Class action accuses Blue Shield of shortchanging customers

The information I dug up about Blue Shield and gave to regulators last month is now the basis of a class action lawsuit. The lead attorney on the case is the former director of the federal office charged with enforcing the Obamacare provision that Blue Shield is accused of violating.

As California Healthline reports:

A class-action lawsuit filed earlier this month claims that Blue Shield of California stiffed consumers on more than $34 million dollars in refunds on premiums they paid in 2014.

Federal law requires insurers to issue refunds if they don’t spend at least 80 percent of premium dollars on medical care or on improving the quality of care.

The lawsuit, filed July 1 in Los Angeles County Superior Court, argues that Blue Shield improperly counted as medical expenses certain payments it had made erroneously in 2014 — to providers who were not in its network and patients whose coverage had lapsed. By counting those mistaken payments as legitimate medical expenses, Blue Shield pushed itself closer to the 80 percent threshold, thus reducing the size of the refunds it owed, according to the complaint.

Under the consumer refund rule, those payments should have been logged as administrative expenses, the suit says, and Blue Shield customers are therefore entitled to a bigger refund.

“If Blue Shield is allowed to get away with that, not only will its customers be cheated out of $34 million; the door will be left open for other insurers to adopt Blue Shield’s dishonest accounting approach,” Michael Johnson, a former Blue Shield of California public policy director, wrote in a letter to the insurer’s regulator, the Department of Managed Health Care. His letter makes the same allegations as the ones contained in the lawsuit.

Here's the complete article.