| LOS ANGELES
LOS ANGELES Consumer advocates filed a class-action suit against Anthem Blue Cross on Monday, accusing California's largest for-profit health insurer of illegally using drastic rate hikes to force customers into inferior health plans.
The suit comes two days before top executives from several major U.S. health insurers, including Anthem's parent company, WellPoint Inc. , were to meet in Washington with Obama administration officials to discuss escalating premiums.
Anthem's plan to boost its individual premiums by as much as 39 percent has spawned inquiries by state regulators and congressional committees. The White House and Democrats on Capitol Hill also have seized on Anthem's proposed rate hikes in seeking to bolster support for a renewed drive to overhaul the nation's health care system.
The lawsuit in California claims Anthem violated state law by closing certain blocks of its individual health plans to new members without offering comparable coverage to policyholders who opted to remain.
Over time, the pool of older, sicker customers who choose to stay end up trapped in the closed policies, prevented by pre-existing medical conditions from finding affordable plans elsewhere and subjected to rising rates until finally forced to accept lesser insurance or to drop coverage altogether. If they do switch, it is often to plans with fewer benefits, higher deductibles or both, the suit says.
'GUN TO OUR HEADS'
"Blue Cross has a gun to our heads," Mary Feller of San Rafael, Calif., one of the named plaintiffs in the suit filed in Ventura County Superior Court by the advocacy group Consumer Watchdog 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 said in a statement announcing the class-action complaint.
There was no immediate comment from the insurance company, or from the state Department of Managed Health Care, which regulates Anthem Blue Cross policies. But industry executives have said climbing premiums reflect soaring medical costs.
Since 1993 California law has required insurers to protect individual policyholders from being caught in circumstances the industry refers to as a "death spiral," the suit says.
Insurers must either offer customers of closed plans a comparable alternative or pool the risk of those individuals with customers in policies that remain open in order to minimize their premium hikes, the suit says.
About 800,000 Californians hold health insurance policies with Anthem Blue Cross, accounting for the biggest share of some 2 million people with individual coverage in the state, said Jerry Flanagan, health care policy director for Consumer Watchdog.
By comparison, health maintenance organizations (HMOs) make up the bulk of California health plans, covering some 21 million patients. But individual policies are often the only option for those who are self-employed or do not receive health care coverage through their jobs.
The lawsuit, Feller and Freed vs. Anthem Blue Cross, Case No. 56-2010-00368587-CU-BT-SIM, seeks unspecified restitution for the plaintiffs and a court order barring future alleged violations of the state health and safety code.