Class Accuses Blue Cross of Bait and Switch

LOS ANGELES (CN) - A Superior Court class action claims that Blue Cross of California uses "bait and switch tactics" to impose midyear hikes on its customers. The three lead plaintiffs all say that Blue Cross jacked up their deductible in February, "just two months into the deductible year."

Named plaintiffs Janet Kassouf, Alison Heath and David Jacobson say they bought policies with the expectation that annual deductibles and out-of-pocket costs would be fixed for the calendar year, but saw abrupt changes to the terms and conditions of their plans.

In February, "just two months into the deductible year," Heath learned that her $2,500 deductible would go up to $2,950; Kassouf's jumped from $1,500 to $1,750, and Jacobson's increased from $500 to $550, the complaint states.

"When a consumer purchases a plan with an annual deductible of $2,500, the consumer expects he or she will have to pay for the first $2,500 in health care services during the calendar year, and that the insurer will cover the remaining costs of health coverage according to the terms of the plan contract," the complaint states. "Blue Cross's unilateral changes to the annual deductible at whim, however, have resulted in a moving target without any certainty of how much a consumer will have to pay to meet the deductible in any given calendar year."

Blue Cross, doing business as Anthem Blue Cross, "claimed that the mid-year changes to 'annual' and 'yearly' out of pocket costs were necessary to protect consumers from premium increases, yet Blue Cross:

"a. Simultaneously increased premiums by 20 percent or more.

"b. Had five times the required reserves (tangible net equity ['TNE']) - $1.2 billion in excess of state-mandated TNE - as of June 30, 2011 while the company paid $525 million in dividends to shareholders in 2010.

"c. Postponed similar mid-year changes to its nearly identical policies regulated by the California Department of Insurance ('CDI')," according to the complaint. (Parentheses, brackets and italics in complaint.)

The class adds: "In addition to unilaterally raising the annual deductible and other out of pocket costs while escalating premiums, Blue Cross has made other unilateral changes to its individual plan contracts. For example, Blue Cross recently notified policyholders that it was reducing the policy term to just one month, which would purportedly allow Blue Cross to modify any 'terms and conditions' of the individual plan contracts, including deductibles and other out of pocket costs, at each contract 'renewal' on sixty days notice - or up to six times per year.

"Through its conduct of unilaterally escalating annual out of pocket costs and unilaterally altering coverage descriptions ... to allow Blue Cross to change any benefit on just sixty days notice, Blue Cross has breached the individual plan contracts entered into with plaintiffs and California consumers and breached the implied covenant of good faith and fair dealing."

The policyholders say Blue Cross misrepresents the true cost of its coverage, and places "restrictions and limitations that render contract benefits 'illusory.'"

Anthem Blue Cross PR Director Darrel Ng told Courthouse News that the insurer worked "diligently to slow the increase in medical costs so we can keep health insurance affordable for as many Californians as possible."

"Health plans are highly regulated in the state, and all changes were made with the knowledge and approval of state regulators," Ng said.

He denied that an adjustment of benefits was a breach of contract and said such changes "can help lessen premium increases."

"Under the terms of the plan we have the right to amend and change the benefits of the plan upon providing the requisite notice," Ng said.

The plaintiffs seek damages for breach of contract, breach of implied covenant of good faith and fair dealing, declaration of rights, violations of the Consumer Legal Remedies Act and violations of Unfair Competition Law.

They are represented by Jerry Flanagan, with Consumer Watchdog, of Santa Monica, which did not respond to a request for comment.

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