Class Says They Paid Blue Shield for Nothing

SACRAMENTO (CN) - Blue Shield of California gouged state employees for "basic health insurance that essentially provides no coverage," a class action claims in Superior Court.

Lead plaintiff Theris Coats says that CalPERS employees who retire at 65 are automatically moved out of Blue Shield and into Medicare.

But if a worker retires before 65 due to disability, and qualifies for Medicare, Blue Shield continues collecting premiums "even though the [Blue Shield] policy expressly excludes coverage for health care that is also covered by Medicare."

CalPERS, the California Public Employees' Retirement System, is the largest state pension fund in the nation, managing pension and health benefits for more than 1.6 million public employees, retirees and their families.

Coats, who seeks to represent a class of more than 1,000, was diagnosed with cancer and had to retire in 2004. Before he did, CalPERS advisers told him he would qualify for disability retirement benefits.

Coats received "basic" health insurance through Blue Shield immediately upon retiring, and also applied for Social Security disability. He was accepted into Medicare in 2006 and began receiving Medicare benefits in 2007.

"Under the Blue Shield policies, any CalPERS member who becomes enrolled in Medicare no longer qualifies for basic coverage. Instead the CalPERS member must transition to a much cheaper CalPERS Medicare health plan," the lawsuit states.

"CalPERS and Blue Shield have in place policies and procedures to ensure that CalPERS members who reach age 65 are promptly transitioned out of private insurance and into a CalPERS Medicare plan. When this happens, the premiums paid by the CalPERS member for health coverage are dramatically reduced since virtually all of their health care is now covered by Medicare."

Coats says he had no idea of the coverage exclusion and unaware that he had to switch his coverage to a Medicare plan. In fact, he says, CalPERS continued deducting monthly premiums from his pension check for the basic Blue Shield plan, and "Blue Shield accepted the premiums even though under its EOC [evidence of coverage] and contract with CalPERS, it was not required to pay any medical bills for plaintiffs health care. At all times, CalPERS and Blue Shield knew or should have known that plaintiff was a Medicare recipient and should not have been paying premiums to Blue Shield for a basic plan."

Coats says Blue Shield collected the excess premiums from him for 9 years, and refused and continues to refuse to refund the unearned premiums.

"While CalPERS and Blue Shield have a robust process for notifying and transitioning Medicare eligible CalPERS members out of basic health plans when the member turns 65, it has no similar process for transitioning younger members who become Medicare eligible due to a disability or some other reason," the lawsuit states.

"Plaintiff and the class have been paying excess premiums for basic health insurance that essentially provides no coverage," Coats added.

Blue Shield of California serves 4 million members and 65,000 physicians in the Golden State.

A Blue Shield representative on Wednesday said the insurer had not yet been served with the lawsuit.

Coats' attorney Stuart Talley said Medicare supplemental plans are "dramatically less expensive" than Blue Shield's basic plan.

"Since the plaintiff had been enrolled in Medicare for many years, Blue Shield and CalPERS should have transitioned him out of their basic health care plan into a Medicare supplement plan," Talley said in an interview.

"CalPERS and Blue Shield go to great lengths to inform people of this situation when they turn 65. However, they have no similar notice procedures in place if you qualify for Medicare due to a disability."

Coats seeks class certification, restitution of unearned premiums, and damages for unfair competition.

His attorneys Talley and William Kershaw are with Kershaw, Cook & Talley, of Sacramento.

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