Santa Clara, CA: Blue Shield of California is facing a consumer fraud class action lawsuit filed by enrollees who allege the insurer owes its members another $35 million in rebates due to errors in its medical-loss ratio calculation of 2014.
Brought by plaintiffs Becky Ebenkamp and Rebecca Morris, the class-action lawsuit seeks to represent more than 446,000 individual policy holders from that year.
According to federal law, insurers are required 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 complaint alleges Blue Shield improperly counted certain payments as medical expenses 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.
The lawsuit states that under the consumer refund rule, those payments should have been logged as administrative expenses, and Blue Shield customers are therefore entitled to a bigger refund.
The rebate rule, part of the Affordable Care Act, is intended to contain the cost of health coverage by limiting the share of premiums insurers can spend on administrative functions, executive salaries, overhead and profits. If an insurer spends only 75 percent of premium dollars on care, for example, it must send refund checks to enrollees equal to 5 percent of the premiums they paid.
Plaintiffs are represented by Jay Angoff of Mehri & Skalet in Washington, DC.