Consumer Watchdog – Anthem Blue Cross Sued for Hiking Premiums In Order To Push Policyholders into Bare Bones Coverage

Santa Monica, CA - Anthem Blue Cross, the California subsidiary of the nation’s largest health insurer, WellPoint Inc., has used enormous rate hikes to force patients into lower-benefit and higher-deductible health coverage in violation of state law, according to a class action lawsuit filed today by Blue Cross policyholders and consumer advocates.

The violations are taking place in specific insurance plans in the individual market that Blue Cross is closing down. California law requires that health insurers that close a policy either offer consumers new comparable coverage, or minimize premium increases on the now-closed policies.  The lawsuit alleges that Blue Cross instead systematically increased the premiums patients must pay and pushed them into lower benefit coverage—often with high deductibles and dramatically scaled back coverage.

The suit was filed by the nonprofit and nonpartisan consumer advocacy group Consumer Watchdog; the law firm of Whatley, Drake & Kallas, LLC; Alan Mansfield of the Consumer Law Group, and Tony Stuart of the Stuart Law firm. Download the lawsuit here: http://www.consumerwatchdog.org/resources/DeathSpiralLawsuit.pdf

“Blue Cross has a gun to our heads.  My husband and I got a letter in the mail from Blue Cross telling us that they were closing our policy,” said Mary Feller of San Rafael, one of the plaintiffs representing the class action.  “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% rate increase.”

The lawsuit seeks to stop Blue Cross from shoving its policyholders into what is known as a  “Death Spiral”–the industry term for what happens when a health insurer “closes” certain health coverage policies to new customers, and later raises rates to those remaining in the closed policy until those enrollees can no longer afford coverage. Since older patients or those with preexisting conditions cannot switch to a comparable or better policy, those sicker patients are trapped in the closed policy and subject to bigger and bigger premium increases until they are forced to accept greatly inferior coverage or drop coverage altogether.

Many of the Californians who were recently hit with massive premium increases were informed several months ago by Blue Cross that it was closing their policies and would be offered alternative plans with much more limited benefits. Those who chose to stay with their current coverage were later told that its price was going to skyrocket.

“Not only did I get hit with a 33% premium increase, my only option was a policy with almost twice the deductible and far fewer benefits,” said Donna Freed, another plaintiff also representing the class action.  “If Blue Cross is allowed to price longtime policyholders out of coverage, what is the value of having insurance.”

According to the lawsuit, “Blue Cross offers lower benefit coverage with higher deductibles and/or lesser benefits, often for increased premiums.  Accordingly, enrollees receive lesser benefits than those to which they are statutorily entitled.”

Consumer Watchdog forwarded the complaint to President Obama, Speaker Pelosi (D-CA), Representative Waxman (D-CA), Representative Stupak (D-MI), Representative Speier (D-CA), Representative Garamendi (D-CA), Senator Feinstein (D-CA), Senator Boxer (D-CA), and Senate Leader Reid (D-NV). Last week Stupak and Waxman convened a hearing of the House Subcommittee on Oversight and Investigations to examine Anthem Blue Cross’s proposed 39% premium increase in the individual health insurance market in California.  Consumer Watchdog urged the lawmakers to hold a follow-up hearing on the Death Spiral issue.

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Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA. Find us on the web at: http://www.ConsumerWatchdog.org

Whatley Drake & Kallas is one of the largest plaintiffs’ law firms in the country. It regularly brings its resources to bear to remedy corporate abuses. In recent years the revolutionary settlements that Edith Kallas and Joe Whatley negotiated with most of the managed care companies in the country, with extensive injunctive relief allowing doctors to practice medicine with protections from the abuses of managed care provide the most noted examples of the firm using litigation to achieve meaningful change.  For more information, go to: http://www.wdklaw.com/

Mr. Mansfield has specialized in the area of national consumer class action and public interest litigation since 1991, focusing on telecommunications and consumer privacy issues. He has been involved over the years in numerous significant matters, including the Joe Camel teen smoking case, Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal. 4th 1057, and the DMV motor vehicle Smog Impact Fee refund case (Jordan v. Department of Motor Vehicles (1999) 75 Cal. App. 4th 449). Mr. Mansfield was previously responsible for several years for the consumer law group in the San Diego office of the largest class action firm in the United States, Coughlin Stoia Robbins Geller & Rudman.  For more information, go to: http://www.clgca.com/

At the forefront of its consumer practice, Stuart Law Firm brings justice to people who have been harmed by fraudulent health insurance marketing practices.  Stuart Law Firm is a national leader in this quickly evolving area of litigation. Sham insurers have convinced hundreds of thousands of American policyholders—who believe they have purchased peace of mind—to buy policies that leave all their personal assets exposed in the event of a serious illness.
For more information, go to: http://www.stuartlaw.us/