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The Knucklehead of the Day award

Today's winner is insurance company Health Net. They get the award for the following.

LOS ANGELES - A woman who had her medical coverage canceled as she was undergoing treatment for breast cancer has been awarded more than $9 million in a case against one of California's largest health insurers. Patsy Bates, 52, a hairdresser from Lakewood, had been left with more than $129,000 in unpaid medical bills when Health Net Inc. canceled her policy in 2004.

On Friday, arbitration judge Sam Cianchetti ordered Health Net to repay that amount while providing $8.4 million in punitive damages and $750,000 for emotional distress.

*****

The award came a day after the Los Angeles city attorney sued Health Net, claiming it illegally canceled the coverage of about 1,600 patients. City Attorney Rocky Delgadillo also said the company illegally ran an incentive program in which it paid bonuses to an administrator for meeting targets of policy cancelations.

Health Net acknowledged that such a program existed in 2002 and 2003 but was subsequently scrapped.

What this company did was outrageous.(The same may be said for the award in the case, but remember this wasn't a jury that ruled. The company deserved punitive damages though I would have put it at about a million) I don't think its an isolated case. To make a long story short in late 1993 I was first diagnosed with cancer and had my employer go out of business at the same time. Having no other choice I had to pick up a conversion policy with the insurance company my former employer used.

I had to make monthly payments. These I always sent registered mail. After a year of paying insurance this way and spending lots of time with doctors, the insurer sent me a letter a week before my next surgery saying my insurance was going to be cancelled. What for? Lack of payment. I had to take two hours away from work to send them copies of all the cancelled checks and mail it certified to the company's offices in Miami and Jacksonville.

Less than 3 months later, another letter like the above arrived. I went ballistic. Telling Blue Cross Blue Shield in no uncertain terms they were to update my account immediately or I'd bring a lawyer and the local news media down on them. What happened? I got a letter of apology from BCBS.

There are Health insurers who will screw people with serious illnesses. Health Net got what they deserved from the judge, but I will top it off by making them today's Knucklehead of the Day.


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Comments (16)

I used to work in the healt... (Below threshold)

I used to work in the health insurance business and your story is just the tip of the iceberg. Congress is complicit in the skullduggery by the way laws are mis-crafted.

Medicare for all americans ... (Below threshold)
Spurwing Plover:

Medicare for all americans not illegal aleins

That would be insanity. The... (Below threshold)

That would be insanity. The CBO is already projecting medicare and medicaid to be 20% of GDP in 2050. The government will be in the business of healthcare and that only, unless we have a huge expansion and where will the money come to pay for it? If we're to maintain those at today's level, fed. govt spending will have to be at least 40% of GDP then, that doesn't include state and local. I hate to think what this will do to the economy.

I know this is "modus opern... (Below threshold)
Lisa:

I know this is "modus operndi" for insurance companies. I was flown from my town to a big city medical center when i went into labor prematurely with my son. Two weeks later, another lady at my office had a family member flown to the same big city for an emergency. We both had the same insurance thru our employer. Blue Cross/Blue Shield. Over the next few weeks, we each received a series of harrassing letters, about two weeks apart with the same lame reasons for denying coverage. And letters threatening to rescind payments already made to medical providers. I kept a notebook with every contact with BXBS, sent all letters certified, appealed every denial. The lady in my office gave up, and ended up paying for the transport out of pocket. I sued. After the deposition of the plan administrator for BXBS, where I caught them violating thier own policies, the insurance company paid up on the helicopter transport (costs in excess of 10K). The key: I am a lawyer. I could sue without it costing me another 10K+ out of my pocket. I feel so sorry for elderly people and others who get confused by the system and others that are simply abused. I believe in a free market health care system, but these type abuses need to be punished severely with big FINES and DAMAGES so that the companies have incentive to do what they promise to do. BTW, my premature son is now a thriving, brilliant 8 yo. (Had to had that in. :)

Sadly, our having handed ov... (Below threshold)
epador:

Sadly, our having handed over the responsibility for paying for our health care AND maintenance to corporations that collect money from our employers (or government agencies that collect money originating from taxpayers) sets up a system guaranteed by human nature and economics to drain considerable amounts of that money away from what superficially is its intended use: health care.

There is no way to fix this system without taking out the middle man and putting the patient in charge of handling his or her own money and spending it as they see fit.

I would guess that most of you with jobs have insurance policies that your employers spend at least $6k a year for (12-14 if for a family). If you had that money (and put it in a health savings account with a conservative return of 5%) odds are you would have plenty of money after only a few years to manage most medical costs and would only need truly catastrophic coverage for huge expenses.

