Judge Orders Health Net To Pay $9 Million Over Improper Cancellation

A private arbitration judge blasted Health Net's cancellation of a member's coverage while she was undergoing chemotherapy for breast cancer and ordered the insurer to pay the member more than $9 million, the Los Angeles Times reports.

The ruling was the first of its kind against a major insurer in California. The judge in the case ruled that Health Net had acted in bad faith and broken state laws.

Previously, Health Net had defended its actions and said it never would have offered coverage to Patsy Bates, the cancer patient, if she had disclosed her true weight and a pre-existing heart condition.

During the hearing, internal Health Net documents were revealed showing that the insurer paid employees bonuses for meeting a cancellation quota and for the amount of money saved by canceling coverage, the Times reports.

Next Steps

Health Net CEO Jay Gellert said the insurer will stop canceling policyholders' coverage until an external review process can be established to approve cancellations.

A spokesperson for WellPoint, Blue Cross of California's parent company, said WellPoint supports changes to the cancellation process.

Blue Shield of California declined to comment.

Health Net faces three other policy cancellation lawsuits pending in California, including one that seeks damages on behalf of 1,600 people whose policies were allegedly canceled over the last four years (Girion, Los Angeles Times, 2/23).

Reaction

Bates' attorney William Shernoff said he wants other insurers to take notice of the award, adding, "We are going to put a stop to this practice" (Watkins, AP/Ventura County Star, 2/23).

Department of Managed Health Care Director Cindy Ehnes and Insurance Commissioner Steve Poizner (R) both praised the ruling (Los Angeles Times, 2/23).

Broadcast Coverage

CNN's "Anderson Cooper 360°" on Friday reported on the ruling. The segment includes comments from:

Bates;
Barbara Fowler, a Health Net employee who handled cancellations; and
Shernoff (Cohen, "Anderson Cooper 360°," CNN, 2/22).

This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.