Health Net Assailed for Giving Bonuses for Canceling Policies
Health Net is under scrutiny from state insurance regulators for awarding bonuses to staff for rescinding a certain number of individual health insurance policies, the Los Angeles Times reports.
According to court documents released Thursday, Health Net canceled about 1,600 policies between 2000 and 2006, resulting in a total of $35.5 million in medical expenses that it avoided paying.
During that period, the insurer provided more than $20,000 in bonuses to its senior analyst in charge of policy cancellations for meeting or exceeding annual targets.
State law prohibits insurers from providing compensation to claims reviewers based on their claims decisions.
William Helvestine, Health Net's lawyer, said the insurer did not violate the law because the employee who received the bonuses was an underwriter, not a claims reviewer. He added that only a small portion of the bonuses were based on the cancellation target.
The records were publicly disclosed upon request from lawyers for the Times during an arbitration hearing in a lawsuit involving a policyholder whose coverage was revoked.
Health Net sought to keep the documents confidential even during the hearing, arguing that they were private and could embarrass the company.
State regulators recently have developed rules to reduce cancellations and to more closely track insurers' cancellation policies.
Byron Tucker, spokesperson for Insurance Commissioner Steven Poizner (R), said the commissioner "has made it clear he will not tolerate illegal rescissions" of health insurance policies. He added, "We are going to take a hard and close look at this case."
Insurers argue that policy cancellations are intended to prevent fraud and ensure that premiums are affordable.
Other insurers that rescind coverage, including Blue Cross of California and Blue Shield of California, contend that they do not have similar policies linking employee performance reviews to cancellations (Girion, Los Angeles Times, 11/9).