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May 29, 2008

Health Insurance Company Paid its Workers Bonuses to Cancel Patient Policies

Health insurance company Health Net Inc. rewarded employees for finding ways to drop customer policies and not pay for their medical expenses, according to an investigation by the California Department of Managed Health Care (DMHC).

Since 2005, the DMHC has been investigating five of the seven insurance companies that provide health care plans to individuals in California. The department is attempting to crack down on the practice among insurers of dropping people's coverage based on often accidental errors in their enrollment applications. In many cases, people's policies have been dropped after they submitted medical claims.

The DMHC has fined Health Net $1 million for failure to disclose a program in which employees received bonuses for meeting or exceeding quotas for health insurance policies to be dropped. The department continues to investigate Health Net and has yet to determine if the dropping of policies or the bonus program are illegal.

The DMHC describes itself as the only stand-alone watchdog agency for managed health care in the country. Since 2005, it has fined Blue Cross $1 million for rescinding its members' health plans and $200,000 for rescinding one person's plan in particular. It has also fined Kaiser Permanente's Kaiser Foundation Health Plans $325,000 for illegally rescinding two policies.

"None of the plans that we are investigating thus far have had an adequately fair process" for dropping policies based on application errors, said DMHC Director Cindy Ehnes.

Health Net's employee bonus program was revealed in the course of a lawsuit by a breast cancer patient who had her health insurance policy dropped by the company after she became sick. The company dropped 1,600 policies between 2000 and 2006, avoiding paying $35.5 million in medical fees.

Ehnes and California Insurance Commissioner Steve Poizner have proposed new regulations that would require health care providers to find that customers deliberately misrepresented information on their applications before dropping their coverage.

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Posted by healthinsurance at May 29, 2008 11:31 AM

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