Claremont Insider: Annals of Healthcare

Saturday, February 23, 2008

Annals of Healthcare

The front page of today's Los Angeles Times leads off with an article about a $9.37 million arbitration award to a plaintiff in a case represented by Claremont attorney William Shernoff.

Shernoff's client, Patsy Bates, had her medical insurance coverage cancelled in January, 2004, by her insurer, Health Net, while she was in the middle of a course of chemotherapy for breast cancer.

Health Net's actions left Bates stuck with $129,000 in medical expenses. The Times article reported that internal Health Net documents uncovered in the arbitration proceedings revealed that Health Net had established bonuses to employees for meeting policy cancellation quotas.

According to the Times piece, $8.4 million of the award was for punitive damages, and the amount award was apparently very unusual for an arbitration proceeding, which generally tends to favor the health insurer (that's why companies like Kaiser, for instance, make arbitration in the event of a dispute a condition of their policy as opposed to a civil trial).

The Times has posted a PDF of Bates' arbitration award on their website.

The article indicates that Health Net has placed a moratorium on cancellations and that other health insurers may be following suit:

When Health Net dropped her in January 2004, Bates was stuck with more than $129,000 in medical bills and was forced to stop chemotherapy for several months until she found a charity to pay for it.

Health Net Chief Executive Jay Gellert ordered an immediate halt to cancellations and told The Times that the company would be changing its coverage applications and retraining its sales force.

"I felt bad about what happened to her," he said. "I feel bad about the whole situation."

Gellert said he would move quickly to "give people the confidence that they can count on their policy." Specifically, he pledged to stop all cancellations until an external review process could be established to approve all cancellations.

Other insurers were considering changing their own practices. A spokeswoman for WellPoint Inc., which operates Blue Cross of California, the state's largest for-profit insurer, said the company was in favor of such an idea. Blue Shield of California declined to comment.

Until Friday, the companies had uniformly defended cancellations, saying they were necessary to hold down costs by weeding out people who may have failed to disclose pre-existing conditions on applications for coverage. They say cancellations happen infrequently.

The judge's strong denunciation of the way Health Net carried out Bates' cancellation and big money award stunned and pleased regulators and patient advocates.

The Times also noted that Shernoff has filed a proposed class action suit on behalf of 1,600 people whose health insurance was cancelled over the past four years. Shernoff is a partner with Shernoff Bidart Darras in Claremont, a firm that has successfully handled many high-profile bad faith lawsuits against insurance companies.