Health Net Lawsuit Reveals Bonuses Were Paid to Cancel Policies
An Industry-Wide Practice
These revelations come at a time when major health insurers, such as Blue Cross, Blue Shield, and Kaiser Permanente, are coming under increased scrutiny in California for canceling policies once expensive treatments are authorized. Policies are often scrutinized for even minor flaws in the original application for health insurance. If a flaw is found, the policy can be canceled, leaving the policyholder with overwhelming medical bills and no coverage.
Lawsuits Over Canceled Policies
These practices are being challenged in courts by policyholders throughout California. Lawmakers and regulators are looking very closely at whether or not insurers have broken the law, both by canceling policies where the application did not show a clear intent to defraud the insurer, and by tying compensation (i.e. bonuses) of claims reviewers to their claims decisions.
Health Net was sued by Patsy Bates of Gardena, California when the insurer canceled her policy in the middle of her chemotherapy treatments for breast cancer. Ms. Bates is seeking $6 million in damages in her Health Net lawsuit.
Health Net Tried to Keep the Information Secret
Health Net sought to keep the documents from going public, but the arbitrator in the case, Judge Sam Cianchetti, ruled that the proceedings would be open to reporters and that all documents produced for arbitration would be public, citing public interest as a reason for allowing the exposure of potentially very embarrassing information about HealthNet practices and procedures.
Health Net lawyers defended the company, claiming the company had not run afoul of state law because the employee for whom bonuses were paid was not a claims reviewer, but an underwriter. Time will tell if Health Nets defense is convincing enough for Judge Cianchetti.