."

The message is very, very clear, file a claim and lose your coverage.

Two final points, please keep in mind, Wellpoint is in business to meet Wall Street expectations. Insuring your health is not even incidental, it is beside the point.

WellPoint, the nation's largest health-benefits company, on Wednesday reported net income of $731.8 million, or $1.09 a share, for the first quarter ending March 31. That's up 20 percent from net income of $611.7 million, or 98 cents a share, from a year ago. The recently completed quarter was the first full reporting period since the completion of WellPoint's $6.5 billion acquisition of New York-based WellChoice.
"We had a very good quarter, and I think I would attribute that to the efforts of our people," said WellPoint Chairman, President and Chief Executive Larry Glasscock in an interview. "I think we had a terrific quarter, I would say an outstanding quarter."
The result beat the $1.07 a share that analysts were forecasting. WellPoint reported revenue of $13.8 billion for the first quarter, up 26 percent from $10.9 billion a year ago.

. . .Wall Street, however, seems to be a bit nervous about how big insurers can keep squeezing more profits from their operations and increasing membership. Stocks for insurers including WellPoint and rival UnitedHealth Group have fallen in recent week

Remember what I just said about lax regulatory authorities? From the mouth of Mr. Glasscock (his real name, BTW), the Wellpoint chairman about the Massachusetts market--a new group of potential Wellpoint victims.

During the conference call with analysts, Glasscock was asked about WellPoint's reaction to recent legislation in Massachusetts aimed at providing health coverage to all residents. He said the program has some good provisions, but he added, "At the same time we think there are some provisions in there that are potentially troubling." For instance, he said some of the measure's complexity and regulatory issues make the business impact unclear for insurers such as WellPoint. "It's still not clear to us that the financial and revenue arrangements are going to be sufficient."

It's all about one thing, squeezing profits. Period.

The only way they can "squeeze" more profits, is by not paying our legitimate claims.

When will the American people wake up to this horrible reality?

Our for-profit system is beyond redemption.

Right now, all that stands between the American people and total insurance industry anarchy and corruption, is the legal system.

NycEve: Author Bio | Other Posts
Posted at 7:19 AM, Oct 16, 2006 in Civil Justice | Health Care | Health Insurance | Insurance Industry | Right to Access the Courts
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Here are soem other related posts on this same issue from Tort Deform.

The Option of Indefinite Denial: NYS Legis. Considers Auto Insurance Nightmare (

NY Auto Insurance Nightmare Continues: The Option of Indefinite Denial & Access to Your Med. Insurance (

The Check is Not in the Mail: Watching Your Medical Costs Go Up (

Posted by: Cyrus Dugger | October 16, 2006 9:35 AM

Eve - I've contested refusals my insurance company sent me and I've usually won. Why? Because they are sloppy and don't care if they deny me coverage I paid for (and that is their business model as you point out). But when I have contested their denials they usually eventualy get the message - that I am not one to the f-ed with and that I read my policy and I don't roll over.

No one should be forced to deal with unfairly rejected claims. Not everyone has the time and ability to advocate for themselves as I have.

Thank you for writing about this. It makes me so angry.

Posted by: ann on | October 16, 2006 1:39 PM

My husband was in a network hospital Blue Cross blue shield HMO hospital with a collasped lung. 8-06
We are coveed 100% Group insurance through Blue Cross New Jersey. We've had this ins for 2 years now.
The bill goes first to Calif (where we live) and then onto New Jersey.
the insurance denied the ambulence because they haven't received the emergency room bill for$83,000.
We just got a letter from the hospital saying the insurance company told them we weren't covered. And that we now owe them $83,000
When my husband was in the ICU the hopital called and were told that we were covered. HELP This is soo frustrating!

Posted by: Teri | November 4, 2006 8:51 PM

Hi I posted yesterday after just getting an $83,000 bill from the PPO hospital.
We have Horizon Blue shield Blue Cross. It covers 100% in network and 0 outside.
The hospital that we went to is in the network.
WHY are they refusing to pay it?
I work full time and don't have a lot of time to spend on the phone.
Any ideas about what I can say or do?
I've also gotten 2 bills for $1800.00 from the ambulence.
The ins won't pay it until they receive the emerg. room bill They have and now its pending
I'm so angry. Can you sue for stress???

Posted by: Teri | November 5, 2006 2:33 PM

Hi Teri,

I will forward your questions. Sorry to hear about what's happening to you.

Hopefully somebody can help, or at least further publicize your problem.

Feel free to email me personally about how it goes ( Also please do keep leaving comments about your story here on Tort Deform.

To answer your question as to why, I just re-emphasize what nyceve says above. Another post I have on this type of problem can be found here as well.

The Check is Not in the Mail: Watching Your Medical Costs Go Up (
Indeed, nyceve has multiple posts on these types of difficulties available here.

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Posted by: Cyrus Dugger | November 6, 2006 10:34 AM

The bottom line about insurance coverage in the United States is that for-profit companies are in charge of our healthcare--not your doctor.

Every dollar they spend on healthcare goes against the bottom line that Wall Street requires.

So the system is in freefall, it is imploding before our eyes.

The only thing that will save us is universal single payer coverage.

Posted by: nyceve | November 6, 2006 7:55 PM

Allow me to play devil's advocate for a moment:

The bottom line about insurance coverage in the United States is that for-profit companies are in charge of our healthcare--not your doctor.

1) Don't physicians and hospitals operate for profit?

2) What about not-for-profit insurers like COPIC?

Posted by: Seth | November 9, 2006 12:07 PM

I have the answer to Teri's above question. If you're interested please email me personally at

Posted by: Cyrus Dugger | November 10, 2006 10:42 AM

The ins won't pay it until they receive the emerg. room bill They have and now its pending

So what precisely is the problem? Was the insurance company just supposed to write you a check for $83,000 without seeing the bill?

Posted by: Ted | November 10, 2006 12:38 PM