City Suing Blue Cross/Blue Shield for $4.2 Million, Alleging 'Hidden Fees'

Dozens of Communities Taking Action Against Insurer; Class Action May Ensue

November 8, 2009
By: Dave Rogers

The City of Bay City is seeking $4.2 million damages from Blue Cross/Blue Shield of Michigan (BCBSM) in a lawsuit filed in Bay County Circuit Court.

The suit, filed by attorney William Horton of Giarmarco, Mullins & Horton, P.C., of Troy, Michigan, alleges that BCBSM overcharged the city in hidden access fees.

Bay City is one of a dozen Michigan communities that is suing BCBSM, with about $40 million in alleged overcharges at issue.

A class action lawsuit is being considered by several communities, and joining that suit might be advantageous if cash-strapped units prevail.

The fees were not specified in the master contract, according to the city suit.

City Manager Robert V. Belleman noted in his biweekly memo to commissioners that the Detroit News had published an article entitled "Communities accuse Blue Cross of hiding $40 million in fees."

He also pointed to reports that Oakland County has settled its lawsuit alleging more than $16 million in hidden fees by Blue Cross Blue Shield of Michigan rather than go to trial.

The amount of the settlement was reportedly $650,000 plus three years of free administration of its plan covering 5,000 employees, services estimated to be worth $8.5 million.

Oakland had an administrative services contract with the Blues for 20 years to oversee hospital and health benefit claims for its nearly 4,000 employees. In a lawsuit Oakland charged fees were added to employee claims without the county's knowledge or consent.

Communities are considering a class action suit against the state's largest insurer. Attorney William Horton said more than 1,000 governments may have paid the hidden fees since BCBSM changed its billing procedures in 1994.

"We have internal memos that say how to set up these plans," Horton says. "They were used for training their sales people to hide these fees."

Blue Cross spokeswoman Helen Stojic denied the fees were hidden and claimed the communities saved money on the Blues' hospital networks.

"The disputed fees were specifically referenced in each of these groups' contracts," she said.

However, attorney Horton says the contract language is so complex only a Blue Cross staff person would know the extent of the fees.

Blue Cross spokesperson Stojic said that even though they are involved in the legal action, the communities continue to operate under contracts with the insurer.

"While we sympathize with government bodies that are trying every possible way to add funds to their budgets because of challenging economic times. We are disappointed that they have chosen to participate in these lawsuits," Stojic said. ###