The practice of "balance billing," in which hospitals bill patients to compensate for low insurance reimbursements, has come under attack in a proposed class action filed on behalf of California consumers.
The lawsuit, filed Monday in Los Angeles Superior Court, says the practice is fraud and a breach of the state's unfair business practices law, and it seeks a court order to stop it.
In balance billing, insurers allow contracting hospitals to bill patients for the difference between what the insurer paid them and what they believe the services are worth, even if they agreed to take the lower fee, the lawsuit said.
The amounts sought by hospitals are sometimes the discounts that the hospital granted to the patient's insurance company in exchange for the patient's business, lawyers said.
Named in the suit were WellPoint Health Networks Inc.; its subsidiaries Blue Cross of California and Blue Shield of California Life & Health Insurance Co.; Cigna Health Care of California Inc.; PacifiCare of California, a unit of PacifiCare Health Systems Inc.; and Prudential Health Care of California and Aetna Health Management Inc., units of Aetna Inc.
California law requires insurers to ensure that hospitals do not charge patients for services that are fully covered under their health plans.
Michael Chee, spokesman for WellPoint and Blue Cross of California, declined to comment on the lawsuit but said the companies' contracts did not allow hospitals to bill patients for the balance of services that are fully covered.
Chee said, however, that patients injured in car accidents were supposed to use their auto insurance coverage to pay their hospital bills. In those cases, hospitals would not be bound by WellPoint's rates or contract, he said.
A Cigna spokeswoman said the claims had "no merit." An Aetna spokeswoman said the company planned to vigorously defend the "legal claims in the case."
"Essentially the insurance companies are transforming the hospitals into their collection agencies," said Michael Cohen, attorney for lead plaintiff Ronald Allen Gass.
"It does two things for insurers: The hospital can get more money