February 12, 2009 / 7:29 PM / 11 years ago

CORRECTED - UPDATE 2-Insurers settle Calif. cancellation lawsuits

(Corrects WellPoint Inc name and stock symbol in 1st paragraph)

* Insurers settle lawsuits over policy cancellations

* Insurers to reinstate coverage for 3,1000 consumers

* Anthem to pay $15 million in reimbursement, fine

* Health Net to pay $8.8 million plus reimbursement (Adds comment from Health Net)

LOS ANGELES, Feb 11 (Reuters) - Health Net Inc HNT.N and WellPoint Inc’s WLP.N Anthem Blue Cross Life and Health Insurance Co agreed to reinstate health coverage and reimburse medical costs for thousands of California policyholders whose coverage was improperly canceled, officials said on Wednesday.

The settlements, worth at least $25 million, end lawsuits brought on behalf of 3,100 policyholders by state Insurance Commissioner Steve Poizner, Los Angeles City Attorney Rocky Delgadillo and private attorney William Shernoff.

Health Net, which was accused of unfairly terminating coverage for 800 people between 2004 and 2009, will reinstate their coverage, reimburse medical expenses and pay $6.3 million in damages and a $2 million penalty, Shernoff said.

The insurer also will reimburse policyholders for out-of-pocket medical expenses in an amount not yet calculated, a spokesman for Shernoff said.

Health Net also agreed not to suspend any California Individual or Family Plan member for one year or until state laws setting standards for cancellations take effect, Shernoff said.

The company also stopped rewarding employees for rescinding policies, and agreed to pay a $500,000 contribution to two health-related charities under the settlement.

A Health Net representative had no immediate comment.

Anthem Blue Cross will pay $14 million in reimbursements and $1 million in fines, and offer new coverage to about 2,330 consumers whose policies were terminated between 2004 and 2008, Poizner said.

Anthem Blue Cross agreed to change its application forms, underwriting process, agent training, and other procedures that allowed the illegal rescission, and faces a $2 million penalty if reforms are not made by an agreed-to date, Poizner said.

Anthem Blue Cross said it was “pleased to have reached the agreement” and would be contacting consumers over the next three months with information about how to participate in the settlement.

The settlement was the latest in a string of cases prompted by a 2007 state investigation into allegations of widespread rescissions, in which insurers were accused of retroactively cancelling policies of consumers with major illnesses. (Reporting by Gina Keating; Editing by Bernard Orr, Leslie Gevirtz)

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