HealthNet (CA)fined for canceling Health Insurance

COMMISSIONER POIZNER ANNOUNCES HISTORIC SETTLEMENT WITH
HEALTH NET LIFE INSURANCE COMPANY TO HALT IMPROPER RESCISSIONS

Company Agrees to Restore Health Insurance for Nearly 1,000 Patients, Includes $25 Million
In Waived Premiums, Penalties, and Reimbursements for Medical Expenses;
Significant Changes to Broken Rescission System


BURBANK – Today Insurance Commissioner Steve Poizner announced an historic agreement valued at $25 million between the California Department of Insurance (CDI) and Health Net Life Insurance Company (Health Net) to offer new healthcare coverage to 926 consumers whose individual and family plan policies were rescinded during the past four years and halt improper rescissions going forward.

The settlement, based upon consumer complaints and a market conduct exam of rescissions back to 2004, covers allegations of unfair claims handling and improper rescission practices. It includes:
• $14.2 million in potential payments for legitimate, billed medical charges;
• $7.2 million in waived insurance premiums; and
• a $3.6 million penalty.
Furthermore, Health Net could be fined an additional $3.6 million if corrective actions stipulated in the settlement are not fulfilled.

“The health insurance industry is on notice that I will not tolerate illegal rescissions, but my ultimate goal is to protect consumers by changing the way future rescissions are decided and prevent improper rescission practices,” stated Insurance Commissioner Poizner. “These practices damage the trust of consumers who pay their premiums and believe they are protected. Moreover, stripping away someone’s coverage can have devastating medical, emotional, and financial effects.”

Under the terms of the settlement, Health Net will not subject the 926 consumers whose policies were previously rescinded to medical underwriting or exclusions for pre-existing conditions. Any medical expenses that would have been covered under the rescinded policies which are not covered by other sources will be reimbursed or paid by Health Net. Consumers retain the option to go through an independent arbitration process to pursue any claims for damages.

“During the settlement negotiations, Health Net was highly cooperative, and I believe their broad-based changes to underwriting and rescission practices will serve as a model and example to other health insurers,” added Commissioner Poizner. “I also commend the state Department of Managed Health Care (DMHC) for helping bring Health Net to the bargaining table.”

Health Net agreed to make significant changes to its application form, underwriting process, agent training, and notification of consumers under investigation for information on their applications. Furthermore, it has agreed to establish an independent, third-party review process for future rescission decisions.

Insurance Commissioner Poizner has aggressively pursued companies that engage in illegal rescissions or other claims handling violations. Health Net is one of five major California health insurers under investigation for improper rescissions of coverage.

In January, Commissioner Poizner and the DMHC announced a joint action against PacifiCare in response to more than 130,000 alleged claims handling violations. This collaborative effort was the first action ever by both CDI and DMHC against a single health plan or insurer, and potentially implicates up to $650 million if all violations are proved and shown to be non-willful and up to $1.3 billion if all violations are proved and shown to be willful. For more information, please visit
http://www.insurance.ca.gov/0400-news/0100-press-releases/0070-2008/release00...


In December 2007, Commissioner Poizner announced an enforcement action against Blue Shield of California Life and Health Insurance Company (Blue Shield) for violations regarding illegal rescissions and unfair claims processing. The Commissioner's actions followed a market conduct exam of Blue Shield by CDI which revealed more than 1,000 violations of the law, half of which were related to improper rescissions, and potentially implicates up to $2.9 million if all violations are proved and shown to be non-willful and up to $5.8 million if all violations are proved and shown to be willful. The exam, based on data from 2004 and 2005, uncovered alarming practices. For more information, please visit
http://www20.insurance.ca.gov/epubacc/Graphics/116269.PDF.


The Health Net settlement documents can be found online at:

http://www.insurance.ca.gov/0400-news/0100-press-releases/0070-2008/upload/HE...



http://www.insurance.ca.gov/0400-news/0100-press-releases/0070-2008/upload/HE...
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