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Originally published Tuesday, April 27, 2010 at 3:01 PM

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WellPoint to cancel coverage only in fraud cases

Health insurer WellPoint Inc. said Tuesday it will start complying ahead of schedule with a health care reform provision that limits cases in which insurers can cancel coverage when a customer gets sick.

AP Business Writer

INDIANAPOLIS —

Health insurer WellPoint Inc. said Tuesday it will start complying ahead of schedule with a health care reform provision that limits cases in which insurers can cancel coverage when a customer gets sick.

The Indianapolis insurer said that starting May 1, it will follow a reform guideline that restricts cases of rescission only to instances where a patient committed fraud or intentional misrepresentation.

"It's a higher standard in terms of policy review," WellPoint spokeswoman Kristin Binns said.

Laws on rescission currently vary by state. In some cases, an insurer can cancel coverage for material misrepresentation, which can be an unintentional mistake filling out a form.

The reform provision limiting this practice to cases of fraud starts Sept. 23.

WellPoint, which operates Blue Cross Blue Shield plans in 14 states, is the largest publicly traded health insurer based on membership.

Last year, its Anthem Blue Cross subsidiary in California agreed to pay a $1 million fine and take back 2,330 people whose insurance was rescinded after they submitted bills for expensive care. In 2008, it paid a $10 million settlement for another 1,770 members who were dropped for similar reasons.

The insurer also has aggressively denied a recent media report that it targeted breast cancer patients for rescission.

"There have been a lot of misrepresentations and inaccuracies in recent days that have caused confusion among our members and among the public generally about our policies in this area," WellPoint CEO Angela Braly said in a statement. "We think today's announcement will go a long way toward bringing greater clarity."

A letter dated April 27 and signed by several House of Representatives committee chairs asked Braly and the leaders of several other health insurers to start limiting rescission immediately. The lawmakers also asked companies to start independent, third-party reviews of rescission cases. WellPoint said in its statement it started that practice in 2008.

Binns said the insurer decided to comply early with the new rescission guideline before it received the letter.

WellPoint and several other insurers also announced recently that they planned to get an early start on another health reform provision that allows dependents to remain eligible for coverage under a parent's insurance until age 26. The reform also calls for that provision to start in September.

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