California Insurer Blue Shield May Have Overcharged for Safety-Net Insurance

Published: Thu 08 Jul 2010

Wendy Blair

On Wednesday, Amalia Lample of Los Angeles filed suit against Blue Shield of California, claiming that the not-for-profit medical plan overcharged her and thousands of other policyholders who purchased safety-net health insurance for those who were ill or unemployed.

In her lawsuit, Lample alleges that Blue Shield, California's second-biggest nonprofit health insurer, knowingly charged more than the maximum health insurance rates created by the state and falsely claimed to regulators that the premiums fell within the official guidelines.

Ms. Lample, 64, claims that Blue Shield of California owes her $4,475 in excess premiums she paid them from 2007 to 2009. She also argues that over 6,000 Blue Shield policyholders with comparable plans were also overcharged starting in 2001.

"This is for justice. It's not only for the money," stated Lample, who decided to file suit in Los Angeles County Superior Court after coming across a piece in The Times about Blue Shield's premiums. "It's not right what they do."

Reactions from Insurer, State

Blue Shield spokesperson Tom Epstein reported that the San Francisco-based corporation had no comment on the suit, which is lobbying for class-action status.

Blue Shield rejected two requests for refunds from Lample, who also complained to the California Department of Managed Health Care. Regulators claimed that they could not prove that the insurer had broken state law.

However, on Wednesday, a spokesperson for the department claimed that the law's definition for determining maximum health insurance rates was vague, making it hard to ascertain whether health insurers were overcharging.

The department is pushing a bill in the State Legislature to "eliminate any question" on premiums health insurers may charge, said spokeswoman Lynn Randolph.

In question is the medical coverage available through the federal Health Insurance Portability and Accountability Act, or HIPAA. Federal law requires health insurance companies to offer coverage to those who have lost their jobs or may otherwise not qualify due to preexisting health conditions.

Policyholders' Case

HIPAA policyholders argue that Anthem Blue Cross and Blue Shield have significantly overcharged them for many years.

Blue Shield insists that its HIPAA premiums fall within state guidelines.

Anthem admitted to overcharging policyholders from 2006 to 2009 and has since agreed to offer refunds.

But one HIPAA policyholder, Culver City lawyer Les Greenberg, claims that Anthem refunded only a small portion of what he was owed. Anthem gave Greenberg a refund of $12. He filed a suit in Small Claims Court, and the judge awarded Mr. Greenberg over $7,300.

Greenberg also filed suit in December for another Anthem policyholder, claiming the health insurer owed more refunds to over 10,000 HIPAA members. Anthem claimed in a statement Wednesday that the refunds it issued were "appropriate."

Greenberg will also represent Ms. Lample in the suit she filed against Blue Shield yesterday.

"They have gone off on a lark of their own to overcharge their subscribers," he said about the two health insurers. "I would call it egregious behavior."