Insurer drops new policy on late-payment cancellations

The California health plan has backed off a change that would have eliminated a reinstatement period.

By — Posted Jan. 5, 2010

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Blue Shield of California has reversed a proposed change to its late-payment policy for individual subscribers after a backlash from members and the public.

The company wrote to its individual subscribers Nov. 25, 2009, warning them they could lose coverage if they paid premiums late.

The wording in the letter made it sound as if a policy could be canceled if the monthly premium wasn't received on or before the official due date. In fact the company allowed for a 28-day grace period before a policy would be canceled, and had no plans to change it.

The company had, however, decided to eliminate a 15-day "reinstatement period" it had offered members after a policy was canceled for nonpayment. During that time, customers were able to get their coverage back by paying the late premium, without having to reapply.

The letter, however, was less than clear about what was changing.

Three weeks later, on Dec. 16, 2009, a Los Angeles Times columnist wrote about the company's policy change and potentially misleading language in the letters, noting that state law requires a 10-day grace period for premiums paid in monthly payments before an insurer can cancel a policy.

The day the column ran, Blue Shield backed off the proposed elimination of the 15-day reinstatement period and said nothing at all would change for its customers -- the 28-day grace period and 15-day reinstatement period will remain in place.

"People said, 'We liked having that peace of mind,' so we put it back," Blue Shield of California spokesman Aron Ezra said.

A message to subscribers posted on the health plan's Web site said, "We deeply regret any confusion this may have caused our members, and appreciate everyone's feedback."

The company's initial push to eliminate the reinstatement period came after "reviewing typical business practices," he said, and trying to match competitors' policies and procedures.

Ezra said he didn't know how the grace period and reinstatement period affect whether claims a physician submits for caring for a member are denied or delayed.

He also did not know how many people received the letters and declined to say how many individual subscribers the company covers.

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