City Atty. Rocky Delgadillo says the health insurer made false promises
of coverage and hid a scheme to drop sick policyholders. The company
denies the allegations.
The state’s largest for-profit health insurer, Anthem Blue Cross, was
accused Wednesday of a widespread pattern of false advertising and
fraud in a $1-billion lawsuit that claims that the company’s coverage
"is largely illusory."
Los Angeles City Atty. Rocky Delgadillo alleged in the suit that the
insurer sold people false promises of coverage and concealed a scheme
to renege on policies for those diagnosed with serious and often
expensive medical conditions, including cancer and congestive heart
failure. The suit says more than 500,000 people were tricked into
buying individual and family policies from Blue Cross.
"Countless Californians who believe they
have insurance actually have policies that aren’t worth the paper
they’re printed on," Delgadillo said. An Anthem Blue Cross spokeswoman
said the company intended to vigorously defend itself and "strongly
disagrees with the allegations." A spokesman for the insurer’s parent
company, Indianapolis-based WellPoint Inc., declined to discuss the
allegations.
The
suit, filed in Los Angeles County Superior Court, accuses Blue Cross
and WellPoint of violating more than 25 state and federal laws. It
demands restitution for patients who were left with medical bills and
seeks more than $1 billion in penalties.
The suit identifies
allegedly illegal practices that were brought to light in Times
articles highlighting problems associated with the cancellation —
known as rescission — of the policies of sick patients.
In
Sacramento today, Cindy Ehnes, the director of the Department of
Managed Health Care, is expected to announce the reinstatements of
several patients whose policies were rescinded by health plans as well
as a process for other patients to have their rescissions reviewed and
reconsidered.
Patients whose coverage has been rescinded by Blue Cross praised the filing of the suit.
"It’s fantastic — nobody should have to deal with this," said Jennifer
Thompson. Blue Cross dropped the 61-year-old Palm Desert real estate
agent last December after she had a hysterectomy for endometrial cancer
that the health plan had approved in advance. Thompson was left with
about $160,000 in medical bills and without insurance for the first
time in her life.
Blue Cross, she said, told her it dropped her
for failing to disclose on her application that she had had breast
cancer 11 years earlier. Thompson said the application had asked for 10
years of medical history. Still, she said, she asked the agent whether
she needed to include the information and he told her no.
Three
days after arriving home from the surgery, "I received a letter from
Blue Cross telling me they were pulling the rug out from under me," she
said. "It was right before Christmas. It was a great gift."
Blue Cross declined to discuss specific rescission cases.
Patient advocates said the suit could be a powerful tool to help dumped patients win back coverage.
"The complaint makes it very clear that a key part of the resolution
will be to make sure everyone has coverage," said Jerry Flanagan, a
patient advocate with Santa Monica-based Consumer Watchdog.
Delgadillo said Blue Cross "engaged in an egregious scheme to not only
delay or deny the payment of thousands of legitimate medical claims but
also to jeopardize the health of more than 6,000 customers by
retroactively canceling their health insurance when they needed it
most."
WellPoint spokeswoman Shannon Troughton said Anthem
executives had wanted to discuss the allegation with Delgadillo before
he took legal action.
"Anthem has offered on several occasions
to meet directly with the city attorney to provide further information
on Anthem’s rescission procedures," she said. "To date, the city
attorney rejected each of these offers, and we are disappointed by his
actions today because of our attempts to meet with him."
Chief
Asst. City Atty. Jeffrey Isaacs said the only request for a meeting
came Friday from one of Blue Cross’ outside lawyers. He said the
company had not been forthcoming in providing requested documents.
"It
was seen as a typical lawyer delaying tactic," Isaacs said. "We saw no
reason to meet with them, and we didn’t think this was a particularly
trustworthy company given their pattern of lies and deceptions to
consumers over the last four years."
WellPoint is developing an
outside third-party review process for all rescission cases, Troughton
said. She said the company had made changes in 2006 in its process for
rescinding policies.
The city attorney’s office said the company
appeared to have been less than candid about the touted changes. The
company said in a February press release that it had developed a new
coverage application in response to criticism that the current
application was confusing and designed to trap people into making
mistakes that could later be used to rescind coverage.
The
press release may have been unlawfully misleading because it failed to
make clear that the new application had yet to be put into use, Isaacs
said.
The city attorney’s office brought its first lawsuit
against a health plan, Health Net Inc., in February. At the same time,
Delgadillo’s office launched a website, at www.protectingtheinsured.org, aimed at encouraging patients and physicians to share their complaints about the practices of health insurers.
It has received more than 40,000 hits, he said.
State
Insurance Commissioner Steve Poizner said he would examine the
allegations leveled in the suit and determine whether action was
warranted.
"The practice of rescinding health insurance only
after a claim has been filed based on an insurer’s failure to do its
due diligence before issuing the policy is illegal and deplorable," he
said in a statement.
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