Health Net Agrees to Settle Civil Suits Dealing With Policy Rescissions

On Wednesday, a California court preliminarily approved a settlement of two class-action lawsuits over rescissions that would require Woodland Hills-based Health Net to extend coverage to former policyholders and reimburse them for out-of-pocket medical expenses, the Los Angeles Times reports.

The agreement would settle lawsuits brought by Claremont lawyer William Shernoff and Los Angeles City Attorney Rocky Delgadillo. The suits were filed on behalf of 800 policyholders who had their coverage rescinded (Girion, Los Angeles Times, 2/12).

The former policyholders would receive about $6.3 million in automatic payments for emotional distress (George, Los Angeles Daily Journal, 2/12). The average payment would be $7,836, but some people would be eligible for payments of as much as $218,000.

Other Provisions

Under the deal, Health Net also will:

• Continue its ban on rescissions until state lawmakers or regulators establish standards for them or until the insurer establishes a third-party review process that is acceptable to the judge who is presiding over the case;
• Pay a $2 million fine to the Los Angeles city attorney;
• Pay $2.1 million in legal fees (Los Angeles Times, 2/12); and
• Contribute $500,000 to a cancer and hospital charity.

The settlement requires final approval from a superior court judge.

Shernoff said he hoped Health Net's settlement would encourage Anthem Blue Cross of California and Blue Shield of California to agree to settle similar lawsuits over rescissions (Los Angeles Daily Journal, 2/12).

Anthem Blue Cross

As expected, the California Department of Insurance announced a settlement over rescissions with Anthem Blue Cross on Wednesday.

The insurer will pay a $1 million fine and reinstate health policies to more than 2,300 consumers whose medical coverage the insurer rescinded.