More Information on the Blue Cross Settlement

Anthem Blue Cross Settles Policy Closure Action

As reported by Martin Bricketto on Law360:
New York (June 21, 2011) — Anthem Blue Cross has agreed to settle a class action in California state court from consumers who accused the insurer of closing certain coverage policies without providing them with legally required options and notices, a group representing policyholders announced Tuesday.

The nonprofit organization Consumer Watchdog said in a statement that the class action sought to block the WellPoint Inc. subsidiary from ensnaring its consumers in a so-called death spiral, a practice in which an insurer closes a certain health plan to new enrollees and raises the rates paid by those remaining until they can no longer afford it.

Death spirals force both new and current enrollees into plans with different and reduced benefits, though older insureds and those with pre-existing conditions can be trapped in the closed plan and stuck with escalating premiums, according to the group. The settlement allows California class members to move to new plans or take advantage of a rate cap.

“The settlement with Blue Cross is very positive news for consumers like my husband and myself who have been trapped in policies with spiraling rate increases. Now we will have the option to move to another policy without underwriting,” said Donna Freed, one of the plaintiffs in the suit, in a statement.

A Consumer Watchdog spokesman said Judge Fredrick H. Bysshe Jr. granted preliminary approval of the settlement in an order dated June 9, which the group received on Friday.

Blue Cross has denied all wrongdoing and agreed to settle to avoid further expenses and the risks of litigation, according to court documents.

A representative for the insurer did not immediately return a request for comment on Tuesday.

Named plaintiffs Randy Freed and Mary Feller had accused Blue Cross of unlawful, unfair and fraudulent business acts and practices in violation of the California Business and Professions Code as well as unjust enrichment.

Consumer Watchdog said California law requires health insurers in closing a policy to either offer consumers new comparable coverage or pool rates to minimize premium increases on the closed policy.

Under the settlement, insureds who stayed in the four closed health policies at issue in the case will see a cap on their rate increases, the group said.

Additionally, any who were enrolled in the closed plans, including those who switched to other Blue Cross coverage, can switch coverage without medical underwriting to any open policy regulated by the California Department of Managed Health Care as well as 12 additional policies regulated by the state’s Department of Insurance, according to the group.

Consumers will have the option to switch later this year and each of the next two years, said Consumer Watchdog, noting that the ability to transfer to new policies without medical underwriting means they can make that switch regardless of medical condition or health history.

The benefits under the settlement will be in place until the end of 2013, after which the “guaranteed issue” provisions of the federal health care reform law are expected to be fully implemented, according to the group.

A hearing on the settlement’s final approval is slated for Aug. 26.

The plaintiffs are represented by Alan M. Mansfield of the Consumer Law Group, Harvey Rosenfield, Pamela Pressley and Jerry Flanagan of Consumer Watchdog, Edith M. Kallas and Adam P. Plant of Whatley Drake & Kallas LLC, and Antony Stuart of the Stuart Law Firm.

Blue Cross is represented by Kurt C. Peterson, Kenneth N. Smersfelt and Amir Shlesinger of Reed Smith LLP.

The case is Feller et al. v. Anthem Blue Cross of Calif. et al., case number 56-2010, in the Superior Court of California, County of Ventura.

— if you would like more information, please visit www.fellerbluecrosssettlement.com (Web Archive copy)