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Insurer To Pay $9 Million Fine

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By THOMAS WATKINS, The Associated Press

Published: February 24, 2008

LOS ANGELES - A woman who had her medical coverage canceled as she was undergoing treatment for breast cancer has been awarded more than $9 million in a case against one of California's largest health insurers.

Patsy Bates, 52, a hairdresser from Lakewood, was left with more than $129,000 in unpaid medical bills when Health Net Inc. canceled her policy in 2004.

Friday, arbitration Judge Sam Cianchetti ordered Health Net to repay that amount while providing $8.4 million in punitive damages and $750,000 for emotional distress.

"It's hard to imagine a situation more trying than the one Bates has had to endure," Cianchetti wrote in the decision. "The rug was pulled out from underneath, and that occurred at a time when she is diagnosed with breast cancer, one of the leading causes of death for women."

Bates, a mother of two, said she screamed when she heard about the damage award.

"I am elated," she said.

Bates' attorney, William Shernoff, said he wanted other insurers to take notice of the award.

"We are going to put a stop to this practice," he said.
Health Net said it was implementing a freeze on policy cancellations that would last until the company sets up a third-party review panel to scrutinize cases. It also said it would review its practices and the way its brokers and agents are trained.

"Obviously, we regret the way that this has turned out, but we are intent on fixing the processes to maintain the public trust," spokesman David Olson said.

The award came a day after the Los Angeles city attorney sued Health Net, claiming it illegally canceled the coverage of about 1,600 patients. City Attorney Rocky Delgadillo also said the company illegally ran an incentive program in which it paid bonuses to an administrator for meeting policy cancellation targets.
Health Net said such a program existed in 2002 and 2003 but was scrapped.

"It's hard to imagine a policy more reprehensible than tying bonuses to encourage the recision of health insurance that helps keep the public well and alive," Cianchetti wrote in the Bates decision.

Bates had been insured with another company but was persuaded to switch over to a Health Net policy after an agent suggested she could save money.

She said she had undergone surgery to remove a tumor and had received her first two chemotherapy treatments when doctors stopped treating her because her bills were going unpaid.

"I was devastated. I didn't know what was going to happen," Bates said. "It's boggling that someone can do that to you."

Bates completed her cancer treatment through a state-funded program.

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