Consumer group sues Anthem Blue Cross over policy changes

A consumer group sued Anthem Blue Cross on Monday, accusing California’s largest for-profit health insurer of violating state law by closing certain policies to new members while illegally offering remaining customers alternative plans with fewer benefits at higher rates.

Santa Monica-based Consumer Watchdog says in its lawsuit, which seeks class-action status, that Anthem closes “blocks of health insurance business” without offering comparable options. It did this last fall, just months before it informed policyholders who stayed put that their rates would rise as much as 39%, the suit says.

Anthem’s proposed rate hikes, set to take effect May 1, have prompted criticism by consumers, regulators and lawmakers and triggered state and federal investigations.

The Obama administration is meeting Wednesday with several of the nation’s largest health insurers to discuss rate increases.

The lawsuit says that plaintiff Randy Freed, 55, of Santa Barbara County, and his wife, Donna, were informed in September that their policy was closed to new members. (When a block of insurance is closed, it drives up premiums for remaining members, who must divide the costs among a smaller pool.) The Freeds tried to find another Anthem policy, but all the options had higher deductibles and fewer benefits.


“I feel like all of our income is going toward insurance,” Donna Freed said.

An Anthem spokeswoman said the company had not seen the California lawsuit, filed in Ventura County Superior Court; Anthem, based in Woodland Hills, has an office in Thousand Oaks.

The lawsuit says that Anthem violated the state’s health and safety code and its business code.

The insurer’s practice has created a “death spiral,” trapping the least healthy customers in closed policies they cannot afford but also cannot leave because of preexisting conditions that may exclude them from other coverage, according to the lawsuit.