Sep 12, 2008 2:05 pm US/Pacific
Health Net Pays $25M For Dropped Policies
BURBANK
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Health Net is one of five major California health insurers under investigation for improperly canceling policies.
AP
A Southland health insurance company agreed to restore benefits for 926 people and pay $25 million in reimbursements and penalties to settle allegations of having illegally dropped policies, a state official announced Friday.
Health Net Inc. of Woodland Hills agreed to pay $14.2 million in reimbursements for medical expenses, $7.2 million in waived insurance premiums, and $3.6 million in penalties to settle allegations of having illegally dropped policies, Insurance Commissioner Steve Poizner said at a news conference Providence St. Joseph Medical Center in Burbank.
As part of its agreement with the California Department of Insurance, the company will also reinstate the healthcare coverage of 926 people, he said.
The case was based on complaints dating back to 2004 that the company had unfairly handled claims and illegally canceled policies, he said.
Despite paying $25 million to settle the case, Health Net officials did not admit to any wrongdoing.
"While we do not necessarily agree with the California Department of Insurance's allegations, we do believe it is time to move forward and make sure these affected individuals can obtain coverage," said Health Net CEO Jay Gellert in a statement.
"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," Poizner said.
If Health Net fails to comply with the terms of the settlement, it will be subject to a further $3.6 million penalty, he said.
Health Net is one of five major California health insurers under investigation for improperly canceling policies.
In January, the Insurance Department and the state Department of Managed Health Care announced a joint action against PacifiCare in response to more than 130,000 alleged claims handling violations.
If all the violations are proved and shown to be non-willful, the company could be forced to pay up to $650 million, and if the violations are shown to be willful, it could be liable for up to $1.3 billion.
In December, Poizner announced an enforcement action against Blue Shield of California Life and Health Insurance Co. for alleged violations in 2004 and 2005 regarding illegal rescissions and unfair claim processing.
The Insurance Department alleges 1,000 violations by Blue Shield, half of which are related to improper rescissions. Blue Shield could pay up to $2.9 million if all violations are proven and shown to be non-willful, and $5.8 million if they were willful.
(© 2008 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. Wire services contributed to this report.)
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