SUNSET PARK — Santa Monica consumer advocacy group Consumer Watchdog, in conjunction with Blue Cross policyholders, filed a lawsuit Tuesday against Anthem Blue Cross, the California branch of WellPoint Inc.
The class action lawsuit accuses the health insurer of forcing customers into coverage offering less benefits and higher deductibles through rate increases in violation of California law.
According to the law, when health insurers close a policy, they must give customers the option of either obtaining new, comparable coverage or cut down on premium increases on closed policies. According to the lawsuit, Blue Cross violated these rules regarding specific plans they are closing, and instead increased premiums and nudged consumers into lower-benefit plans, often with higher deductibles.
“My husband and I got a letter in the mail from Blue Cross telling us that they were closing our policy,” said plaintiff Mary Feller of San Rafael. “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.”
The practice the lawsuit is accusing Blue Cross of is known as a “death spiral” within the insurance industry. This process involves closing certain policies for new customers but later raising rates for old customers, often resulting in them being unable to afford the policy. Elderly consumers or those with preexisting conditions are often unable to find comparable coverage and must stick with their old policy as premiums increase, sometimes forcing them to drop their health insurance all together.
Blue Cross informed effected Californians that their policies would be closed and alternative plans would be offered several months ago. Those who remained with their current plans were then told they would face price increases.
“Not only did I get hit with a 33 percent premium increase, my only option was a policy with almost twice the deductible and far fewer benefits,” said plaintiff Donna Freed. “If Blue Cross is allowed to price longtime policyholders out of coverage, what is the value of having insurance?”
Consumer Watchdog passed along the complaint to President Barack Obama, five members of the House of Representatives and three senators. It encouraged lawmakers to hold a hearing on death spiral issues as a follow-up to last week’s hearing on Anthem Blue Cross’s 39 percent proposed premium increase in individual health insurance in California by the House Subcommittee on Oversight and Investigations.
Anthem Blue Cross was unable to comment at this time.