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California based Health Net Inc., one of the nation’s largest publicly traded managed health care companies, agreed Friday to pay approximately $25 million to settle claims of unfair claims handling and improper cancellation of heath insurance coverage.

Though the Woodland-Hill based company denied liability in the settlement, it agreed to offer replacement health coverage to 926 individuals and families whose health care coverage was rescinded. According to the Sacramento Business Journal, Health Net “defended rescissions as a result of customers who provided inaccurate information when they applied for coverage.” Undoubtedly, this “wrong or inaccurate information” was not parsed out until a substantial claim for benefits was made by a sick or seriously injured policyholder. This was the practice that Aetna also recently paid millions of dollars to settle in California. See our prior post.

The settlement also includes payment of $3.6 million in penalties, $7.2 million in “waived” insurance premiums to restore the cancelled policyholders, and up to $14.2 million to pay medical charges that the HMO previously refused.

Health Net Inc. also agreed to take corrective measures regarding their application, underwriting and coverage decision making, and agreed to a third-party review process for future cancellation decisions.

As nothing can be more devastating than learning for the first time after you or your family has incurred a serious illness or injury, that coverage is being denied, even though premiums were renewed year after year, we hope the measures mandated by this settlement will be fully implemented by Health Net Inc., and further that a model of these reforms become standardized in the industry.

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