On Tuesday, advocacy group Consumer Watchdog filed a lawsuit against Blue Shield of California for allegedly violating a 1993 state law by regularly ending policies and then raising rates for members left in the plan, the San Francisco Chronicle reports.

The lawsuit, which was filed in San Francisco Superior Court, is seeking class certification.

Details of Allegations

A 1993 state law requires health plans that want to stop offering a policy to "pool" members in that policy with other members to minimize rate increases for enrollees in the old policy. The state law also requires health insurers to offer members the option to switch to a comparable policy.  

Jerry Flanagan, Consumer Watchdog's attorney, said that offering members the option to switch to another policy with a deductible that is twice as high as their original policy and fewer benefits is not "comparable."

The lawsuit also alleges that Blue Shield has manipulated California's health insurance regulatory system.

The Department of Insurance and the Department of Managed Health Care both regulate health insurance in California. When residents switch from an individual policy regulated by one department to a policy overseen by the other, insurers are able to screen members and can reject consumers who have potentially costly medical needs, the Chronicle reports.

Janice Rocco, DOI deputy commissioner, said Blue Shield has applied to end 25 individual policies regulated by DOI in July, leaving three plans open for enrollees. It also has applied to increase the number of individual policies regulated by DMHC from nine to 20, Rocco said.

Blue Shield Response

Blue Shield officials denied the lawsuit's allegations. The insurer said, "The allegations are false," adding, "We comply with all aspects of the block closure law and have since it was enacted" (Colliver, San Francisco Chronicle, 6/13).