City Atty. Delgadillo Sues HealthNet

By Rene Villaroman/

LOS ANGELES — Los Angeles City Attorney Rocky Delgadillo filed a civil law enforcement action against HealthNet, Inc, and two of its subsidiaries for engaging in unlawful and deceptive practices. These subsequently led to the denial or delay of authorization of claims or canceling coverage after initially issuing a policy.

The civil complaint, filed on Wednesday, February 20, in the Los Angeles Superior Court, alleges that HealthNet, Inc., HealthNet of California, and HealthNet Life Insurance Co. engaged in unlawful, unfair and fraudulent business practices and unfair, deceptive, untrue and misleading advertising in violation of California’s Unfair Competition (Business and Professional Code 17200) and False Advertising (Business and Professionals Code 17500) laws.

In the complaint, the City Attorney alleges that HealthNet purposefully used false and misleading marketing in an effort to gain more members. HealthNet collected applicants’ medical history using intentionally misleading forms that called for the applicant to make educated medical judgments. Submitted applications were generally accepted by HealthNet without any meaningful review of the accuracy of responses, informed investigation into the medical history of applicants or confirmation that consumers understood the application.

Only after policy holders submitted claims for medical services did HealthNet retroactively conduct investigations into their medical history in order to find discrepancies in the application to allow for a delay in payment or cancellation of coverage. “This practice of post-claims policy cancellation is unlawful, unfair and fraudulent,” Delgadillo claimed in the suit.

HealthNet went as far as creating a secret unit to cancel policies. The company routinely provided benchmarks – including goals for number of rescissions per year and dollars in claims denied – as well as economic incentives to individuals responsible for post-claims rescissions, with bonus payments for reaching company goals. The division met or exceeded its goals every year, denying more than $35 million in claims between 2003 and 2006, the suit alleged.

“Countless Californians who believe they have insurance actually have policies that aren’t worth the paper they’re printed on. At a patient’s most vulnerable moment, the insurance company won’t pay for care, or will cancel the policy altogether,” said Delgadillo. “Industry schemes to maximize profits at the expense of patients are unfair and unlawful, and they must be stopped,” he added.

The City Attorney also announced at a press conference at City Attorney’s Office in downtown LA that, based upon evidence developed in the course of his HealthNet investigation, he is initiating a criminal investigation of individuals associated with HealthNet’s illegal bonus payment program for cancellations in violation of California’s Knox-Keene Act (Health and Safety Code Sec. 1340 et esq.), and others who may have made false statements to the California Department of Managed Health Care regarding these payments, in violation of Penal Code Section 131.

The civil suit seeks to enjoin HealthNet and its agent from engaging in the illegal activities outlined in the complaint and order HealthNet to comply fully with the law. In addition, the suit asks the court to assess civil penalties of $2,500 for each violation of the Unfair Competition Law and False Advertising Law as well as an additional $2,500 penalty for each Unfair Competition violation that victimized any senior citizen or disabled person. Delgadillo also seeks to have wrongfully canceled policies reinstated and full restitution to all victims of the alleged practices by HealthNet.

“This lawsuit is an important step towards holding health insurance companies accountable for their anti-patient practices,” said California Medical Association President Richard Frankenstein, M.D. “Health insurance companies may say they are providing coverage, but time after time they do everything then can to avoid paying for health care for their policyholders.”


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One response to “City Atty. Delgadillo Sues HealthNet

  1. Pingback: » City Atty. Delgadillo Sues HealthNet free medical web log: On my blog you will find stories from other writers which I have found inspiring, educational, or just fun. Follow the links to read the whole story directly from the author.

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