On the first day of Obamacare open enrollment, a consumer group sued Anthem Blue Cross for attempting to automatically renew policies that no longer cover out-of-network costs for hundreds of thousands of Californians.

A lawyer for Consumer Watchdog said Tuesday that Anthem was “railroading existing members into bare-bones plans” without properly disclosing the change to them in recent renewal letters.

On top of the loss of out-of-network coverage, many of the customers also face big premium hikes.

Los Angeles resident Paul Simon, one of the patients involved in the lawsuit, would pay 33% more next year for his policy — $655.72 a month, up from $491.54 this year, according to his renewal letter.


Consumer Watchdog’s lawsuit says Anthem engaged in a “bait-and-switch” scheme. The group’s attorneys said Anthem should have sent the customers a “discontinuation” notice to properly inform them that they were losing their out-of-network coverage. Instead the insurer sent notices saying the policies would automatically renew if the member takes no action by Dec. 15.

“We believe that Anthem is trying to take advantage of consumers during the open enrollment period,” said Travis Corby, a lawyer representing the consumer group. “They are selling 2017 Affordable Care Act health plans as being the same as their 2016 products.”

Anthem customers are not the only ones facing big premium hikes for 2017.

Statewide average premiums on the online marketplace known as Covered California will rise an average of 13.2% in 2017. That is roughly half as much as the 25% rise for a mid-level plan on the federally run online marketplace used by 39 other states.


Darrel Ng, an Anthem spokesman, said his company had changed the plans’ design “to mitigate rate increases and keep monthly premiums affordable.”

He said Anthem believes that the lawsuit “is without merit.”

“The benefit package being offered in 2017 was approved by the Department of Managed Health Care and Covered California and is consistent with federal guidance,” Ng said. “Affected members have been mailed written notice of this change so they can make an informed decision on their healthcare needs during the open enrollment period for the coming year.”

The change, effective Jan. 1, affects policyholders who had signed up for Anthem’s preferred provider organization, or PPO.


In most areas in the state, Anthem is changing its PPO into a so-called exclusive provider organization, or EPO — which means that it will no longer pay even a portion of bills from doctors or hospitals not in its network.

Leslie Burkes of Los Angeles, another Anthem customer, said Tuesday that she had picked Anthem’s PPO because a family member has a serious medical condition and sees specialists outside the network.

“I’m trapped in a double blind,” she said. “We will have no coverage to doctors we need.”

The lawsuit, filed in Los Angeles County Superior Court, asks the judge to force Anthem to renew the plans as PPOs for 2017. It also seeks monetary damages for customers who are harmed and payment of the consumer group’s attorney fees.


Open enrollment, a period when consumers can sign up for or change their health insurance coverage for next year, began Tuesday on Covered California. To get coverage that begins Jan. 1, people must sign up by Dec. 15. For insurance with later start dates, people can sign up through Jan. 31.

Jan Spencley, executive director of San Diegans for Healthcare Coverage, a nonprofit that offers free enrollment counseling, said her phone has been ringing as beneficiaries open notices from their current carriers showing how much their premiums will climb next year.

Rate increases are softened significantly for most enrollees because they receive taxpayer-supported subsidies based on their income.

But for many people, the subsidies are rising more slowly than their premiums, Spencley said. That may mean a large rate hike unless they are willing to switch to a less expensive policy.


“Some of the calls I get from people are just heartbreaking,” Spencley said, “because they’re one flat tire or dead car battery away from not being able to pay for health insurance anymore.”

Paul Sisson at the San Diego Union-Tribune contributed to this report.

melody.petersen@latimes.com

Follow @melodypetersen on Twitter


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UPDATES:

3:55 p.m.: This article was updated with additional comments from Darrel Ng and Jan Spencley and with background information about Covered California.

This article was originally published at 12:45 p.m.