Right now, only about half of that money goes to paying health care costs. The rest goes to "administrative" costs within the insurance corporations and their inestors, and the providers' having to deal with the insurance companies.

What most of the articles r... (Below threshold)
JR:

What most of the articles reporting this story fail to state is that the policy was canceled retroactively because Ms. Bates provided false information on her application for the policy. If you understand the law...and the conditions of the policy...then you are familiar with "material misrepresentation."

"Material misrepresentation" is legitimate grounds for cancelation of a policy that is back up by voluminous caselaw precedent. AND,it is fair. Interestingly, everyone seems to sway towards the policy holder in just about every one of these "mean corporations v. the individual." As a result, the truth rarely sees the light of day.

By the way...Ms. Bates had her medical bills paid, and received coverage on your dime through Califoria's State program after her policy was canceled. She thanks you while counting her millions. And she thanks the Abritrator (note: not a Judge or jury because these policies have an Arbitration clause).

One final thing...guess who the Health Care Carrier will pass this loss onto...Bueller? Bueller?

Cheers
JR

JR writes:AND,it is ... (Below threshold)

JR writes:
AND,it is fair.
Interestingly, everyone seems to sway towards the policy holder in just
about every one of these "mean corporations v. the individual." As a
result, the truth rarely sees the light of day.

Mean corportations

What 2nd largest hospital chain in the US had to pay nearly one billion in fines for overbilling medicare and medicaid

What largest medical school in the country had to accept a federal overseer or be closed because of medicare and medicaid billing fraud

Why did BCBS try to cancel my health insurance for non-payment when I had made all payments in a timely fashion always before payment was due.

Why did BCBS repeat the same tactic two and a half months later after receiving the proof of payments the first time?

Why does a diagnostic testing center try getting patients to pay $100 or more dollars for tests when they are only owed a $15 co-pay. If a patient pays the overcharge why does the testing center then refuse to credit a credit card used for the original payment till threats are made.

I worked in health care(radiology technician) for over 20 years. First in the Navy and then for a hospital and testing center after I left the service. That employer of mine that went out of business. It came after the federal government arrested its owner for medicare fraud and shut the doors of my employer. The FBI raided the office I worked at.

There is so much fraud going on it is sick.

BTW you leave out the other lawsuits and cancellation policy that Health Net had in force. Back when Bates was insured by them. The judge who made the ruling? The insurance company requires 3rd party arbitration to settle disputes with people health net insures. The company got a judge not jury and as a result Health Net got bit on the ass by their own policies.

Bill

This is another example, Bi... (Below threshold)
SPQR:

This is another example, Bill, of an instance where there are two sides to the story. I don't think this is necessarily a good candidate for your "knucklehead" award.

Thank You Judge Sam Cianche... (Below threshold)

Thank You Judge Sam Cianchetti for sticking with the people! These big Corporations DO NOT care about the people and are ruination of this country. Knucklehead he is NOT and I am HAPPY that there are still a FEW out there who will side with the PEOPLE and this heafty award says so. It is time they get the message that we the people are NOT going to take it any more! Take what?

Take the fact that Corporations are set up to have the same rights as a PERSON and they abuse them and use them AGAINST The PEOPLE! Get smart people, not only is health care, sick care in this country, but the Corporations, The Fed, The IRS, The WORLD BANK, The WTO, The FDA, and the like are all bleeding us a slow death. The masses are run and played by a FEW. Get to KNOW your enemy!

Uhhhh...Bill...your example... (Below threshold)
jr:

Uhhhh...Bill...your examples show that the Insurance Companies are the victims of fraud on a regular basis. I have no doubt that medical providers frequently pad invoices...provide unnecessary treatment, and even make referrals to peers so that their friends can get in on the gravy train.

A couple things about your comments. First, if you are aware of fraud taking place, you are obligated to report it. It seems to me that you have no problem being complicit. Secondly, in reference to your issue with premium payment...it sounds like a simple accounting error and has nothing to do with this story.

By the way, "Judge" Sam Cianchetti should be followed by the (ret) designation. He is a retired judge (which is normal on arbitration cases). He is not an acting Judge. And, he is also a very liberal ex-Judge who ran for Congress in California on the Democratic ticket. Regardless, the policy in question requires third party arbitration. And it is, unfortunately, binding. In other words, the carrier cannot appeal even though the whole basis for the decision dealt with the incentive program that the Health Provider had in place and did not deal with the real issue of the cancelation, which was false information on the application for policy. For all we know, the "policy holder" stated on that application that she had no pre-existing conditions, when in fact she may very well have been diagnosed with cancer prior from switching to her original carrier to Health Net.

