California Fines Health Net $1M For Lying About Linking Employee Bonuses To Policy Cancellations

Main Category: Litigation / Medical Malpractice
Article Date: 19 Nov 2007 - 10:00 PST

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The California Department of Managed Health Care on Thursday fined Health Net $1 million for lying to state investigators about paying employees bonuses based on the number of individual health insurance policies they canceled, 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, the insurer paid its senior analyst in charge of policy cancellations more than $20,000 in bonuses based in part on meeting or exceeding targets for rescinding individual health insurance policies, according to court documents released Thursday. According to the documents, Health Net canceled about 1,600 policies between 2000 and 2006, and as a result, avoided paying a total of $35.5 million in medical expenses (Kaiser Daily Health Policy Report, 11/12).

The fine was the first the state has assessed against an insurer for withholding information about employee bonuses. DMHC Director Cindy Ehnes said, "This is a penalty for a failure to be truthful" with state regulators (Costello, Los Angeles Times, 11/16). Health Net accepted a consent agreement and agreed to no longer link bonuses to policy cancellations (San Francisco Chronicle, 11/16).

Meanwhile, the state still is investigating Health Net's cancellation policies, which could lead to additional penalties. The state Department of Insurance also is investigating the case. DMHC regulators also are investigating policy cancellations by 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). Please note: The Kaiser Family Foundation is not associated with Kaiser Foundation Health Plan, Kaiser Permanente or Kaiser Industries.

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation. © 2005 Advisory Board Company and Kaiser Family Foundation. All rights reserved.