Claiming it collected employee contributions for health coverage but never paid premiums, Pennsylvania’s attorney general has filed suit against a Texas company.

Tom Corbett

Tom Corbett announced that his office’s health care section has filed a lawsuit against Turbine Airfoil Designs, a Texas corporation operating out of Harrisburg, Pa. Named in the suit are the aviation part manufacturing business, as well as three of its corporate officers: CEO John A. Walton, President Benjamin C. Frazier and Chief Financial Officer Anne C. Richie.

“We have dozens of complaints from TAD employees who are now facing thousands of dollars in unpaid medical bills simply because they tried to use the health care benefits they were promised,” Corbett said in a statement. “Company officials knew, or should have known, that non-payment of health insurance premiums would leave workers vulnerable, but failed to warn their employees or take steps to prevent a health disaster from striking these families.”

The lawsuit claims TAD started to fall behind on premium payments to Capital Blue Cross for employee health care coverage in August 2008, resulting in numerous delinquency notices never disclosed to employees. A payment plan also established between the insurer and TAD was never completed by the Texas firm, eventually resulting in the cancellation of coverage.

Employees were not notified of the cancellation until March 17 and that their PPO coverage had ceased six months earlier, on Oct. 9, 2008, according to Corbett’s office. Numerous TAD employees sought coverage during this time, unaware that payment of their claims had been suspended or that their PPO benefits had effectively stopped.

Yet, Corbett’s office claims, TAD continued to withhold health care contributions from employee paychecks that were to be forwarded to Capital Blue Cross. In addition, employees laid off from the firm were also told that they could continue medical coverage under COBRA guidelines, with some making payments when not actual health insurance plan existed.

“These workers made good-faith efforts to purchase health insurance coverage in order to protect themselves and their families, only to be victimized twice – with smaller paychecks and cancelled coverage,” Corbett said.  “Health care costs are a major concern for every Pennsylvania family and nobody should have to suffer through a crisis like this.”

The lawsuit seeks restitution by the company and its officers to all employees who suffered losses and civil penalties and fines of up to $1,000 for each violation of the state’s consumer protection laws, or up to $3,000 for each violation involving a victim age 60 or older.

Harrisburg, Pa.-based Capital Blue Cross said it is contacting employees of the company to resolve medical bills sent between October 2008 and March.

The insurer’s president and CEO, William Lehr Jr., said in a statement that the company wants to help any and all affected TAD employees.

“Capital BlueCross is a business – but we also are a non-profit organization with a 70-year community mission,” Lehr said in a statement. “And this is one of those instances where mission should prevail. So I have directed that we will reach out to the affected covered employees in the coming days, to develop a plan to address the situation with them.”