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February 21, 2008

Los Angeles Launches Action Against California Health Insurer

The Los Angeles city attorney launched a wide-ranging legal action on Thursday against one of California’s biggest health insurance providers, accusing it of illegally selling policies to customers and then denying them coverage when they fell ill.

The action is being launched as health insurers face closer scrutiny from US regulators and legislators. Health insurance has become one of the dominant themes of the presidential election, with Democratic challengers Hillary Clinton and Barack Obama promising to reform what they contend is a broken system.

Rocky Delgadillo, the Los Angeles city attorney, accused Health Net of defrauding customers by setting illegal policy cancellation targets for its sales agents, who rarely possessed any medical training.

Mr Delgadillo said 1,600 Health Net customers had policies cancelled illegally. Damages of $2,500 (€1,700, £1,275) per customer are being sought. But the final damages tally could be much higher as Health Net is also held responsible for illegally advertising its products to thousands more customers.

The company is accused of “unlawful, unfair and fraudulent business acts and practices and deceptive advertising”. In addition, Mr Delgadillo said the company created a “secret unit” responsible for cancelling policies.

More than $35m of claims for medical treatment had been denied, he said, adding that customers were often in a vulnerable position when they discovered they were not covered with health insurance. “Just imagine . . . you’re in a hospital bed awaiting treatment and you find that Health Net will not provide the coverage you have paid for,” he said.

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Posted by healthinsurance at February 21, 2008 02:37 PM