Health Net's disclosures Thursday 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.
The bonuses were disclosed at an arbitration hearing in a lawsuit brought by Patsy Bates, a Gardena hairdresser whose coverage was rescinded by Health Net in the middle of chemotherapy treatments for breast cancer. She is seeking $6 million in compensation, plus damages.
Health Net had sought to keep the documents secret even after it was forced to produce them for the hearing, arguing that they contained proprietary information and could embarrass the company. But the arbitrator in the case, former Los Angeles County Superior Court Judge Sam Cianchetti, granted a motion by lawyers for The Times, opening the hearing to reporters and making public all documents produced for it.
At a hearing on the motion, the judge said, 'This clearly involves very significant public interest, and my view is the arbitration proceedings should not be confidential.'
The description given of how the company handled individual policies was disturbing.
The documents show that in 2002, the company's goal for Barbara Fowler, Health Net's senior analyst in charge of rescission reviews, was 15 cancellations a month. She exceeded that, rescinding 275 policies that year -- a monthly average of 22.9.
More recently, her goals were expressed in financial terms. Her supervisor described 2003 as a "banner year" for Fowler because the company avoided about "$6 million in unnecessary health care expenses" through her rescission of 301 policies -- one more than her performance goal.
In 2005, her goal was to save Health Net at least $6.5 million. Through nearly 300 rescissions, Fowler ended up saving an estimated $7 million, prompting her supervisor to write: 'Barbara's successful execution of her job responsibilities have been vital to the profitability' of individual and family policies.
We have previously discussed allegations that other California health insurers retroactively cancelled policies of people who became sick here.
As we said then, health insurance that is liable to be cancelled soon after the policy-holder gets sick and makes a significant claim hardly deserves to be called "insurance."
This seems to be another example that what you see is not what you will really get in our current dysfunctional health care system.
Hat tip to the Health Care Blog.