Class Action Lawsuit Barring “Bait and Switch” Health Plan Deductibles Advances

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According To Blue Cross, “Any Term or Benefit” of Health Coverage Could Change Each Month

A consumer protection lawsuit that would bar Blue Cross from changing “any term or benefit” of consumers’ health plans each month may proceed, a Los Angeles Superior Court judge has ruled. Judge Jane Johnson green-lighted two class action lawsuits brought by Consumer Watchdog and Shernoff Bidart Echeverria Bentley LLP challenging Blue Cross’s “bait and switch” tactics, including policy fine-print that purports to allow Blue Cross to change “any term or benefit” of consumers’ health plans each month.

Consumer Watchdog said the lawsuit is critical to ensure consumers get the health care they paid for, especially as the deadline looms for Californians to purchase health insurance or face tax fines.

“In the world according to Blue Cross, consumers are required to buy its policies, but once enrolled, Blue Cross can change the price and take away the benefits and coverage it promised,” said Consumer Watchdog staff attorney Jerry Flanagan. “When consumers purchase health plans, they carefully consider the price they’ll pay and the services they’ll receive. If Blue Cross is allowed to boost profits by reducing benefits each month, then consumers’ health plans are worthless.”

The Court rejected Blue Cross’s attempt to bar a claim brought by Consumer Watchdog under California’s Consumers Legal Remedies Act (“CLRA”), which outlaws such bait-and-switch tactics and unconscionable contract provisions. Read more here:
Download the lawsuit here:

The class action lawsuit contends that Blue Cross engaged in various unfair and deceptive acts in violation of the CLRA by:

  • Increasing “annual deductibles” and other “annual” and “yearly” out of pocket costs, thereby reducing the benefits available under the health plan contracts, in the middle of the year.  As a result, Plaintiffs and Class members must pay more than promised for covered medical treatments.
  • Adopting a new contract provision purportedly allowing Blue Cross to change “any term or benefit” of its heath service plans each month.
  • Converting individual health service plan contracts from annual to month-to-month in duration.  Thus, the health service plans now terminate at the end of each month and “renew” upon payment of the next month’s premium. As a result, consumers are more likely to be terminated due to payments delayed by mail or processing errors by Blue Cross.

The class action lawsuit also challenges violations of state health laws and claims for breach of health plan contracts.

“Years ago I was diagnosed with breast cancer. I have paid big premiums and rarely went to the doctor.

Now, Blue Cross is dramatically increasing my premiums and reducing my coverage in the middle of the year.  That’s not fair. If I told Blue Cross that I decided to pay them a smaller premium in exchange for the reduction in coverage, Blue Cross would drop me!” said Janet Kassouf of Hayward, one of the lead plaintiffs in the lawsuit.

Blue Cross has claimed that the mid-year changes to “annual” and “yearly” out of pocket costs were necessary to protect consumers from premium increases, yet Blue Cross:

  • Simultaneously increased premiums by up to 20% in 2011;
  • At the time of the changes had five times the required amount of cash reserves (tangible net equity [“TNE”])—$1.2 billion in excess of state-mandated TNE—while the company paid $950 million in dividends to its shareholders since 2011.

The next step in the litigation is “class certification,” in which Consumer Watchdog will ask the Court to allow the lawsuits to proceed on behalf of all affected Blue Cross customers. At least eleven health plans are affected by Blue Cross’s bait-and-switch tactics: PPO Share 500, PPO Share 1000, PPO Share 1500, PPO Share 2500, PPO Share 3500, PPO Share 3500-R, PPO Share 5000, PPO Share 7500, Individual HMO, Individual Select HMO, and Individual HMO Saver.

The case, Kassouf et. al. v. Anthem Blue Cross (Case No. BC473408), and related action, Taub v. Anthem Blue Cross (Case No. BC457809), are both pending in Los Angeles Superior Court, Central Civil West department 308.

Jerry Flanagan
Jerry Flanagan
Jerry Flanagan is Consumer Watchdog's Litigation Director. Flanagan leads Consumer Watchdog’s litigation efforts in the areas of health insurance coverage and access to treatments. He has over 20 years experience working in public interest and health care policy, legislation and litigation.

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