Law360, New York — Anthem Blue Cross was hit with a class action Monday by policyholders accusing the California health insurer of using “bait and switch” strategies to unilaterally change plan contract terms by increasing annual deductibles and premiums in the middle of the deductible year.
In their complaint filed in California state court, the plaintiffs, represented by California nonprofit Consumer Watchdog, alleged that Blue Cross’ strategies involved roping policyholders into plans and then increasing deductibles and premiums by roughly 20 percent, in addition to hiking up other annual out-of-pocket costs in May — the middle of the deductible year.
The plaintiffs said the tactics violate state health and safety codes including the Knox-Keene Act, which prohibits health care plans from using misleading advertisements and deceptive coverage descriptions.
“These are contracts that are offered on one set of terms, and then Blue Cross changes the essential terms of the contract, like the deductible,” Jerry Flanagan, a staff attorney for Consumer Watchdog, told Law360.
Three plaintiffs — Alison Heath, Janet Kassouf and David Jacobson — are presently enrolled in plans from January 2011 to December 2012, which require annual deductibles of $2,500, $1,500 and $500, respectively, according to the complaint.
The plans were called PPO Share $2,500, PPO Share $1,500 and PPO Share $500, respectively, according to the complaint.
“The number and the name of the plan is the annual deductible, so that’s clearly an essential part of the plan,” Flanagan said.
But the insurer notified the plaintiffs in February — two months into their deductible year — that it planned to reduce its scope of coverage from May onwards, increasing its annual deductible by between 10 percent to 18 percent for each of the three plaintiffs, according to figures in the complaint.
The insurer also allegedly said in its February letter that it would implement a 20 percent premium hike, along with increases in the annual maximum co-payment or co-insurance limit, and an increase in the annual prescription drug deductible, the complaint said.
Blue Cross also changed individual plan contracts by reducing the policy term from one year to one month, meaning it could alter the terms of plan contracts each month when the contracts were renewed, with 60 days notice, according to the complaint. This would allow the insurer to make changes to the plan as often as six times a year, the complaint said.
“The consumer is basically left with a contract that is worthless,” said Flanagan. “Because these companies have reserved their right to make changes, like the cost of the coverage and the benefits consumers receive, such that the policy is rendered illusory.”
The changes affected insurance plans regulated by the state’s Department of Managed Health Care, according to the complaint.
The plaintiffs asked the court to bar Blue Cross from violating their individual plan contracts and for undisclosed consequential and punitive damages, according to the complaint.
"Anthem Blue Cross works diligently to slow the increase in medical costs so we can keep health insurance affordable for as many Californians as possible," said Blue Cross spokesman Darrel Ng, in an emailed statement. "Health plans are highly regulated in the state, and all changes were made with the knowledge and approval of state regulators."
Ng said the firm would not comment on pending litigation.
The plaintiffs are represented by Harvey Rosenfield, Pamela Pressley, Todd M. Foreman and Jerry Flanagan of Consumer Watchdog.
The case is Janet Kassouf, Alison Heath, David Jacobson v. Anthem Blue Cross, case number BC473408, in the Superior Court of the State of California, County of Los Angeles.
–Editing by Kat Laskowski.
