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California AG Investigating Health Plans on Rate Increases

Cheryl Clark, for HealthLeaders Media, February 26, 2010

Saying health plan rate increases are "devastating to Californians . . . and possibly illegal," California Attorney General Edmund G. Brown Jr. subpoenaed seven insurance companies operating in the state.

"Our best attorneys are going to get to the bottom of this, and where we find violations of California's unfair business laws, we intend to stop them," Brown said in a statement.

He added that his office has been concerned for several months that some companies "are unjustly raising premiums and denying payment of legitimate claims."

The companies subpoened are: Aetna Health, Anthem Blue Cross, CIGNA, Health Net, Blue Shield of California, Kaiser Permanente, and PacifiCare. The subpoenas deal with the companies' fee-for-service plans, which reimburse doctors and hospitals for services performed.

Brown said his investigation will focus on consumer and provider complaints about payment delays, reduced payments and denials of claims, and how health plans determine doctor and hospital rankings and whether those rankings mislead customers on quality.

He also will look into whether health plans disclose the amount and frequency of premium increases at the time of enrollment.

The California Medical Association, which represents 35,000 physicians, and the California Nurses Association applauded Brown's action.

"California's top five insurers control 86% of the state's private healthcare market," said CMA President Brennan Cassidy, MD. "They use that power to force higher premiums on their policyholders, deny patients needed treatment, underpay providers, and boost their profits at the expense of Californians," Cassidy said.

The CNA released data from its research arm, the Institute for Health and Socio-Economic Policy, showing that claim denial rates averaged 26% for the seven insurers.

"What we see over and over is an arrogant industry that is indifferent to the pain and suffering caused by routine care denials or economic catastrophe prompted by outrageous price gouging," said CNA/NNOC Co-President Geri Jenkins, RN.

Brown's inquiry follows another that his office launched into HMO practices "of reviewing and paying insurance claims submitted by doctors, hospital and other medical providers" last September. That investigation was prompted by reports that California's five largest health insurance companies were denying insurance claims at rates of up to 39.6%. Also, Anthem Blue Cross recently announced it planned to hike premium rates by as much as 39% for some individual insurance members.

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