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Insurer loses $6M appeal over hidden fees
DETROIT — An insurer lost a crucial $6-million appeal Wednesday in a case over hidden fees paid by customers, a decision that could influence the outcome of dozens of similar lawsuits against the health insurer.
A federal appeals court affirmed the work of U.S. District Judge Victoria Roberts, who found Blue Cross Blue Shield of Michigan was "self-dealing" and violating labor law for years.
A Detroit-area auto supplier, Hi-Lex Controls, accused Blue Cross of inflating costs with charges that weren't properly disclosed. Roberts awarded $5.1 million, plus nearly $1 million in interest, in 2013.
Blue Cross "committed fraud by knowingly misrepresenting and omitting information about the disputed fees in contract documents," the appeals court said in a 3-0 decision.
There are many more lawsuits alleging similar acts by Blue Cross. Roberts put them on hold last year, at the insurer's request, until the Hi-Lex appeal was over.
"Employers work hard to manage their health care costs," said Perrin Rynders, an attorney for Hi-Lex. "It is upsetting that an organization trusted to help keep costs in line would violate that trust and take advantage of its customers."
Blue Cross spokeswoman Helen Stojic said the company is disappointed with the appeals court decision. The insurer has defended its actions, claiming the charges were allowed under contracts with customers.
But evidence in the Hi-Lex case showed the practice was controversial even inside the insurer. The judge found Blue Cross ignored Hi-Lex's inquiry about the disputed fees in 2003 and then covered them up.
"We want to stay away from identifying what is in the fee," senior underwriter Ken Krisan said in a 2007 email to a colleague.