Articles Posted in Insurance Law

Our San Francisco insurance attorneys know everyone in the US is paying close attention to this year’s upcoming election. In California, aside from the presidential election, there are also several state issues to be decided in November. One of these is a ballot initiative dealing with automobile insurance, and we have talked about it in a previous blog post. The issue is Proposition 33, which if passed would allow insurance companies to offer discounts to new customers who can prove they have had auto insurance for the last five years. It addresses Proposition 103, which requires personal auto insurance rates to be determined using factors in decreasing order of importance: insured driver’s safety record, number of miles driven annually by the insured, and number of years driving experience of the insured. A similar measure was narrowly defeated in 2010. And as with that initiative, there are two sides to the debate about the proposal.

Proponents say that the 2012 version includes consumer protection language not included in 2010, although they argue this could be harder to convey if the language in the sample ballot is kept, according to reports from the campaign. The Prop 33 campaign is taking issue with both the ballot description of the proposition and the opponent’s language, saying that those who wrote the language may not understand the California insurance industry. Proponents filed a lawsuit over this issue in the Superior Court of California last week, naming Secretary of State Debra Bowen, Attorney General Kamala D. Harris, and Consumer Watchdog founder Harvey Rosenfield as respondents. It was filed on behalf of American Agents Alliance’s executive director Michael D’Arelli, one of Prop 33’s major backers. The case is expected to be heard next week, before the August 13 deadline for the copy of the ballot.

The current language of the ballot label states: “Changes current law to allow insurance companies to set prices based on whether the driver previously carried auto insurance with any insurance company. Allows proportional discount for drivers with some prior coverage. Allows increased cost for drivers without history of continuous coverage. Fiscal Impact: Probably no significant fiscal effect on state insurance premium tax revenues.” The Prop 33 campaign says the problem is with the phrase “allow insurance companies to set prices”. They claim this language is highly likely to prejudice voters into voting no on the measure, and is unnecessary. Instead, the group prefers the language: “Changes current law to allow an insurance company to offer a continuous coverage discount based on whether the driver previously carried auto insurance with any insurance company.”

California insurance customers should be aware of another scam that is affecting the state. As San Francisco insurance lawyers, we know that insurance can be confusing and complicated and unscrupulous people take advantage of this to try to trick people with scams.

This recent scam, according to the California Department of Insurance and news reports, involves fake checks being sent to California insurance customers pretending to be from the Department. Some even have a forged signature of Insurance Commissioner Dave Jones. The checks have been for various amounts from $2,000 to $5,000 and are sent with an explanation that the Department is issuing a “refund” or sending a “payment” to the individual or family. But a statement from the Department said, “”The department does not issue checks such as these and is warning consumers and businesses to be alert if they are presented with a check of this type.” It also warned businesses and individuals to be on the lookout for these fake checks and not to trust any checks purporting to come from the Department of Insurance.

California is one of six states affected by this type of scam. Here, most of the checks have been received in the southern half of the state. California insurance spokesperson from the department, Dave Althausen, said that the Department has yet to discover why the checks are being circulated, who is behind it, or what they are hoping to gain through this fraudulent exercise. Mr. Althausen said that the California Highway Patrol is currently investigating the case and are hoping to halt the distribution of the false checks and discover the story behind them.

Anthem Blue Cross has gotten in trouble this week with California state regulators over trying to collect millions of dollars from medical providers for medical claims the company thinks were overpaid. As San Francisco insurance attorneys we understand that insurance companies are for-profit entities, but often the drive for profit leads the companies to push everyone else out of the way–including the interests of medical providers and policyholders.

California insurance law allows health insurance plans to seek reimbursement for overpaid medical claims within one year of the payment of the claim. If the insurance company wants to seek to collect on claims over a year old, it needs to demonstrate fraud or misrepresentation by the medical provider.

But according to news reports, earlier this year the California Department of Managed Health Care began investigating collection attempts by Anthem Blue Cross in the state. The Department is a government entity tasked with regulating managed health care plans in California and protecting the state’s 20 million health plan enrollees, as well as educating consumers about their health care rights. The investigation discovered that between 2008 and 2011, Anthem Blue Cross tried to collect overpayments from 535 providers for claims that were more than one year old and the company did not provide any evidence of fraud or misrepresentation, despite the California law requiring it. Anthem accuses the various medical providers of improperly coding the claims using upcoding, unbundling, or miscoding procedures. Anthem also tried to collect from another 13 providers who it claims billed for services never rendered.

When justice is done in insurance cases, our San Francisco insurance attorneys are happy to see insurance companies made to abide by their policies and the laws of California. So the news last month that Travelers Companies reached a settlement and have agreed to pay millions in refunds to policyholders and fines to the State of California was welcome. Too often the consumer is lost in a confrontation with a Goliath, and Travelers is one of the largest insurance companies in the US, with offices in every state and several foreign countries, and with revenue of $25.5 billion in 2011.

