HEALTH PLANS: $9 million? OK, We’ll change our tune

On Thursday HealthNet was being sued by the LA City attorney’s office and saying that it was doing nothing wrong and would keep on trucking:

Health Net’s Olson said the company’s application had been approved by regulators and didn’t need to be changed.”There are 110,000 Californians who figured it out and were able to fill out the application in a way that got them low-cost, high-quality coverage,” he said. “It’s fine and it’s working.”

Presumably they had faith that the arbitration process that many health plan policyholders have to go through would mitigate any risk.

What a difference a day makes.

Friday, the arbitrator in the case of the cancer patient whose insurance was retroactively terminated—this was the case which revealed the bonuses paid to staff who cancelled policies— awarded $9 million in punitive damages to the patient. This isn’t quite the $89 million that was awarded against HealthNet in 1993 in the Fox-Hipple case, but the difference is that in arbitration there’s usually no appeal (that $67m was never paid in full).

Jay Gellert, HealthNet’s CEO immediately announced that they would stop retroactive cancellations. But of course with lawyer William Shernoff now smelling blood, and with Blue Shield still fighting for the “right to recission” in the courts, the damage isn’t over.

Hopefully this will eventually mean that the companies will accept real regulation and real reform in the individual market, which essentially means ending it. 

(FD I am a HealthNet individual policy holder and they haven’t “recivved” me yet. Then again I haven’t had a claim in 3 years!)

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9 replies »

  1. I agree with John Graham that this was one of the least “appealing’ cases in the recission stories and I’m surprised that the arbitrator was so aggressive. But there were plenty of other more attractive targets, and Healthnet and the rest know…
    As for those promoting individual policies in the advertising on this blog? Sadly I have no control as its part of the Google adwords program, but I assure John that it’s not much. In fact it’s so small I’m considering taking it off (but turning down “free money” can’t be something John would approve of!)

  2. Someone has to take the other side of this:
    “Bates never reviewed the application” (p. 4 of the arbitration decision).
    Bates is the woman in question, who won $9 million, who did not fill out or even read her own application, who told the “insurance man” to write 185 lbs on the application, and who later told him to write a lower number when he informed her that 185 lbs would cause her premiums to be rated up.
    These facts are all in the arbitrator’s decision. Nevertheless, he gave her $9 million dollars reward for her carelessness. What a country!
    (By the way, how much money does our friend Mr. Holt make from the health insurers promoting individual policies at the right side of this blog, I wonder?)

  3. Health Net got what it deserved in this case, and I hope they, as well as the rest of the industry, got the message. I wonder how the executives and bean counters who make these decisions would feel if they were on the receiving end of them.

  4. All but about 6 million people who are in the country and claim they can’t afford insurance have it.
    It would be a huge mistake to socialize medicine when the problem is that small.

  5. We don’t need universal health care, we need better market regulations.
    This is too funny. We may not need universal health care to stop some of the most egregious behaviors by insurers, but it doesn’t follow from that that we don’t need UHC. Some of us think that we need UHC, because everyone ought to be covered.

  6. Trust is the key to successful business dealings, and the health insurance industry’s biggest problem is that no one trusts any health insurers to pay claims fairly, fully or quickly.
    While I understand that Healthnet was trying to minimize risks, control costs and make its individual policies affordable to more people, I don’t understand how these numbers people can be so out of touch with normal business ethics. Nor do I understand how they can operate without considering the marketing and public relations aspects of their decisions, not to mention their government relations problems.
    What this says to me is that insurers are run by technicians who don’t listen to their marketing, government relations, sales or PR departments. They just look at what is actuarily sound, financially appealing and legally doable. And that gets them in big trouble, year after year. And it will continue until Obama tries to put them out of business. They seem to be asking for it.
    They must have wonderful golden parachutes.
    This should be an easy problem to solve, but only boards of directors and new regultions can solve it. We don’t need universal health care, we need better market regulations.

  7. Good outcome, and good move by the CEO to stop retroactive cancellations. If you accept that our society has made a choice to opt for for-profit health care coverage, it still doesn’t mean that those for-profit entities don’t have to abide by commonly accepted business ethics.
    If I enter into a “bad deal” as a company because I’ve not scrutinized the deal properly (e.g., shoddy underwriting in this case, one could say), then you have to live with the outcome of your decision. Changing the rules later flies in the face of business ethics.
    Before we all rejoice in this decision, however, you can bet your life that HealthNet will be tightening up their underwriting mechanisms a lot…and fewer people will be covered as they are deemed to be a “bad deal” business-wise.