Health Net Sued By Los Angeles City Attorney for Illegal Business Practices

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 payment of bonuses to employees who find ways to cancel policyholders’ coverage.

Lawsuit details

According to a press release from Delgadillo’s office, the civil lawsuit against Health Net, Inc., Health Net Life Insurance Co and Health Net of California alleges that the companies engaged in unlawful, unfair and fraudulent business practices and unfair, deceptive, untrue and misleading advertising in violation of California’s Unfair Competition and False Advertising laws. Specifically, the complaint alleges that Health Net purposefully used false and misleading marketing in an effort to gain more members and collected applicants’ medical histories using intentionally misleading forms that called for applicants to make educated medical judgments.

Delgadillo alleges that the submitted applications were generally accepted by Health Net without any meaningful review of the accuracy of responses, informed investigation into the medical history of applicants or confirmation that consumers understood the application. He claims that only after policyholders submitted claims for medical services did Health Net retro-actively conduct investigations into their medical history in order to find discrepancies in the application to allow for a delay in payment or cancellation of coverage.

The lawsuit seeks civil penalties of $2,500 for each violation of state law and to have wrongfully canceled policies reinstated, as well as providing full restitution to victims. According to Delgadillo:

Countless Californians who believe they have insurance actually have policies that aren’t worth the paper they’re printed on. At a patient’s most vulnerable moment, the insurance company won’t pay for care, or will cancel the policy altogether. Industry schemes to maximize profits at the expense of patients are unfair and unlawful, and they must be stopped.

Criminal probe

Delgadillo said that he also instituting a criminal probe into the insurer’s business practices of creating secret units whose job was to find ways to cancel insurance policies. Health Net was fined $1 million in 2007 for lying to California’s Department of Managed Health Care about paying bonuses to employees who were able to find ways to rescind policyholders’ coverage – a practice that is against the law.

If your insurance company has failed to pay your valid claim, they may have acted in bad faith and you may have recourse against them. For a free, no obligation consultation with a qualified attorney whose practice focuses in this area of law, please click here.

To view the press release, go to: www.lacity.org/ATTY/index/attyindex56050877_02212008.pdf.

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