Lawsuit Seeking Class Action Status Alleges Fraud in Hospital Billing

A lawsuit filed in Los Angeles Superior Court on Monday on behalf of California consumers is seeking a court order to bar hospitals from billing patients to compensate for low health insurance reimbursements, a practice called "balance billing," Reuters/Los Angeles Times reports. According to the lawsuit, balance billing is a practice in which health insurers allow participating hospitals to bill patients for the difference between their reimbursements and what the hospital considers the services to cost, even if they agreed to take the lower fee during contract negotiations. Lawyers for the plaintiffs said that in some cases the amount billed to patients is equal to the discount that hospitals give to health insurers.

The lawsuit, which is seeking class-action status, alleges that the practice constitutes "fraud and a breach of the state's unfair business practices law," according to Reuters/Times. California law requires health insurers to guarantee that hospitals do not charge patients for services fully covered under their health plans. Defendants named in the lawsuit include WellPoint Health Networks and subsidiaries Blue Cross of California and Blue Shield of California Life & Health Insurance; Cigna Health Care of California; PacifiCare of California, a unit of PacifiCare Health Systems; and Prudential Health Care of California and Aetna Health Management, units of Aetna.

"Essentially the insurance companies are transforming the hospitals into their collection agencies," Michael Cohen, an attorney for one of the plaintiffs, said. He added, "It does two things for insurers: The hospital can get more money ... and it saves the HMO the expense of having a collection agency." Michael Chee, a spokesperson for WellPoint and Blue Cross, did not comment on the lawsuit but said that the companies' contracts do not allow hospitals to bill patients for services fully covered under their health plans. He also said that patients injured in car accidents are expected to use their automobile insurance to pay hospital bills, adding that in such cases, hospitals are not bound by WellPoint's rates or contracts with hospitals. A spokesperson for Cigna said the lawsuit has "no merit," and a spokesperson for Aetna said the company will defend the "legal claims in the case" (Reuters/Los Angeles Times, 7/22).