There’s more from the LA Times about the Blue Cross of California case where benefits were retroactively denied. For some reason, although the case has been sealed, the Times was able to report on testimony of four BC employees.

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.

Given that the lawyers obviously combed through these cases, and found people like the woman denied coverage for obstetric care 2 years into her policy, this starts smelling worse and worse for Wellpoint. Health insurers are in a very vulnerable position right now. Their profits are sky-high, and far more of the premium is sticking with them than their cleints or the genreal public understands—medical loss ratios are down in the low 70s. Not to mention certain executives with their multi-million or billion dollar pay outs.

Wellpoint would be well advised to do what they can to make this case disappear very quickly. Otherwise they might start realizing that they’re in an election year and health insurers are only just above the oil and tobacco guys in the popularity stakes.