California Insurance Commissioner Dave Jones announced that the insurance company reached a settlement to pay $9 million in refunds to policyholders and a further $1.5 million as a fine. The $1.5 million fine will go into California’s General Fund. “In cases where the California Department of Insurance has identified premium overcharges, respondents have agreed to refund said premium overcharges and have refunded or are in the process of refunding any and all overcharges identified by the California Department of Insurance,” according to a stipulation order (a copy of which can be found here, see also the notice of noncompliance here.

This is after the California Department of Insurance conducted an examination of the company, specifically looking at whether it was properly applying rating rules and underwriting guidelines for both commercial and personal lines. The Department found that Travelers committed numerous violations of the Insurance Code and Regulations. Department examiners looked at 866 current policies and 424 expired policies, finding 125 errors in calculating premiums, 76 improper applications of underwriting or other internal company rules, and 19 cancellation errors, i.e. polices which were improperly declined, cancelled or not renewed, between the beginning of January and end of July in 2006.

As San Francisco insurance attorneys, we know all about insurance companies’ tactics to deny coverage, even when an insurance plan provides for that coverage. But now there is interesting news that a group of thousands of California doctors are suing Aetna, the country’s third largest insurance provider, for denying patients access to out-of-network doctors, even when the patient has purchased a policy giving them the right to chose providers. The doctors claim that Aetna is illegally limiting patients’ choices.

This new lawsuit was brought by the Los Angeles County Medical Association, California Medical Association, and a coalition of healthcare organizations and providers. It accuses Aetna of threatening patients with denial of coverage if they visit outside the network of providers. The suit also accuses Aetna of threatening doctors with having their contracts cancelled if they refer patients outside of the network, as well. It also accuses Aetna of false advertising, breach of contract, unfair business practices, and both intentional and negligent interference with health care providers. The goal of the lawsuit is to end these practices and get an immediate injunction, as well as compensation for patients and physicians and punitive damages.

“Despite making tens of millions of dollars selling policies with out-of-network benefits, Aetna has engaged in a campaign to retaliate against its members who attempt to use their out-of-network benefits, and the physicians who refer these members to out-of-network providers,” the lawsuit states. Rocky Delgadillo, chief executive of the Los Angeles County Medical Association, called Aetna’s actions an “attack on patients rights in favor of profit” to the Wall Street Journal.

This blog has followed the Affordable Care Act debate, nicknamed “Obamacare,” as the law has ramifications on many different health insurance issues affecting local consumers. Our San Francisco insurance attorneys (know that whether you are happy with the Court’s ruling or not, this decision (see the decision here) will have a huge impact on the future of health insurance in our state.

Starting in 2014, California will receive as much as $15 billion a year to expand Medi-Cal coverage for the poor and to provide federal subsidies to people buying policies in a state-run exchange. In fantastic news for insurance policyholders, insurers have to cover consumers regardless of pre-existing conditions and insurance companies will be required to spend at least 80 percent of premiums on medical care for individuals and small businesses. There are also incentives to provide for more coordinated patient care and taking away incentives for unnecessary medical procedures.

California Insurance Commissioner Dave Jones told the Los Angeles Times that getting coverage for even a portion of uninsured Californians would drastically reduce the amount of unpaid for medical care that is driving up costs for everyone else. And no one disputes that costs need to come down. The average premium for employer coverage in California has increased 154% in the last ten years, which is more than five times the state’s overall inflation rate of 29% in the same time period.

Like the rest of the country, our San Francisco insurance lawyers are eagerly waiting for the Supreme Court’s ruling on the Affordable Care Act (the so-called “Obamacare”), which should be handed down soon. Since the oral arguments earlier this year, this has been a huge national issue (see our previous post about the debate here).

So much is at stake with this law. There are nearly seven million Californians who do not have health insurance. A new study by Families USA reports that California has the highest number of residents who die prematurely each year from lack of health insurance. According to the study, 3,164 California residents between the ages of 25 and 64 died prematurely in 2010 because of lack of insurance, or about 61 residents per week! These are unacceptably high numbers. Californians are less likely to have health insurance, receive employer-based insurance, and be able to afford coverage than residents of other states. Californians are also more at risk of being denied coverage for preexisting conditions than those in other states.

Nationally, this new study found that those who died from lack of health insurance per year grew as well. In 2005 that number was 20,350. By 2010, it was 26,100. And over that five year period, a shocking 134,120 US residents died prematurely from not having health care coverage.

