Report: Bonuses paid for dropping sick patients David Edwards and Nick Juliano

Published: Friday November 9, 2007



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Print This Email This A health insurance company serving customers in a half-dozen states set out to drop hundreds of customers and paid lucrative bonuses to an executive in charge of eliminating coverage. One customer is suing the company, Health Net Inc., after a company salesman pressured her to switch to a Health Net plan only for the company to cut-off her coverage in the middle of costly cancer treatment. California small-business owner Patsy Bates was one of more than 1,600 customers who had their Health Net policies rescinded between 2000 and 2006 saving the company $35.5 million, the Los Angeles Times reports. Over the same period the senior Health Net analyst in charge of canceling policies received more than $20,000 in bonuses based in part on her meeting annual targets for revoking the coverage. Bates, who owns a beauty salon outside Los Angeles, is suing the company because it canceled her insurance when she was in the middle of chemotherapy treatments for breast cancer. She alleges the company acted in bad faith and left her with $200,000 in unpaid medical bills while she remains unable to continue the cancer treatment. Internal company documents made public in the suit "provided an unprecedented peek at a company's internal operations and marked the first time an insurer had revealed how it linked cancellations to employee performance goals and to its bottom line," reported Lisa Girion in the LA newspaper. The documents outline the role played by Barbara Fowler, Health Net's senior analyst overseeing rescission reviews. The company set out to cut millions of dollars in costs by denying customer's care, and Fowler was in charge of that effort, cutting around 300 policies per year. In 2002, rescinded 275 policies, nearly 100 more than the company's goal that she cut 15 policies per month (180 in a year). The next year, Fowler cut "$6 million in unnecessary health care expenses," by eliminating 301 policies. Health Net called it a "banner year." Fowler's policy-slashing acumen was on display again in 2005, when she cut $7 million worth of coverage by eliminating nearly 300 policies, again exceeding the company's goal. "Barbara's successful execution of her job responsibilities have been vital to the profitability" of individual and family policies, her supervisor wrote at the time. Fowler's cost-cutting zeal did not go unrewarded, although the company disputes the notion that she was compensated strictly for cutting off customers. Over the seven year period, the analyst's annual bonuses ranged from $1,654 to $6,310, but a company lawyer told the Times that just a fraction of that amount was tied to the policy cuts. Health Net attorney William Helverstine said no more than $276 in any year was tied to cancellations. What Fowler did is hardly unusual in the US healthcare industry. Insurance companies routinely employ cancellation departments to review customer records as soon as they ask the company to cover a costly procedure. Once they're asked to start paying pricey hospital bills, companies will review policies to ensure the clients qualified for coverage when the signed up. However, the documents in Bates case reveal possible illegality in how Health Net conducted its reviews, according to the Times. California law forbids insurance companies from tying any compensation for reviewers to their decisions to cut claims. Health Net also represents customers in New York, New Jersey, Oregon, Arizona and Connecticut. Critics say the insurers are more concerned with padding their pockets than protecting policyholders, and several lawsuits have been brought alleging that companies improperly cut-off care, leaving sick customers unable to pay crushing medical bills. "Insurers love to market the promise, 'We'll take care of you. Just sign here,' " Karen Pollitz, of the Institute for Health Care Research and Policy at Georgetown University, told USA Today earlier this year. "Then there is all this opportunity for the insurer not to keep the promise, and you don't find out until it's too late." Health Net insists it was justified in its sudden elimination of coverage because Bates shaved 35 pounds from her weight when she listed it on an insurance application, and she did not disclose that she had been screened for a preexisting heart condition. Had it known either of those factors, the policy never would have been approved to begin with. Bates says a Health Net broker visited her beauty shop in Gardenea, Calif., in 2003 promising to save her money if she switched from her current health insurance provider. She says the broker filled out the application the company now claims is inaccurate. The broker was "asking questions about her medical history as she styled a client's hair in her busy shop and he talked to another client waiting for an appointment at the counter," the LA Times reports. "She maintained that she answered his questions as best she could and did not know whether he asked every question on the application." Bates is seeking $6 million in compensation and damages from her lawsuit. The arbitrator in the case, former Los Angeles County Superior Court Judge Sam Cianchetti, earlier ruled the rescission of Bates coverage invalid; at the end of a hearing that began Thursday Cianchetti will determine whether the company acted in bad faith and owes Bates any damages. Bates' lawyer, William Shernoff, called the company's behavior "reprehensible" and said Health Net's linkage of compensation with coverage cuts show it was looking for any excuse to cancel policies and save money. "I haven't seen this kind of thing for years," Shernoff told the Timesa. "It doesn't get much worse." The following video is from CNN's American Morning, ABC's World News, CBS's Evening News and NBC's Nightly News. All were broadcast on November 9, 2007.





