Health Net sued for insurance cancellations
Health Net Inc. is being sued by Los Angeles City Attorney Rocky Delgadillo for promising medical coverage and then dropping patients if they needed expensive treatment.
In a suit filed Wednesday in Los Angeles Superior Court, the City Attorney accuses Health Net (NYSE: HNT) of using "misleading information" to gain members in the individual market and then using the information against them to delay coverage.
The suit states that Woodland Hills insurer used untrained salespeople to collect people's medical histories, used purposefully misleading forms and did not review the information until after they filed claims.
"The application is essentially a trap for the unwary that maximizes the possibility that it will contain errors or omissions that defendants can later use as a purported basis for rescission," the suit states.
The city attorney says Health Net went as far as to create a secret unit in its organization to cancel policies, and that it provided benchmarks -- including goals for numbers of rescissions per year and dollars in claims denied -- and bonus payments to employees for reaching company goals.
"The division met or exceeded its goals every year, denying more than $35 million in claims between 2003 and 2006," according to the city attorney's news release.
Delgadillo also said Thursday that in addition to seeking civil penalties, he is initiating a criminal investigation of individuals associated with Health Net's bonus payment program for cancellations, and he is examining statements made to the California Department of Managed Healthcare regarding these payments.
"This is a matter that Health Net takes very seriously," the insurer responded in a prepared statement. "We have a long-standing tradition of providing health care coverage to people in need." The company said it paid nearly $200 million in claims for its 110,000 individual members in 2007 and that state regulators are already reviewing the claims made by Delgadillo in the filing.
If they really did intentionally skew the odds toward incorrect data collection, then use that as an excuse to drop coverage of subscribers requesting health care, and especially if they set goals for and rewarded employes for denied claims, they deserve to be raked over the coals for the miserable thieving scumbags that they are.