Anthem settles suit involving 120K policyholders

Anthem Blue Cross has agreed to settle a lawsuit that accused the health insurer of manipulating policies and forcing California patients into higher deductible policies with fewer benefits.

The case was brought by Santa Monica-based Consumer Watchdog and several law firms in 2010 after the state's largest for-profit insurer closed policies for about 122,000 policyholders in 2009.

"It is important to note that this settlement admits no wrongdoing on behalf of Anthem," it said in a statement.

Policyholders who have stayed in PPO Share 500, PPO Share 1000, PPO Share 1500 or PPO Share 2500 plans are entitled to switch to new health plans regardless of their health history and have their rates capped in the future, according to Anthem, an affilate of Indianapolis-based WellPoint Inc.

The agreement has been given initial approval in a California Superior Court and will be finalized at a hearing scheduled for Aug. 26.

Policyholders Donna and Randy Freed, of Goleta, said they hope they'll be able to get into better policies with lower deductibles under the agreement.

After their monthly premium for a family of three went up to $1,800, they switched to another Anthem plan that costs $1,100 a month — but their deductible jumped from $1,500 to $5,000.

"You're paying out too much either way," said Donna Freed, 56, who has undergone several surgeries in recent years. "I'm hoping that we can get a policy that has a lower deductible again that is comprehensive."

It's a hope shared by many individual policyholders who have seen repeated rate increases in recent years. For those in policies that are closed, the problem can be severe.

"When a company closes a policy, older and sicker people are stuck in it because their health conditions bar them from getting insurance at another company, but the younger, healthier people leave," said Jerry Flanagan, the advocacy group's spokesman.

As healthy — and cheap to treat — people leave the policy, premium rates go up because the pool is sicker and divides costs among itself. As rates go up, more healthy members drop policies until only the sickest — and most expensive — policyholders are left.

The lawsuit alleged that policyholders in closed policies were illegally being charged disproportionately more than those in plans that were still accepting members.

Under California law, health insurers that close a policy must either offer consumers new comparable coverage, or otherwise minimize premium increases, said Flanagan.

"Under the terms of the settlement, people in the closed policies now have a choice: they can stay in a closed policy and benefit from a rate cap system that will make sure they're not gouged disproportionately or they can switch to any new policy without any new medical underwriting," he said.

The problems faced in the Anthem plans are not unusual in the individual market, where policies are typically purchased by self-employed individuals, those whose employers don't offer benefits and small businesses. Individual policyholders lack the bargaining power and large pool of policyholders in group policies, such as those purchased by large companies for employees.

Under federal health care reform, the individual market is slated to undergo a major makeover, and will be managed by state-operated health care exchanges that provide consumers options in buying insurance.

The changes are intended to ensure affordability in the run up to the national requirement for Americans to carry health insurance, which will go into effect in 2014.