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A California Blue Cross employee testified in secret last year that the state’s largest health-plan company routinely canceled policies of sick members after looking for inconsistencies – not fraud – in their applications.
Experts say, however, that state law allows only deliberate omissions or misstatements as grounds for canceling health coverage.

The testimony, given in a lawsuit against Blue Cross, also indicated that those reviews were triggered by claims for treatment of certain illnesses.

In one exchange, plaintiffs’ attorney William M. Shernoff of Claremont asked if, under Blue Cross procedures, it mattered “whether the nondisclosure was inadvertent or willful.”

A second employee, Sheila Millan, testified that the reviews were triggered by claims made for treatment for certain illnesses, such as hypertension, diabetes and cardiovascular disease. “When a claim comes in and there is a certain diagnosis, that would pretty much [consign] them to be reviewed for a possible preexisting condition,” Millan testified. “There is a list.”

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