Los Angeles Sues Health Net Over Policy Cancellation Practices
In a lawsuit filed Wednesday, Los Angeles City Attorney Rocky Delgadillo alleges that Health Net used "a wide range of unlawful, unfair and fraudulent acts and practices" to cancel policies of members who needed expensive treatment, the Los Angeles Times reports.
Health Net denied the lawsuit's main allegation that the coverage the insurer sells is often unavailable when members need costly treatments and suggested that the suit was misguided and duplicative of other enforcement efforts.
According to the lawsuit, Health Net's business practices violate more than 20 separate state laws, including canceling policies for unintended errors in completing the application.
Delgadillo said he wants Health Net, either by agreement or court order, to follow state laws. He added that he also wants Health Net and two subsidiaries named in the suit to reinstate policies that were improperly canceled and to refund premiums.
If Delgadillo can prove that each of the 100,000 individual policies sold by the company over the last four years was falsely advertised and at risk to unfair cancellation, Health Net's liability could be in the hundreds of millions of dollars, according to sources close to the investigation.
Delgadillo said he is opening a separate criminal investigation into Health Net's bonus practices.
In November 2007, Health Net drew criticism for providing bonuses to employees in part for canceling policies of people who have submitted substantial medical claims. The company was fined $1 million by state regulators for lying twice to investigators about such payments.
Health Net said that the bonus program ended some time ago (Girion, Los Angeles Times, 2/21).