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Unethical Health Insurance Practices

Our Atlanta, Georgia lawyers see health insurance companies deny valid claims on a daily basis, depriving policyholders of necessary medical care to which they are entitled. Now, a California health insurer has been caught red handed. The insurer, Health Net, has agreed to pay as much as $14 million to settle a pair of lawsuits brought on behalf of 800 former policyholders whose coverage was dropped after they submitted substantial medical bills.

On February 11, the court granted preliminary to a settlement in which individuals whose health insurance policies were canceled since 2004 are eligible for payments of up to $218,000. The average payment is expected to be $7,836.

The settlement would resolve a class-action lawsuit filed by private attorneys and by Los Angeles City Atty. Rocky Delgadillo.

In addition to the payments to customers, it requires Health Net to pay a fine of $2 million to the city attorney and to contribute $500,000 to charities.

The settlement comes after a two-year crackdown by California regulators on the widespread and controversial practice known as rescission. Rescinding an insurance policy is a serious matter. It means that an insurer is accusing the policyholder of withholding or concealing vital information.

A policy rescission means that the consumers coverage is completely gone. Insurance companies can unilaterally cancel a health insurance policy, after issuance if the insurer later finds omission on the application. In many cases, the rescission is for a valid reason, such as failure to mention a history of severe cardiovascular problems. But many insurers collect premiums and when a large claim is filed, rescind the coverage over minor mistakes in the application.

In deals with California regulators, insurance providers Health Net, Anthem Blue Cross and Blue Shield all have agreed to make substantial changes in the way they sell individual coverage in an effort to reduce the number of rescissions. Health Net has agreed to pay more than $40 million to resolve the regulatory actions and litigation over rescission.

According to documents Health Net rescinded 1,600 policies and saved $35.5 million over several years. Health Net paid bonuses to an employee based in part on how many rescissions she carried out.

We applaud the California officials who protected consumers from these reprehensible practices, and can only hope that Georgia officials will show the same courage.

Our Atlanta Georgia consumer attorneys are prepared to help consumers fight back against insurance company abuse. If you have questions concerning an illegal or unethical practice by an insurance company please contact us.

Full post as published by Georgia Injury Lawyer Blog on February 15, 2009 (boomark / email).