A lawsuit contends that a Carmel-based health insurer ran a scheme to avoid paying in-home care claims for potentially thousands of California's elderly.

Senior Health Insurance Company of Pennsylvania, or SHIP, had a claims process "designed to frustrate and confuse policyholders with needless demands for irrelevant information" in violation of its own policies and California law, according to the suit filed Tuesday in San Bernardino County Superior Court by the group Consumer Watchdog.

"They're preying on the elderly," group founder Harvey Rosenfield said Wednesday.

A call to the company seeking comment was not immediately returned.

The not-for-profit insurer is run by a trust created by the Pennsylvania Insurance Department. It was previously known as Conseco Senior Health Insurance Company and it services long-term policies originally sold by Conseco, American Travelers Life, Transport Life, United General Life, and Continental Life.

Senior Health Insurance operated as Conseco Senior Health Insurance until late 2008, but Conseco (now CNO Financial Group) transferred the unit to an independent trust based in Pennsylvania when it abandoned the long-term care insurance market due to heavy losses. Conseco took a $1.2 billion charge to unload the unit.

It has about 10,000 California policyholders, Rosenfield said.

The average age of its policyholders in 2009 was 80, according to the California Department of Insurance. That year, the company agreed to pay $500,000 to settle claims by state regulators that it had improperly denied claims on long-term care policies and that its claims-handling practices were confusing and onerous. The company agreed to repay claims dating back to 2004.

The new lawsuit makes similar allegations. It alleges that SHIP tried to avoid reimbursing policyholders for long-term care by ignoring or taking an unreasonably long time to respond to claims; requiring unnecessary paperwork and medical examinations, and requiring that the caregivers have licenses in violation of company policy and California law.

The suit, which seeks class-action status, was filed on behalf of Dr. William Hall, 78, of Upland. Hall, a retired chief of medicine at a California hospital, bought a long-term care policy in 1994 and submitted claims in 2010. SHIP refused to reimburse all but 20 percent of his expenses.

"He immediately ran into a brick wall" and was forced to pay tens of thousands of dollars for his home care, which depleted his savings, Rosenfield said.

"My Dad bought this policy to spare his children some of the time and expenses that many of our parents require when they get older, but SHIP has only drained my family's resources," his son, Eric Hall, said in a statement. "Because of SHIP, my family has spent more time and expense on his care than if he had never bought the policy in the first place. It has been an uphill battle."