Consumer Group Files Class-Action Lawsuit Against Anthem Blue Cross

Published: Wed 03 Mar 2010

Wendy Blair

A consumer advocacy group filed a class-action lawsuit on Monday against Anthem Blue Cross, accusing the biggest for-profit health insurance company in California of using radical rate hikes illegally to force policy holders into inferior medical plans.

The lawsuit arrives only two days before major executives from multiple United States health insurance companies, including Anthem's holding company, WellPoint, are to travel to Washington, D.C. to discuss rising health insurance premiums with the Obama administration.

Anthem's plan to raise individual health premiums by as much as 39 percent has spurred inquiries by congressional committees and state regulators. Democrats in Congress and the White House have also capitalized on Anthem's proposed premium hike in trying to garner support for a renewed effort to revamp the country's health care system.

The California lawsuit alleges that Anthem broke state law by closing certain portions of its individual medical plans to new policyholders without providing comparable coverage to members who chose to remain.

Eventually, the pool of older, more ill policyholders who opt to remain end up stuck in closed plans, precluded by preexisting conditions from finding affordable coverage from another insurer and subjected to escalating rates until finally compelled to either accept an inferior plan or to cancel coverage completely. If they do change plans, it is frequently to coverage with higher deductibles, fewer benefits, or both, the lawsuit claims.

Blue Cross Has Policyholders in No-Win Situation

"Blue Cross has a gun to our heads," said Mary Feller of San Rafael, California, one of the plaintiffs named in the lawsuit filed by the consumer advocacy group Consumer Watchdog in Ventura County Superior Court on behalf of policyholders.

"We could either stay with our old coverage or switch to a new policy with much lower benefits. What Blue Cross did not tell us was that staying with our better policy would mean a 39 percent rate increase," Feller explained in a statement revealing the class-action suit.

The insurance company had no immediate comment, nor did the state Department of Managed Health Care, which oversees the policies of Anthem Blue Cross. However, executives in the health insurance industry have said that escalating rates simply reflect skyrocketing medical expenses.

Since 1993, California regulations have required health insurance companies to safeguard individual policyholders from getting trapped in a situation the industry calls "a death spiral," the lawsuit claims.

Insurance companies must either offer holders of closed policies a comparable alternative or pool those individuals' risk with members in plans that are open in order to keep the premium hikes as small as possible, the lawsuit says.

Roughly 800,000 California residents have health insurance through Anthem Blue Cross, representing the largest share of two million people with individual plans in the state, according to Jerry Flanagan, the director of health care policy at Consumer Watchdog.