California Supreme Court Denies Review of Post-Claims Underwriting Case: Health Plans Must Conduct Pre-Issuance Investigation or Show Enrollee Deception Before Canceling Policies

In the first published opinion on the application of Health and Safety Code section 1389.3 (prohibiting post-claims underwriting), the California Court of Appeal held that California Physicians’ Service d/b/a Blue Shield of California (“Blue Shield”) violated the statute by denying coverage retroactively when it should have obtained the necessary information and made its decision as part of the pre-contract underwriting process.’ Practices by several health plans described as “post-claims underwriting” have given rise to complaints brought by policyholders who contend their coverage was wrongfully denied. The California Department of Managed Health Care (“DMHC”) has also taken action on the issue.

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