New class action claims insurance company got rid of risks, kept profitable insureds

By Kelly Holleran | Mar 24, 2010

Goldenberg Two Illinois residents have filed a putative class action complaint against an insurance company, alleging it violated Illinois insurance laws when it forced them to pay 250 percent more for their coverage.


Two Illinois residents have filed a putative class action complaint against an insurance company, alleging it violated Illinois insurance laws when it forced them to pay 250 percent more for their coverage.

Lead class plaintiffs Charlotte Phillips and Bob Myrick say they faced massive increases on their health insurance premiums after defendant insurance company WellPoint Inc. acquired defendant insurance company RightCHOICE for $1.3 billion in 2002. As a result, defendant Unicare, a subsidiary of WellPoint, took on all the insureds in Illinois.

According to the complaint filed March 17 in Madison County Circuit Court, the merger forced less profitable policyholders, such as those who were ill or who were less profitable for the insurance company, to either be forced into paying a higher cost for their health insurance, to receive an inferior insurance policy or to be forced from obtaining insurance.

For example, Phillips claims she had an individual PPO plan with RightCHOICE before the merger. In June 2002, Phillips got pregnant and was supposed to be covered for her baby's birth in 2003, the suit states. However, Phillips was forced to enroll in the Unicare 1000 plan, which caused her to pay 250 percent more for insurance, the complaint says.

The plaintiffs are represented by Mark C. Goldenberg and Thomas P. Rosenfeld of Goldenberg, Heller, Antognoli and Rowland in Edwardsville and by Clinton A. Krislov and Kenneth Goldstein of Krislov and Associates in Chicago.

When she first began receiving RightCHOICE benefits, Phillips claims she was only paying $153 per month. By Dec. 5, 2002, her coverage had increased to $240 for one month, according to the complaint.

Myrick, a diabetic, also claims his insurance increased by a substantial amount after the merger. Initially, Myrick enrolled in an individual RightCHOICE policy for himself and his family at a cost of $430 per month, the suit states.

When the merger occurred, Unicare would have denied Myrick's application for insurance because of his diabetes, he claims. So he had no choice but to convert his policy to Unicare for at least 250 percent more than he was previously paying.

"He could not afford to pay the premium for Unicare 1000 at a 250 percent increase under the conversion option and was forced to let his coverage lapse," the suit states.

Both Phillips and Myrick were forced to obtain insurance coverage through different companies because of the huge increase in their rates, the complaint says.

They allege there are many others like them who were negatively impacted by the merger.

When the merger occurred, WellPoint directed RightCHOICE to withdraw its insurance company from the Illinois market and transfer its policy holders to Unicare. In effect, RightCHOICE policy holders were faced with three options. They could either reapply with Unicare for a new policy, keep an inferior policy to their RightCHOICE one and face an increased premium of 250 percent or forego coverage with Unicare.

"The conversion was effected by exploiting a perceived statutory loophole in which it categorized the transactions as unrelated, and in that way sought to withdraw RightCHOICE and market Unicare and retain the profitable RightCHOICE insureds and re-price or get rid of the risks, in other words, to re-rate, re-price, or shed less profitable undesirable insureds," the suit states.

The merger violated the Health Insurance Portability and Accountability Act because under an Illinois HIPPA statute, insurance companies are prohibited from refusing to renew a client's coverage based on their health status. Once a policy holder secures coverage, he/she should be able to rely upon renewing the policy each year without an increase in rates, the complaint says. Only under extremely limited circumstances is an insurance company allowed to terminate a person's health coverage.

But after the merger, Unicare based prices of insurance plans on the policy holders' health status. The plaintiffs contend the insurance company should not have been allowed to act in such a way. They say if they could have continued their policies with RightCHOICE, they would not have been forced to pay higher premiums and receive less benefits because they would have been able to renew their policies.

"Thus, Illinois HIPPA protection required either that Defendants here (a) offer all affected policy holders the option to purchase any other individual health insurance coverage it currently offered in Illinois and to do so by acting 'uniformly without regard to any health status-related factor of enrolled individuals' or to (b) be prohibited from reentering the market during the five-year period beginning on the date of the discontinuation of the last health insurance coverage not so renewed," the suit states. "Defendants ploy here was to have RightCHOICE effect an Illinois market withdrawal without offering its insureds the option to purchase other policies sold by its Unicare affiliate except by reunderwriting, repricing, or being rejected or forced on to a policy with lesser benefits at greatly increased cost."

In the six-count complaint, the plaintiffs allege the defendants violated the Illinois HIPPA, breached their contract, were guilty of consumer fraud and deceptive trade practices and intended that the plaintiffs rely on their deception.

The plaintiffs seek an order requiring the defendants to make restitution to the policy holders for all money they obtained through their unlawful conversion, an order requiring the defendants to restore previous coverage to the plaintiffs and a declaration that the defendants violated the Illinois Consumer Fraud and Deceptive Business Practices Act and the Illinois Insurance Code. They also seek compensatory and punitive damages, attorneys' fees, costs and other relief the court deems just.

Madison County Circuit Court case number: 10-L-303.

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