Consumer Group Says Blue Cross of California $150K Fine for Overcharges is “Not Enough”

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Santa Monica, CA — The California Department of Managed Care’s (DMHC) decision to fine Blue Cross of California $150,000 for overcharging more than 45,000 enrollees in April for a total of $12 million is too little and will not deter the company from the same behavior in the future, according to the Foundation for Taxpayer and Consumer Rights (FTCR).

“A $150,000 fine on a company that had a $300 million profit increase is barely a slap on the wrist and won’t deter Blue Cross from making the same mistake again,” said Jerry Flanagan of FTCR. “What is more disturbing is that the DMHC claims to have known nothing about the problem until regulators read about it in the newspaper. The DMHC’s poor response time marks a dangerous shift in priorities at what is supposed to be the nation’s premier HMO watchdog.”

The DMHC recently approved a merger between Blue Cross of California’s parent company, WellPoint, and Anthem Inc. which included at least $265 million in bonuses to top executives. Governor Schwarzenegger, whose administration oversees DMHC, has received $209,300 in campaign contributions from Blue Cross of California, WellPoint and company executives.

In April, Blue Cross of California overcharged approximately 45,000 enrollees who pay monthly premiums by credit card or direct withdrawal from bank accounts by two, three or even five times the premiums they owed. Irene Arnold of Stockton, who pays her monthly health insurance premium through a direct withdrawal from her checking account, was charged five times the value of her monthly premium. Instead of the monthly premium of $222, Blue Cross withdrew $1110 from her account, which amounts to a 400%, or $888, overcharge. Though Blue Cross officials told Irene Arnold that the money would be returned within 24 to 48 hours, she was not compensated for the insurer’s mistake for nearly two weeks.

On May 2, FTCR wrote a letter to the DMHC calling on the regulator to require immediate refunds, payments for other costs incurred by enrollees, interest, and to levy a fine against Blue Cross equal to the amount inappropriately removed from enrollees’ bank accounts. Read the letter.

FTCR is conducting health care town halls throughout California with patients, business owners, doctors, nurses and hospital executives. A common theme of these meetings has been the need to rid the health care system of waste, inefficiency and profiteering and to reinvest savings to increase access to care.

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The Foundation for Taxpayer and Consumer Rights (FTCR) is California’s leading nonpartisan consumer advocacy organization.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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