Court Case Shows How Health Insurers Screw You

The insurer claimed—I’m not making this up—that its customers bore some of the financial responsibility for being ripped off because they weren’t paying close enough attention to what BCBSM was doing………………..

Court case shows how health insurers rip off you and your employer

Commentary: Blue Cross Blue Shield of Michigan added hidden fees to hospital claims

By Wendell Potter

In ruling in favor of Hi-Lex, the court said BCBSM committed fraud by knowingly misrepresenting and omitting information about the disputed fees in contract documents. Specifically, the administrative services contract it signed with Hi-Lex, as well as its monthly and quarterly claims reports, misled Hi-Lex into believing that the fees and charges it disclosed to its customers were the only forms of compensation that BCBSM retained for itself.

When the lower court found in favor of H-Lex, BCBSM filed an appeal with the U.S. Court of Appeals for the Sixth Circuit.  In essence, the insurer claimed—I’m not making this up—that its customers bore some of the financial responsibility for being ripped off because they weren’t paying close enough attention to what BCBSM was doing. It argued that Hi-Lex and its other employer customers should make a “contribution” to defray the judgment against the company because its customers didn’t act soon enough to put a stop to the scheme.

As you can imagine, attorney’s for Hi-Lex called BCBSM’s “contribution theory” absurd.

“Just as a bank robber cannot keep ill-gotten gains by seeking contribution from the bank’s security guard who failed to thwart the robbery,” attorney’s for Hi-Lex wrote in response to the insurer’s motion, “BCBSM cannot keep the disputed fees by seeking contribution from employers for failing to discover and thwart its illegal taking of millions of dollars form (its self-insured customers’) plans.”

Lest you think this scheme was something BCBSM dreamed up on its own, an actuary from the consulting firm Milliman Inc. testified under oath that many other insurers engaged in the same practices.

The Court of Appeals affirmed the $6.1 million fraud judgment, agreeing with the lower court that “BCBSM committed fraud by knowingly misrepresenting and omitting information about the disputed feeds in contract documents.” This misrepresentation, the court said, “helped sustain the illusion that BCBSM was more cost-competitive” than its competitors.

BCBSM hoped the U.S. Supreme Court would take the case but the high court refused, meaning the lower courts’ rulings stand.  As a consequence, as many as 50 of BCBSM’s other customers also filed suit. Rather than risking a similar fate in the courts, the insurer is reportedly settling with at least some of the other companies.

You might want to suggest that your employer look into this. It’s just the most recent evidence that some insurers are more interested in padding their bottom lines than doing the right thing for their customers.

Wendell Potter is the author of Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR is Killing Health Care and Deceiving Americans and Obamacare: What’s in It for Me? What Everyone Needs to Know About the Affordable Care Act.

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