Our San Francisco insurance attorneys have probably seen it all in terms of shady behavior by insurance companies trying to squeeze more and more profits from their customers. The whole foundation and reason for insurance is to pay while you are healthy and everything is fine, so that when you get sick or things go wrong the benefits are there for you to use. But even we are constantly amazed by the shady dealings these unscrupulous companies sometimes have with their customers.

One classic example in the industry has its own nickname: the so-called “death spiral.” This is when a health insurer closes a type of policy to all new customers and then raises rates to those remaining in that type of policy until those enrolled cannot afford it anymore. Since customers with pre-existing conditions cannot switch to a comparable or better policy, they are forced to accept either inferior coverage or much bigger premium increases.

Recently, Consumer Watchdog filed a lawsuit against Blue Shield for using “death spirals” in the San Francisco Superior Court. They claim that Blue Shield has used enormous rate hikes and threats of rate hikes to force patients into these lower benefit, higher cost plans in violation of California law.

California law requires that when insurers close a policy, they offer a new comparable policy to the consumer or minimize rate increases for the closed policy. The suit alleges that Blue Shield is purposefully trying to push older, sicker customers who are more expensive for them into these worse policies that require them to pay much more out of their pocket, saving Blue Shield money. They are accused of closing 31 policies regulated by California agencies, without offering comparable policies or limiting rate increases as they are required to do.

One of the plaintiffs in this case, Robert Martin of Gilroy, California, said, “Blue Shield closed my family’s policy and then threatened us with a 23% premium increase. We had no choice but to switch to the only bare bones policy Blue Shield offered us. When Blue Shield cancelled the original rate increase, the company refused to let us transfer back into our old, higher benefit policy. Then, Blue Shield raised the rate of our bare bones policy by 14.8%!” A Watchdog spokesperson said that death spirals represent insurance companies at their worst, trying to cheat paying customers and game the system.

He said, “Instead of providing coverage to loyal customers who have paid their premiums, Blue Shield pushes consumers into skimpier coverage or prices them out of care altogether when they are sick and need insurance the most.”

The lawsuit alleges a broader scheme to manipulate the health insurance market, and Consumer Watchdog has a chart that maps this allegation. The consumer group was already successful at settling a similar “death spiral” case against Blue Cross in California last year. In that case, Blue Cross agreed to follow the law-to offer comparable plans and limit rate increases if policyholders choose to stay in the older, closed plans.

If your insurance company is trying to get away with a horrible scheme like this, contact a San Francisco insurance claim attorney as soon as possible.

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Our San Francisco insurance attorneys were interested to see news that another round of legal reforms of California’s workers’ compensation system is ongoing. The California Assembly and Senate had a joint hearing on this issue earlier this year, entitled, “Informational Hearing, Injured Workers Since SB 899: A Discussion on the Impacts of SB 899 on Permanent Disability Benefits.”

Governor Arnold Schwarzenegger signed into law a previous reform bill in 2004 that changed or affected almost every facet of California workers’ comp law. But the reformed system has turned into a boondoggle that has almost everyone united in favor of new reforms to fix the growing problems, many stemming from the last reform effort. One speaker noted that workers’ comp medical treatment costs have gone up 10 percent every year since the last reform. Others noted that injured workers are receiving 60 percent less benefits today than in the pre-reform era. The system is benefiting none and making no one happy. Current Governor Jerry Brown has signed into law a few workers’ comp related bills, but he also advocates for a more comprehensive reform, saying it should be on a “broad and balanced scale.”

This comprehensive reform will have two main tricky issues to contend with: (1) better managing permanent disability benefits (which have been drastically cut in recent years), and (2) an attempt to stop premium rates increasing.

Our San Francisco insurance attorneys keep a close eye on all facets of California insurance law. For example, yesterday, the California Assembly passed AB 2138, which increased assessments to health and disability insurers to enable them to have more funds to fight insurance fraud. It would increase the annual assessment from its current rate at 10 cents per insured person up to 20 cents per insured person. This money will particularly be used to help local district attorneys around California prosecute insurance fraud, because at the moment most localities do not have enough money to prosecute nearly as many cases as they would like. It is especially a problem when local governments are as cash-strapped as they are now.

The impetus for this legislation was a 2008 report by CDI’s Advisory Task Force on Insurance Fraud, which found insufficient policy assessments to fund a state-wide anti-fraud effort and recommended the increase included in AB 2138.

This bill was sponsored by the California Department of Insurance and it’s Commissioner Dave Jones. Department records show that between 2007 and 2010, CDI received more than 6,000 health and disability fraudulent claims but only a very small number of the 6,000 were referred to district attorneys. Only 656 investigations took place, resulting in 221 arrests and 184 convictions with an average annual chargeable fraud of $223 million.