Settlement Between State Agency and Blue Shield Shortchanges Consumers Hit With Unexpected Medical Bills

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Santa Monica, CA — The Department of Managed Health Care’s (DMHC) settlement announced today does not ensure that Blue Shield customers are fully reimbursed for the costs they incurred as a result of the company’s misrepresentations regarding its network of doctors and hospitals, according to Consumer Watchdog who along with The Arns Law Firm other attorneys sued Blue Shield on behalf of consumers.

The problems arose in the first year of Obamacare when Blue Shield misrepresented to consumers that their doctors and hospitals were participating in Blue Shield’s network. Blue Shield also failed to disclose that all of its new individual Obamacare plans provided limited, or “narrow,” provider networks.  Blue Shield customers were stuck with big medical bills as result of receiving treatments from providers Blue Shield represented were part of the company’s network but subsequently billed as “out-of-network.”  Recent studies have found that narrow provider networks lead to worse health outcomes for consumers and delay the diagnoses of disease.

Consumer Watchdog noted that it was particularly concerned with the fact that under the DMHC settlement with Blue Shield, consumers will not receive any reimbursement unless they submit a claim form and provide documentation of out-of-pocket losses; such “claims” processes are well-known to discourage consumers from seeking reimbursement.   Furthermore, Blue Shield will solely determine which consumers will be invited to make a claim and whether any claims will be paid.  

Consumer Watchdog also questioned Blue Shield’s assertion that it already paid its customers $38 million dollars.  The agreement does not specify how the figure was calculated or whether consumers recovered 100% of their out-of-pocket losses.

The settlement announcement today comes on the heels of a high-profile hearing on the pending lawsuit against Blue Shield on Friday in San Francisco Superior Court.  A key principle of the litigation is that consumers should have the opportunity to recover 100% of their out-of-pocket losses.

“The deal announced today puts the burden on victimized consumers, not Blue Shield, to recover money they are owed with no guarantee that Blue Shield will pay consumers 100% of what Blue Shield took from them.  Blue Shield customers will be better served by the rigorous safeguards and oversight imposed by the civil justice system,” said Jerry Flanagan, lead staff attorney with Consumer Watchdog.  

Also announced today by the DMHC was a similar agreement with Anthem Blue Cross. In comparison, that agreement provides that a pending class action lawsuit brought by Consumer Watchdog and other attorneys will determine the appropriate refunds to consumers.   Lawyers for Consumer Watchdog and Blue Cross told a Los Angeles Superior Court last week that they had reached agreement on the principle terms of a settlement.

The Blue Shield lawsuits filed in early to mid-2014 before the DMHC enforcement actions have been consolidated into a single action—Blue Shield Affordable Care Act Cases, JCCP No. 4800—which is pending in San Francisco Superior Court.

The consolidated lawsuit against Blue Shield alleges that Blue Shield:

•    Misrepresented to consumers that their physicians and hospitals (“providers”) participated in Blue Shield health service plans when in fact they did not.  Due to Blue Shield’s misrepresentations, consumers were required to pay more out-of-pocket for covered health care services than they planned for;

•    Made false and misleading representations and omissions about provider networks in its advertising, marketing, and other communications;

•    Prevented consumers from obtaining medical services for months by failing to provide them with identification cards or proof of enrollment, even while the consumers continued to pay for their health plans.

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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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