SAN FRANCISCO (KCBS) – Blue Shield is forcing customers to either pay higher premiums or switch to a worse policy, according to a class action lawsuit filed against the insurance company in San Francisco on Wednesday.

Attorneys say more than 300,000 Californians could find themselves in the predicament Robert Martin of Gilroy faced when Blue Shield notified him it was closing the policy group he was in and raising premiums 30 percent.

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KCBS’ Doug Sovern Reports:

Martin said his only alternative was to switch to a policy with a much higher deductible and far fewer benefits.

“I think it was incredibly unfair. I couldn’t believe they did this and when we went through the normal channels of appeal to the Department of Health, I couldn’t believe the lack of interest on the regulator’s part,” said Martin.

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So Martin is suing in a class action filed by the nonprofit Consumer Watchdog, where attorney Jerry Flanagan said Blue Shield is using what the insurance industry calls “a death spiral” to purge customers who file the most claims before the federal health reform law takes effect in 2014.

“Blue Shield is pushing consumers with preexisting conditions into skimpier benefit policies when they need coverage the most,” said Flanagan.

Blue Shield denies any wrongdoing and said it is in compliance with California law.

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