City Sues Health Net Over Cancellations

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One of the state’s largest insurers, Health Net Inc. of Woodland Hills, sold individual policies with the promise of medical coverage while engaging in a secret and illegal scheme to drop patients if they needed expensive treatment, the Los Angeles city attorney contended in a lawsuit filed Wednesday, the Los Angeles Times rerpots.


The company defrauded thousands of policyholders using “a wide range of unlawful, unfair and fraudulent acts and practices” aimed at avoiding payment for expensive treatment by canceling the policies of those who needed it, “rendering that coverage largely illusory,” the suit maintained.


Los Angeles City Atty. Rocky Delgadillo said in an interview Wednesday that he was opening a separate criminal investigation into Health Net’s practice of paying employee bonuses based in part on canceling policies of people who have submitted substantial medical claims.


The lawsuit is the latest action by state regulators, lawmakers, doctors, patients and now law enforcement officials targeting insurance company practices — notably canceling policies when they become too expensive for the insurers. The companies, however, maintain that they do this to keep costs down by weeding out people who may have failed to disclose preexisting conditions when they applied for coverage.


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