Two large health insurers have been charging more than state-mandated rates for last-resort health coverage. About 19,000 people are affected, according to the Los Angeles Times.
Blue Shield of California charged premiums as much as 55 percent above the California cap, and policies of Anthem Blue Cross, a unit of Indianapolis-based WellPoint Inc., have been as much as 36 percent higher, the Los Angeles Times said.
The rates added thousands of dollars a year to some coverage plans.
State regulators said they had not examined the premiums for years but recently opened investigations.
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"We really do view this with alarm," said Lynne Randolph, a spokeswoman for the Department of Managed Health Care.
She said the investigation could lead to an order to reimburse consumers.
The policies were established under a 1996 federal law to cover people who lost or left work after their job-based health insurance ran out.
The federal COBRA law allowed job-related insurance to be extended for up to three years at the individual's expense.
The federal Health Insurance Portability and Accountability Act, or HIPAA, requires insurers to offer their most popular coverage options to people whose COBRA insurance has ended.
HIPAA insurers cannot reject people if they have pre-existing medical conditions, so the policies tend to cover people who cannot get coverage elsewhere.
A California state law passed in 2001 capped the premiums for HIPAA policies.
The Times found that Blue Shield's monthly premium for a family of four in Los Angeles with a 40-year-old primary policyholder was $4,812 a year higher than the cap.
Anthem charged $3,552 a year more, the newspaper said.
Anthem is reviewing its policies and has determined that some people were overcharged since 2006, spokeswoman Peggy Hinz said. The company promised to reimburse anyone who was overcharged.
A Blue Shield spokesman said the company had not violated the law but rather used its own interpretation of the cap.
"We think we are obeying the letter of the law," spokesman Tom Epstein said.
Even with the higher rates, Blue Shield lost about $7 million on its HIPAA coverage last year and expects to lose up to $20 million this year, Epstein said.
The company has defended its rates in a letter to the state's managed care department. However, Epstein said it would switch to using a weighted average if regulators order it to do so.