State Fines Health Net $1M; Other Action Possible in Case
On Thursday, the Department of Managed Health Care fined Health Net $1 million for lying to investigators about linking employee compensation to the cancellation of individual insurance policies, the San Francisco Chronicle reports (Colliver, San Francisco Chronicle, 11/16).
State law prohibits insurers from providing compensation to claims reviewers based on their claims decisions.
According to court documents released last week, 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 (California Healthline, 11/9).
Cindy Ehnes, DMHC director, said, "This is a penalty for a failure to be truthful" with state regulators (Costello, Los Angeles Times, 11/16).
The fine was the first against an insurer for withholding information about employee bonuses.
Health Net accepted a consent agreement and agreed to no longer link compensation to policy cancellations (San Francisco Chronicle, 11/16).
Meanwhile, the state is still investigating Health Net's cancellation policies, which could lead to additional penalties.
The Department of Insurance also is investigating the case (Los Angeles Times, 11/16).
Along with Health Net, DMHC regulators are investigating the policy cancellations by four other insurers:
- Blue Cross of California;
- Blue Shield of California;
- Kaiser Foundation Health Plan; and
- PacifiCare Health Systems (Los Angeles Times, 11/16).
State officials already have fined WellPoint, Blue Cross's parent company, $1.2 million and Kaiser Permanente $325,000 for improperly canceling coverage (San Francisco Chronicle, 11/16).
Insurers argue that policy cancellations are intended to prevent fraud and ensure that premiums are affordable (Los Angeles Times, 11/16). 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.