OAKLAND — A consumer group has sued Anthem Blue Cross for allegedly using its widely publicized rate hikes to attempt to force customers into lower benefit and higher deductible plans, a tactic the group calls a "death spiral."
Many of the individual policyholders who recently learned their premiums would jump by as much as 39 percent were informed several months ago that Anthem Blue Cross was closing their plan to new customers, The firm then offered them plans with greatly reduced benefits, the class-action lawsuit filed by Consumer Watchdog says.
Many of the healthy patients have options and can switch. Older patients and those with pre-existing conditions cannot change to a comparable or better policy, so they are essentially trapped in their existing coverage and forced to pay ever-increasing premiums until they can no longer afford it, the lawsuit argues.
"These customers are then forced to accept greatly inferior coverage or to drop it altogether," said Harvey Rosenfield, founder of Consumer Watchdog.
The lawsuit asserts that this violates a state law requiring health insurers that close a policy to offer consumers comparable coverage or to minimize premium increases in their existing plans.
Peggy Hinz, a spokeswoman for Anthem Blue Cross, said the firm has not yet seen the lawsuit and thus could not comment.
Joined by leaders of the California Nurses Association, Rosenfield also said the group will consider gathering the 700,000 signatures needed to put an initiative on the 2012 ballot that would give state officials the power to regulate large premium increases. The 2012 election would be the earliest for which such a measure could qualify.
"We can’t afford to pay ever higher premiums to enrich insurance company executives," he said.
The recent decision by Anthem Blue Cross to raise premiums for its 800,000 individual policyholders in California by as much as 39 percent drew widespread publicity and has been cited frequently by those arguing for health care reform.
The firm was set to raise the rates March 1, but agreed to delay the increase until May to give the state Department of Insurance time to investigate.
San Rafael resident Mary Feller was informed in September that her existing plan was being closed to new members.
She said she was told she could switch to another plan without medical underwriting, but the plans offered were significant downgrades.
It was important for the family to maintain good coverage, she said, because her 26-year-old daughter had been diagnosed with cancer.
She was stunned a few months later when she received notice of a 39 percent rate increase, making her health insurance more expensive than her house payment.
"We’re seeing a system that bankrupts Americans," she said. "This is unsustainable."
Reach Sandy Kleffman at: 925-943-8249 or [email protected]