Insurance Company Ordered to Pay $9 Million for Cancelling Patient's Policy

Thursday, March 13, 2008 by: Jo Hartley
Tags: health insurance, health news, Natural News

(NewsTarget) A precedent-setting ruling was handed down recently in which a large California insurance company was ordered to pay more than $9 million to a breast cancer patient it dropped during chemotherapy treatment. California's Health Net has since stopped its questionable practice of cancelling sick policy holders' coverage.

The ruling was handed down by a private arbitration judge and serves as a powerful punitive measure against major insurers whose cancellation practices are currently under scrutiny by courts, state regulators, and politicians.

The judge ruled that state rules were violated and that the company acted in bad faith.
"Health Net was primarily concerned with and considered its own financial interests and gave little, if any, consideration and concern for the interests of the insured," stated the judge in the 21 page ruling.

Health Net's Chief Executive Officer immediately halted all cancellations and released a statement saying that the company would be changing its coverage applications and retraining its sales staff. CEO Jay Gellert also promised to move quickly to "give people the confidence that they can count on their policy."

The judge's strong condemnation of Health Net's cancellation practices and the large sum of money awarded was a clear message to insurance regulators and patient advocates. The California State Insurance Commissioner praised the judge's ruling.

Before this ruling, insurance companies had staunchly defended such cancellations, explaining that they were necessary to keep costs down. Their reasoning behind the cancellations was that they were weeding out people who had failed to disclose pre-existing conditions on their insurance applications. They also stated that such cancellations occurred infrequently.

Health Net initially defended its actions, saying it would never have insured the patient in question if she had disclosed her accurate weight and a pre-existing heart condition. The patient stated that she was distracted at the time a broker filled the application out on her behalf and that she had answered to the best of her ability.

It was determined during the hearing that Health Net awarded paid bonuses to paid employees who met a cancellation quota and for the amount saved. The judge specifically addressed this practice, saying, "It's difficult to imagine a policy more reprehensible than tying bonuses to encourage the rescission of health insurance that keeps the public well and alive."

Health Net's lawyers argued that the patient's suffering due to the cancellation was "minimal" and this argument was said to have infuriated the judge. Most of the award was in the form of punitive damages. This kind of award is unusual in private arbitration. This case was heard by a private judge because Health Net required the patient to agree to binding arbitration.

Health Net's legal problems are expected to continue. There are three other cancellation lawsuits pending, one of which is a class action suit seeking damages on behalf of 1600 people who have lost coverage through these cancellations over the last four years.

About the author

Jo Hartley
Wife, Mother of 8, and Grandmother of 2
Jo is a 41 year old home educator who has always gravitated toward a natural approach to life. She enjoys learning as much as possible about just about anything!
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