Health Net Ordered to Pay $9 Million for Illegally Canceling Breast Cancer Patient's PolicyFeb 25, 2008 | Parker Waichman LLP
Health Net Inc. has been ordered to pay $9 million to a California woman for illegally canceling her health insurance coverage after it learned she had been diagnosed with breast cancer. The Health Net fine, levied by an arbitration judge, came one day after the Los Angeles city attorney's office announced it would be suing Health Net for illegally canceling health insurance coverage for 1,600 other customers
Patsy Bates, 52, a hairdresser from Lakewood, California, had been left with more than $129,000 in unpaid medical bills when Health Net Inc. canceled her policy in 2004. Bates had been insured with another company but was persuaded to switch over to a Health Net policy after an agent suggested she could save money. She said she had undergone surgery to remove a tumor and had received her first two chemotherapy treatments when doctors stopped treating her because her bills were going unpaid. Bates was able complete her cancer treatment through a state-funded program.
On Friday, arbitration judge Sam Cianchetti ordered Health Net to repay that amount while providing $8.4 million in punitive damages and $750,000 for emotional distress. "It's hard to imagine a situation more trying than the one Bates has had to endure," Cianchetti wrote in the decision. "The rug was pulled out from underneath, and that occurred at a time when she is diagnosed with breast cancer, one of the leading causes of death for women."
Los Angeles City Attorney Rocky Delgadillo has also sued Health Net, charging that the company illegally paid bonuses to employees for meeting policy cancellation targets. Delgadillo alleges that Health Net illegally cancelled at least 1,600 policies due to the incentive program. For its part, Health Net has admitted that such a bonus policy was in effect at the company in 2002.
In the wake of the Bates decision, Health Net said it would be implementing a freeze on policy cancellations that would last until the company sets up a third-party review panel to scrutinize cases. Health Net also said it would review its practices and the way its brokers and agents are trained. "Obviously we regret the way that this has turned out, but we are intent on fixing the processes to maintain the public trust," a Health Net spokesperson told the Associated Press.
Bates' attorney told Reuters that he hoped that multimillion-dollar punitive damages award, the first in a such case, will send a message to other large health insurers who face lawsuits over the similar practices. "Let's see if these other big health carriers will change their practices, then we will have done something," he said. "Until this punitive damages award came down, nobody was doing anything."