Group Asks Attorney General to Investigate Abuses

Today the Foundation for Taxpayer and Consumer Rights (FTCR) urged Attorney General Bill Lockyer to investigate an HMO’s conduct in forcing unfair arbitration rules upon its patients. Sparking FTCR’s call for a Justice Department investigation is the publicy acknowledged Blue Cross practice of requiring its arbitrators to use the so-called “commercial rules” of arbitration, rather than allowing the more patient-friendly health care claim rules to be used.

“HMOs have created a system of justice of, for and by HMOs by rigging the arbitration process in their favor and ignoring established rules of fairness,” stated Pamela Pressley, FTCR staff attorney and Fair Justice advocate. “This is exactly why pre-dispute binding arbitration agreements should be banned. Patients don’t find out until they are forced into arbitrating a dispute that the rules will be stacked against them.”

FTCR is asking the Attorney General to investigate the practice of Blue Cross in disregarding the American Arbitration Association’s (AAA) established health care rules of arbitration and instead forcing the arbitrator to use the “commerical rules.” The AAA, the arbitration provider written into all Blue Cross arbitration contracts, advertises that it applies the AAA health care guidelines in all disputes between HMOs and patients.

The AAA‘s health care arbitration rules would provide the patient with 1) less cost by having the HMO pay the administrative fees, 2) the right to pursue discovery — including depositions, 3) the choice of the arbitrator, and 4) the assignment of an arbitrator from an experienced panel of health care providers. Instead, under the “commercial rules” used by Blue Cross, patients are forced to split the costs and fees with the HMO, are not allowed any discovery, and are denied the choice of an arbitrator with health care experience.

FTCR is the sponsor of legislation that would ban altogether the one-sided, pre-dispute arbitration process used by just about all California’s HMOs. AB 1751 (Kuehl) is currently on the Assembly Floor where it will be voted on next week.

The letter calling for a Department of Justice investigation of the practices of Blue Cross in its arbitration process follows.

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May 26, 2000

The Honorable Bill Lockyer

Attorney General

P.O. Box 944255

Sacramento, CA 94244-2550

Dear Mr. Lockyer:

I am writing on behalf of the Foundation for Taxpayer and Consumer Rights to bring to your attention the current practice of Blue Cross in unfairly forcing its patients into an arbitration system that requires arbitrators to use the more consumer-unfriendly “commercial rules,” of arbitration rather than the protocols that arbitrators have developed to use in all health care cases.

As explained in the attached April 30, 2000 San Francisco Examiner article, Blue Cross requires its patients to use American Arbitration Association (AAA) arbitrators in its contracts that provide for binding arbitration of all disputes. The AAA claims that it uses a set of rules developed for health care claims in all arbitration disputes between HMOs and patients. In reality, however, Blue Cross has forced the AAA to use the “commercial rules” of arbitration in all its arbitrated disputes with patients. The difference between the two sets of rules is striking:

The health care rules provide the consumer with 1) less cost by having the HMO pay the administrative fees, 2) the right to pursue discovery — including depositions, 3) the choice of the arbitrator, and 4) the assignment of an arbitrator from an experienced panel of health care providers. Under the commerical rules that AAA is required to use by Blue Cross, however, the patient is forced to split the costs and fees with the HMO, is not allowed any discovery, and is denied the choice of an arbitrator with health care experience.

FTCR urges an investigation by your office into the practices of Blue Cross in its arbitration process for possible violations of Business and Professions Code sections 17200, et. seq. Patients should not be kept in the dark until the time a dispute arises that Blue Cross will foist upon them a set of rules that are directly contrary to the publicly advertised policies of the American Arbitration Association. This misleading and possibly fraudulent practice affects potentially millions of California patients and should be stopped.

Thank you for your consideration of this matter.

Sincerely,

Pamela Pressley

Staff Attorney