INSURANCE - Health Net fined for lack of candor - It will pay $1 million for misleading the state about bonuses tied to policy cancellations. A wider probe continues.
The state Thursday slapped a $1-million fine on Health Net Inc., the Woodland Hills-based insurer that acknowledged last week that it set goals for cancellations and paid bonuses in part based on how many policyholders were dropped and how much money was saved.
State officials said they levied the fine after finding that the company misled investigators about such bonuses on two occasions during interviews at the company's headquarters this fall.
Thursday's fine was solely related to the company's candor. Health Net's cancellation practices remained under investigation by the state. If any violations of state regulations are found, the company could face additional fines.
In a consent agreement, Health Net agreed to pay the fine -- one of the largest in the history of the Department of Managed Health Care -- and to no longer engage in compensation practices linked to coverage cancellations.
The fine comes amid a broad investigation the state began early this year into how frequently insurers cancel policyholders' health coverage after they get sick and run up large medical bills.
Although these rescissions affect only a small portion of the companies' overall business, they can leave sick patients with crushing medical bills and no way to obtain needed treatment.
Department Director Cindy Ehnes stressed the seriousness of the action. "This department regards truthfulness from insurers as essential for us to do our job and protect the public," she said. "This is a penalty for a failure to be truthful" with regulators.
Health Net offered an apology. "We are sorry for any misunderstanding with the DMHC. It is important to note that we are currently abiding by the policy in the agreement," Jay M. Gellert, the firm's chief executive, said in a statement.
Retroactive cancellations have been the focus recently of intense scrutiny by lawmakers, state regulators and consumer advocates.
The managed-care agency is reviewing the coverage policies of five health maintenance organizations: Kaiser Foundation Health Plan Inc., PacifiCare Health Systems Inc., Blue Cross of California, Blue Shield of California and Health Net.
In the agency's first report, Blue Cross was fined $1 million for routinely rescinding health insurance policies. Reviews of the four other insurers are expected over the next several months.
State law forbids insurance companies from tying compensation for claims reviewers to their decisions on those claims.
- Health Net Acquires Sentinel Life Insurance Jun 08, 1993
- Health Net to reinstate members Sep 12, 2008
- State Fines Insurer Over Anti-Fraud Unit Sep 09, 1998