Would that be fair to the other policy holders with that carrier who didn't provide false information?

Personally, I don't think you can hand out a "Knucklehead of the Day" aware on this without knowing all the facts. Then again, I'm not familiar with the vetting process.
Cheers
JR

City Attorney Rock... (Below threshold)
City Attorney Rocky Delgadillo also said the company illegally ran an incentive program in which it paid bonuses to an administrator for meeting targets of policy cancelations.

I realize that insurance companies have to protect themselves from fraud, and there may have been some of that going in this case. On the other hand, setting corporate incentives for seeing how many policies get canceled seems a bit perverse.

And JR makes a good point a... (Below threshold)

And JR makes a good point about who's ultimately going to pay for this. On the one hand, we cheer these "soak the rich" settlements, but then we complain about the skyrocketing costs of medical insurance premiums.

((((On the other hand, sett... (Below threshold)
JR:

((((On the other hand, setting corporate incentives for seeing how many policies get canceled seems a bit perverse.))))

On the other hand, if only policies were canceled that deserved to be canceled based on the agreement (contractual) set forth upon binding the policy between carrier and customer, why would that be perverse.

You have to understand that Underwriters rarely get involved in reviewing policy information for violations. In fact, most underwriting violations are recognized inadvertantly by the claims folks, who investigate a claim only to find that the medicals show a pre-existing condition...or the policyholder gave a fake address to secure better premiums...etc...

There are no employees spared to spend each day...every day going over information to determine if the insured has been on the level. My guess is that the company went to the underwriting staff and said something along the lines of "I know you guys have a full plate...but if you do these policy reviews we'll see that you're compensated."

Of course, if you pay a bonus based on just looking at an Account file and don't tie the bonus to results, there is the risk that the employees will take full advantage of the situation. I think the bonus tied to legitimate cancelations is not only ethical...it's a good business practice. Of course, the nanny state of California had three laws in effect at the time that discouraged this type of incentive.

Sorry...I don't see a problem with this case. I do see a problem with a claimant getting punies when it's entirely possible she deserved the cancelation...and the arbitrator refused to address the issue of false information altogether.

Cheers,
JR


ORegon muse writes-<p... (Below threshold)

ORegon muse writes-

"And JR makes a good point about who's ultimately going to pay for this. On the one hand, we cheer these "soak the rich" settlements, but then we complain about the skyrocketing costs of medical insurance premiums."

Then a corporation shouldn't be penalized in any way because they will pass on the costs? Maybe you should have read what I wrote in the post.

"The company deserved punitive damages though I would have put it at about a million"

I wouldn't have made the penalty so big. Health Net did deserve to be fined. BTW they are currently the subject of lawsuits and at least once cancellation policy.

They say the patient had a pre-existing condition she didn't disclose. There is actually recent case law. Try Cindy Hailey v. California Physicians' Service, DBA Blue Shield of California, California Court of Appeal, 4th District, 3rd Division

To summarize- The 4th District Court of Appeal unanimously said insurers have a responsibility to make sure patients' policy applications are complete and accurate before issuing coverage -- not after expensive claims come in the door. Judges said plans cannot revoke patients' policies unless they fully investigate pre-enrollment forms up front or insurers show patients intentionally misled them.

There is another December 2007 appeals court decision that ruled= The ruling closely followed a similar one against Blue Shield on Dec. 4, 2007. The 2nd District Court of Appeal unanimously ruled that the practice of reviewing individuals' applications after claims are submitted and then pulling the coverage based on alleged errors is prohibited unless insurers follow specific pre-enrollment criteria.

Two recent court rulings give grounds to judge to rule against Health Net. Health Net deserved to get punished. They did, and they get the Knucklehead as an extra added prize.

No is no vetting done as to who gets the Knucklehead. It is who ever or whatever I choose. Kevin or Jay don't tell me who to choose or who not to. I do take nominations from readers.

Bill

JR wrote- Uhhhh...Bill...yo... (Below threshold)

JR wrote- Uhhhh...Bill...your examples show that the Insurance Companies are the victims of fraud on a regular basis.

An insurance company pads their bills and the federal government overpays them millions or billions in US taxpayer money(Where did that medicare and medicaid money come from? Yours and my wallet. I'm surprised you're not outraged at having your money stolen.) Then the corporation is caught and fined and they are the victim?

The victim is taxpayers who had their money stolen by the corporation not the other way around.

Bill

Bill, you do realize that y... (Below threshold)
SPQR:

Bill, you do realize that you are citing to law that was made after the insurance company's actions?

As I said, this is a very poor choice on your part for a "Knucklehead" award.




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