HealthNet Rewarded Employee For Rescinding Coverage

In a recent lawsuit, California-based insurer HealthNet revealed that it rewarded at least one employee for boosting the number of health insurance policies she could rescind during the course of a year. According to the L.A. Times, the insurer encouraged the employee to set goals maximizing the number of policies she could rescind during a given period of time, and awarded her a bonus for saving the company millions of dollars by cancelling health coverage.

HealthNet officials insist that the employee's bonus was based on many performance factors, not just the cancellation of health policies. However, the attorney representing an individual whose policy was cancelled noted that the rescinding policies was the primary function of this employee's job.

This news comes as California is placing health insurance policy recissions under the microscope. While insurers wish to retain the right to retroactively cancel coverage if the person applying misrepresents their health status on the application, in some cases, it seems that the consumer is making an honest mistake and is not attempting to defraud the company. For example, in the case which inspired this lawsuit, an insurance broker filled out a hairstylist's application while she was styling a client's hair in a busy salon. She later could not say for sure whether this broker asked her all of the questions on the application, but thought she completely and honestly answered what he did ask. When she later required expensive chemotherapy, the insurer reviewed her medical records and found that she had previously been screened for a heart condition based on her use of fen-phen years ago. HealthNet asserts that they would have never offered her coverage to begin with if they had known about this. The HealthNet company documents revealing the employee's performance goals and bonuses may help this hairstylist win her $6 million lawsuit.