Court Approves Blue Cross "Death Spiral" Settlement
Good news for Blue Cross consumers.
Yesterday morning I drove up to Ventura to attend the final approval hearing in Consumer Watchdog's class action lawsuit against Blue Cross for illegally closing insurance policies and using big rate hikes to force patients into lower-benefit and higher-deductible health coverage -- known as the "death spiral." Superior Court Judge Frederick H. Bysshe, Jr. approved the settlement. Class members will receive a notice in the mail informing them of their rights.
Under California law, health insurers that close a policy must either offer consumers new comparable coverage, or “pool” rates in order to minimize premium increases on the now-closed policies. The settlement requires Anthem Blue Cross to provide consumers both the option to move to a new policy and to limit rate increases. All transfers to new policies will be allowed without medical underwriting writing—i.e. regardless of medical condition or health history.
The key terms of the settlement include:
• Blue Cross consumers who remained in enrolled in closed health policies – PPO Share 500, PPO Share 1000, PPO Share 1500, and PPO Share 2500 – will benefit from a cap on their rate increases. Consumers’ rates in these plans will be limited to the lower of the rate attributable to their own closed plan, or the average rate of all closed plans, whichever is lower, minus an additional 2%.
• All consumers who were enrolled in any of the four closed plans, including those that transferred to other Blue Cross coverage, will have the opportunity to switch coverage, without medical underwriting, to any open policy regulated by the California Department of Managed Health Care. In addition, class members may switch to 12 additional policies regulated by the Department of Insurance. Consumers will be given the option to switch later this year, in 2012 and 2013.
Read the press release announcing the settlement here.
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