Last Thursday, the state slapped Health Net, Inc. with a $1 Million fine. Ironically, Health Net is our neighbor here in Woodlands Hills although our only connection with them is in representing insureds with claims against them.
The insurance company set goals for cancellation on policies and paid bonuses to employees based on how many policies the dropped and how much money that saved the company. The penalties help shed light on the way insurance companies work. While they spend millions of dollars on commercials to make people think their goal is to help, these types of incidents show how insurance companies really work. Unfortunately, trusting your insurance company may be a mistake.
The fine came after the company mislead state investigators about bonuses paid to employees on more than one occasion. The fines resulted from the insurance company not be straight forward in response to the investigation. As we have found to be the case on many occasions with insurance companies, what they tell you they are going to do, does not always match what they actually do.
Basically, when a Health Net insurance employee found people who were sick, and made large claims and cancelled them, Health Net rewarded them. Health Net was able to find the people that needed protection the most, and hurt them. In one case, Health Net left an insured stuck with nearly $200,000 in medical bills.
As insurance companies always have an excuse for their conduct, Health Net claimed that the cancellations were necessary root out fraud and keep premiums down. It appears that it did so by committing fraud.
The fine is one of the largest in the history of the Department of Managed Care.