In a continuing state crackdown on health insurers, Health Net Inc. of Woodland Hills has agreed to offer new coverage -- no questions asked -- to 926 people whose policies it canceled after they got sick.
One of the state's largest insurers, Health Net signed a first-of-its-kind agreement with the California Department of Insurance, agreeing to pay $3.6 million in penalties, plus as much as about $14 million in reimbursements for medical charges that the insurer had refused to pay. The company, however, did not admit to any wrongdoing.
This was the first such action by the Department of Insurance but only the most recent in a string of similar insurer fines and penalties imposed mainly by the state Department of Managed Health Care. The two agencies together regulate health insurance in California.
"These practices damage the trust of consumers who pay their premiums and believe they are protected," said Insurance Commissioner Steve Poizner. "Moreover, stripping away someone's coverage can have devastating medical, emotional and financial effects."
Poizner's agency said it would continue to oversee Health Net's compliance at the same time it investigates rescission activities at other insurance companies.
The Health Net agreement came under immediate fire from critics, who called it a partial solution at best. They suggested that the deal announced Thursday might short-circuit plans to sue the insurer and eliminate the potential for more lucrative court damage awards.
Health Net has been zapped by fines, penalties and court judgments in the last year. Most prominent was a $9.4-million judgment awarded in February to Patsy Bates, a Gardena hair salon owner. Her coverage was dropped by Health Net while she was undergoing chemotherapy to treat breast cancer.
The company also was fined $1 million in November for misleading state investigators about bonuses paid to employees based in part on how many policyholders were dropped. In February, Los Angeles City Atty. Rocky Delgadillo sued the company, alleging fraudulent practices, and Health Net is fighting the complaint. And in May, Health Net agreed to reinstate 85 former enrollees and pay a $300,000 administrative fine to the state Department of Managed Health Care.
Health Net Chief Executive Jay Gellert said his company did "not necessarily agree with the California Department of Insurance" on the latest allegations. Nevertheless, he called the settlement an opportunity "to move forward and make sure these affected individuals can obtain coverage."
