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Health Insurance Exposed

Posted by Jane Akre
Thursday, November 15, 2007 2:12 PM EST
Category: Protecting Your Family
Tags: Bad Faith Claims, Medical Malpractice and Negligent Care, Managed Care and Insurance Companies

News Update
Thursday, Nov. 15, -California slapped $1-million fine on Health Net Inc., for misleading investigators about its goal-setting policies. An investigation about cancellation practices continues.

Imagine you are sick and about to undergo lump-removal surgery for a cancerous tumor in your breast.  A hospital administrator comes into your room and instead of talking about your surgery, tells you the procedure has been cancelled because your insurance won’t pay.

That nightmare is exactly what happened to Patsy Bates, 51, a hairdresser from Gardenia, California who relied on her health insurance company, Health Net Inc. at a time she needed it most.  She is now seeking $6 million in compensation from the company.  

Afterall, an insurance broker had come into her shop in a mini-mall and promised he would save her money over her existing health policy. She says she answered his questions as best she could, even though she was multi-tasking at the time. 

Health Net says in cancelling her policy that Bates had potential pre-existing conditions and it likely would have denied her coverage had it known. 

An arbitration hearing in the lawsuit is offering an  unprecedented look at the inner workings of the insurance industry, information the company would rather keep secret.    

Health Net had argued that being forced to produce documents at a November 8th hearing would reveal  proprietary information that could embarrass the company.

But the arbitrator, Judge Sam Cianchetti granted a motion by lawyers for the Los Angeles Times making all documents public and opened the hearing to reporters.

Previous lawsuits have been settled out of court with specifics kept secret.

The documents reveal that Health Net Inc. saved about $35.5 million by rescinding 1,600 policies between 2000 and 2006, with Bates cancelled policy (January 2004) among them.

They also reveal that one of California’s largest health insurors, Health Net Inc. paid the executive in charge of cancellation more than $20,000 in bonuses for meeting or exceeding targets and saving the company money. 

When the company’s senior analyst in charge of rescinding policies exceeded goals, her supervisors called it a "banner year" because the company avoided about "$6 million in unnecessary health care expenses.”

“Ive got cancer, and I could die,” Bates tells the Los Angeles Times. About Health Net she says, they “walked away from the agreement. They don’t care.”

Bates eventually had the necessary surgery after her daughter covered three months of insurance premiums on her debit card.

The insurance was cancelled after post-surgery chemotherapy was underway, delaying the treatments for several months until a charity program agreed to fund it.

Bates owes $200,000 in medical bills and can’t afford the followup tests to determine if she still has cancer.

She still has the catheter in her chest from the chemotherapy. A doctor has agreed to remove it without charge once she gets health clearance.

It is against California law to tie employee compensation to denying health claims.

Doug Heller, Executive Director of the Foundation for Taxpayer and Consumer Rights, a Santa Monica-based consumer group, says health insurance operates like property insurance. “Use it and lose it. If you file two claims you lose your insurance,”  he tells IB News. 

His group has been pushing the state to re-write regulations requiring insurors justify dropping policyholders.  

“If you are taking such drastic steps you should have to prove to the state this is not a profit making exercise but a legitimate and lawful act,” he says.

The case is familiar to one filed with attorney Shernoff’s help by Justin Sigman. He had just been approved by Blue Shield when he was struck with gastroenteritis and dehydration.

When he sent a $9,000 bill to Blue Sheld he was dropped. The insuror said he had a preexisting condition. Sigman filed suit.

Eventually Blue Shield settled a class action claim by 6,000 cancelled policyholders agreeing to stop the practice unless it can show a policyholder lied.

Heller believes the practice of dropping costly policyholders is a standard operating procedure in the insurance world.

“What came out in Health Net matter is how institutionalized and despicable it has become,” he tells IB News.#



Health Magazine,  September 2007-11-15


How to be a wise consumer


Healthcare Advocates


Intervenes on consumer’s behalf for a fee


Foundation for Taxpayer and Consumer Rights


Watchdog group based in Santa Monica, CA


Blue Shield Settles, LA Times May 2007




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