Health Net , one of California’s largest for-profit insurers, was ordered to pay $9 million by a private arbitration judge after the company canceled a cancer patient’s coverage while she was in the middle of receiving chemotherapy treatments. The award has been described as the first of its kind and sends a strong warning to insurance companies to stop canceling policies in bad faith.

Details of the case

Patsy Bates was in the hospital awaiting surgery for her cancer when a hospital administrator came to her room and told her that her surgery, scheduled for the next day, had been canceled due to problems related to her insurance. Health Net authorized surgery only after Bates’ daughter authorized the insurer to charge 3 months’ worth of premiums in advance on her debit card.

Bates was ultimately left with almost $200,000 in medical bills and right in the middle of chemotherapy when Health Net canceled her policy. Her chemotherapy was delayed for 4 months, after which the expenses to complete it were paid by a charity. She sued Health Net for bad faith insurance practices – an area of law that is slowly becoming more consumer-friendly.

The tables are turning

Insurance companies have been finding ways to cancel policies for many years, but the tables may be turning as judges and state regulators crack down on these deceptive practices. Health Net seems to be one of the worst when it comes to illegally rescinding policies. For example:

• Just last week, Los Angeles California City Attorney, Rocky Delgadillo, announced that his office has filed a civil lawsuit against Health Net for illegal business practices in the state and that he is also launching a criminal probe into the insurer’s conduct.
• Only three months before, Health Net was fined $1 million for failing to disclose information to the Department of Managed Health Care about its program to pay bonuses to employees for rescinding policies – which, coincidentally, came to light during the Bates’ case.

Health Net blasted by judge and insurance commissioner

According to an article in the Los Angeles Times, Judge Sam Cianchetti, the retired Los Angeles County Superior Court judge who presided over the case, thought that Health Net’s behavior was egregious. He was quoted as saying, "Health Net was primarily concerned with and considered its own financial interests and gave little, if any, consideration and concern for the interests of the insured.”

In addition, the Times reported that Steve Poizner, California’s Insurance Commissioner, applauded the judge’s ruling and added, “"Health insurers simply cannot hold out the promise of insurance for their consumers and then snatch it away just when people need it most. That is illegal, immoral and will not be tolerated."

Has your insurance company acted in bad faith?

Illegal rescissions equate to bad faith and consumers can take their insurance carriers to bat over it. For a free, no-obligation consultation with an attorney who understands how insurance companies operate, please click here.