With the insurance industry serving as the whipping boy in the national debate on health care, California Attorney General Edmund G. Brown Jr. has subpoenaed financial records and other documents from California's seven largest health insurance companies.
Brown, who is investigating possibly illegal practices by some California health insurers, says, "We have been looking at these companies for a number of months and are very concerned that some of them are unjustly raising premiums and denying payment of legitimate claims. Not only are the rate increases devastating to Californians strapped by the economy, but in some cases, they are possibly illegal."
The AG's subpoena seeks records from Aetna Health, Anthem Blue Cross, CIGNA, Health Net, Blue Shield of California, Kaiser Permanente and PacifiCare. They cover pay-for-service health plans, which are health plans that reimburse doctors and hospitals for services performed instead of a health maintenance organization (HMO) approach. The companies have 30 days to hand over their financial and other records.
Brown's office served subpoenas to those same companies last month regarding their managed care plans, known as HMOs.
California began an official inquiry last September into HMO practices of reviewing and paying insurance claims submitted by doctors, hospitals and other medical providers. The investigation was prompted by reports that California's five largest health insurance providers were denying insurance claims at rates of up to 39.6 percent.
Recently, Anthem Blue Cross announced to its members that it planned to hike premium rates by as much as 39 percent. Brown's investigation will probe whether the other health plans are planning similar rate hikes and will consider whether Anthem's steep rate increases for individual California consumers are fair under California law.
Dave of San Rafael, CA, is among those hit by the hefty premium increase. "My Anthem health insurance rates are going up $100/month -- AGAIN -- same as last year," he tells ConsumerAffairs.com. "My rates have more than doubled in three years even as I've lowered my coverage, to try and save money."
The investigation will include an examination of how much the plans are spending on health care versus non-healthcare costs such as marketing, administration and profits. The plans have been asked to provide detailed information on how they spend policy-holders' premiums and how they review claims and decide whether and how much to pay the doctor or hospital for the service.
The investigation also will examine:
• Member and medical provider complaints against the health plans describing payment delays, reduced payments and denials of payment claims, and the health plans responses to those complaints;
• How health plans determine doctor and hospital rankings and whether those rankings mislead customers on quality;
• Whether the health plans intend to raise premiums, and, if so, whether the plans disclosed the amount and frequency of the premium increases at the time of enrollment;
• Whether the health plans offer alternative policies to members when they increase premiums and whether the plans may deny enrollment in the alternative policies based on preexisting conditions.
A denial of payment was under Charles of Arcadia, CA's skin when he wrote ConsumerAffairs.com. "I was released from a hospital and the doctors gave me a prescription for two bleeding stomach ulcers, which Blue Cross refused to allow filled," he says. "How can a clerk override the findings of an MD?"
The investigation also will look for violations of law, including California's Unfair Competition Law (Business & Professions Code section 17200) and False Advertising Law (Business & Professions Code section 17500.) These laws prohibit "any unlawful, unfair or fraudulent business act or practice" and the use of "false or misleading statements" to the public.
