Los Angeles Sues Health Net for Insurance Cancellations

Rocky Delgadillo, the Los Angeles City Attorney, is suing the insurance company Health Net. Delgadillo accuses the company of using misleading forms to get customers to make errors or admissions that could then be used as an excuse for canceling their insurance policies when they need expensive treatments. From the article:

The suit states that the Woodland Hills-based insurer used untrained salespeople to collect people’s medical histories, used purposefully misleading forms and did not review the information until after they filed claims….The city attorney says Health Net went as far as to create a secret unit in its organization to cancel policies, and that it provided benchmarks — including goals for numbers of rescissions per year and dollars in claims denied — and bonus payments to employees for reaching company goals.

Interestingly, Delgadillo is pursuing a criminal investigation of individuals involved in these cancellations, in addition to filing a civil suit. If his allegations are substantiated, this is a very good thing. There should be strong disincentives against such dishonesty on the part of insurers.

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