Lawsuit: Insurer Anthem Misleading California Customers

SACRAMENTO (AP) — California health insurance company Anthem Blue Cross is misleading several hundred thousand customers about changes in their policies that will leave them paying more for inferior coverage, a consumer advocacy group said in a lawsuit filed Tuesday.

Santa Monica-based Consumer Watchdog says many customers who chose health plans that provide coverage for out-of-network doctors will be surprised to learn that their bills are no longer covered. The organization is asking a Los Angeles County Superior Court judge to require that the company maintain its existing policies for another year.

The lawsuit was filed on the first day of the three-month enrollment window for people who buy their own coverage. Consumers in the affected Anthem plans will be automatically enrolled in new, more limited plans if they don't cancel and switch by Dec. 15.

"This change means that many folks will be effectively cut of form their physicians on Jan. 1 if they do nothing," said Jerry Flanagan, litigation director at Consumer Watchdog.

In most of California, Anthem is changing its "preferred provider organization," or PPO, plans that provide coverage for out-of-network doctors to "exclusive provider organization," or EPO, policies that do not.

The change applies only to people who buy their own private health coverage from the Covered California insurance exchange or from a broker in what's known as the individual market; plans issued by employers or the government programs Medicare and Medi-Cal are not affected.

Anthem's changes come amid significant upheaval in the individual market nationally as insurers adapt to President Barack Obama's health care law, which prohibits them from denying coverage to people with health problems. Many states have seen insurers exit the market or raise prices sharply as they contend with high costs. California has largely avoided the massive, headline-grabbing price increases seen elsewhere but is still facing the highest year-over-year increases since "Obamacare" took effect, an average of 13 percent this year.

Darrel Ng, an Anthem spokesman, said in an email that the company changed PPO plans to EPOs in order to limit price increases. The changes were approved by regulators at Covered California and the Department of Managed Health Care, he said.

"Affected members have been mailed written notice of this change so they can make an informed decision on their health care needs during the open enrollment period for the coming year," Ng said. "We believe plaintiff's case is without merit."

Rodger Butler, a spokesman for the Department of Managed Health Care, confirmed that the agency approved the changes and said, "the consumer notifications meet the legal requirements set forth in state and federal law."

The exact number of affected customers is unknown. Anthem had just under 600,000 customers in individual market PPO plans statewide as of June 30, according to state regulators. The changes apply to California's largest metro areas but exclude those in portions of the Central Coast and the Central Valley.

Consumer Watchdog's lawsuit says Anthem told affected customers they'll be automatically re-enrolled in "similar coverage" if they don't take action to cancel their policy and choose a different one. The lawsuit says the switch from a PPO to an EPO is so fundamental that Anthem should have terminated the policy, signaling to consumers that they need to take a close look at their coverage.

Citing state and federal laws that require insurance companies to continue coverage unless they provide advance notice of a cancelled policy, Consumer Watchdog says Anthem should be compelled to continue its PPO policies through 2017.

Anthem Blue Cross is the second largest insurer selling PPO plans in the individual market. The largest, Blue Shield of California, will continue selling PPO plans statewide next year, according to state regulatory filings.

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