February 23, 2010 / 1:10 AM / 9 years ago

California health insurer draws hail of charges

LOS ANGELES (Reuters) - A review of 3,000 consumer complaints against Anthem Blue Cross, California’s largest for-profit health insurer, has found over 700 violations of state law during the past four years, state regulators said on Monday.

The investigation into claims-handling practices by Anthem, a unit of WellPoint Inc, comes as the company fends off sharp criticism from the Obama administration for its plans to raise premiums for some individuals by up to 39 percent.

On a third front, lawyers delivered opening statements in the Los Angeles trial of a breach-of-contract suit brought against Anthem by a man who claims the insurance company wrongfully denied coverage for a life-saving liver transplant.

Anthem was singled out for review by California Insurance Commissioner Steve Poizner, who is seeking the Republican nomination for governor this year, on the basis of a large number of consumer complaints, spokesman Darrel Ng said.

“We understand that when you handle thousands of claims, human error is a factor. But it looks like that there may be something else going on, which is why we started the enforcement action,” Ng said.

The 700-plus violations cited by regulators were submitted to an administrative law judge for further review and possible sanctions. The company faces fines of up to $10,000 for each violation, or more than $7 million if all cases were proven.

The lion’s share involved a failure to pay claims within 30 days, or to respond quickly enough to regulators investigating consumer complains, Poizner’s office said.

COMPANY ‘TAKES ISSUES VERY SERIOUSLY’

Regulators said they also found dozens of instances in which the company misrepresented policy provisions or offered “unreasonably low settlement offers.”

“We take the issues raised ... very seriously,” WellPoint said in a statement, adding that the review “represents a small fraction” of the “many millions” of claims it handles each year. “We look forward to receiving the specifics from the investigation and to ... resolve these issues.”

Anthem agreed earlier this month to delay its planned premium hikes until May after Poizner retained an outside actuary to examine the company’s rates. Competitors such as Blue Shield of California and Aetna also have raised premiums significantly in recent years, Ng said.

The administration and congressional Democrats have seized on Anthem’s proposed premium hikes as part of their strategy to boost support for an overhaul of the U.S. healthcare system. Top WellPoint executives have been called to testify on Wednesday on Capitol Hill.

Indianapolis, Indiana-based WellPoint, the largest U.S. health insurer by membership, has said Anthem’s planned premium increases in California are in line with its rivals, reflecting soaring medical costs and an exodus of healthy consumers from its ranks.

In the breach-of-contract case going to trial this week, a lawyer for liver transplant patient Ephram Nehme, 62, told a Los Angeles Superior Court jury that his client was forced to go out of his coverage network, and out of state to Indiana, for his surgery because his illness had rapidly progressed.

Anthem lawyers have said the company was under no obligation to reimburse Nehme for the $205,000 cost of his surgery because he went out of network after the transplant had been approved at an in-network Los Angeles hospital.

But Nehme’s lawyer, Scott Glovsky, said his Los Angeles doctors recommended that he go to Indiana because he risked waiting too long if he stayed in California. He said Anthem denied authorization of the Indiana surgery without conducting an inquiry or talking to any of Nehme’s physicians.

Editing by Dan Whitcomb and Eric Walsh

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