Recent headlines report that a $9 million award was given to 52-year-old Patsy Bates. She had begun chemotherapy for breast cancer after undergoing surgery to remove a tumor. Her insurance company, Health Net, pulled the plug on her coverage half-way through treatment leaving her doctors no choice but to stop chemotherapy.
At the root of Health Net’s decision was that the insurance company rewarded employees for canceling high dollar value policies with claims for medical treatment. Health Net’s employees were also expected to meet a quota for the number of cancellations. Bates was able to produce internal communications that exposed the insurance company’s practice.
Health Net had rewarded itself with more than $35 million by rescinding policies with claims between 2002 and 2006. The Los Angeles city attorney, Ricky Delgadillo, had ironically brought a suit against the insurance company a day before Bates’ record settlement was announced. In LA’s lawsuit Delgadillo alleges that Health Net illegally terminated over 1,500 policies.
If Bates’ award follows what has happened to other large settlements the $9 million dollar award will be appealed and dragged out in the courts for as long as Health Net’s attorney’s can manage. The amount that will be paid to Bates will most likely be far less than the reported $9 million.
Bad faith lawsuits, like the kind against Health Net, continue despite large settlements. In previous years several Long Term Disability insurance companies had their hands slapped for the same type of practice as Health Net’s. Unfortunately, there is no real incentive to stop. Even if Bates’ award is not reduced, Health Net has still profited handsomely for their efforts.
Sadly, the employees who participated in the Draconian practice of denying insurance claims, because of financial rewards, will never feel the hurt and pain that they have caused to so many people. They will not have to look into the faces of their victims or have to walk a day in their shoes. Certainly, those employees had to know what they were doing was illegal–yet they let Health Net continue the practice.
Is the insurance industry serious about bringing a halt to the practice of canceling policies based on quotas? Probably not, but maybe there are some smart attorneys who are willing to create a whistle blower fund that pays for evidence of cancellation quotas so they could pursue class action lawsuits.