Insurer Dropped Sick Patients to Save Money

By Justin Rood

Nov 9, 2007 11:00am

In the middle of her expensive, months-long chemotherapy regimen, a Los Angeles hairdresser with breast cancer learned her insurer had abruptly decided to cancel her policy. The decision ultimately left the 51-year-old hairdresser, Patsy Bates, with nearly $200,000 in debt, according to the Los Angeles Times today, but it helped win $20,000 in bonuses for the employee who made the call to cut Bates’ coverage. By dropping Bates’ policy and those of roughly 1,600 others, the employee helped the insurance company, Health Net, save more than $35 million from 2000 to 2006, the paper reports. Click Here for Full Blotter Coverage. The company’s own policies awarded cash bonuses to employees who dropped policyholders whose costly medical bills triggered the company’s review of the policyholders’ applications, even if they had serious illnesses — part of what the paper calls an "industry-wide but long-hidden practice of rescinding coverage after expensive medical treatments have been authorized." Overall, Health Net dropped roughly 1,600 policies from 2000 to 2006, the Times reports, noting that "state law forbids insurance companies from tying any compensation for claims reviewers to their claims decisions." The company said the law did not apply in this case because Fowler was an underwriter, not a claims reviewer, and the goals she was given and which she met were reasonable. It said it cancelled Bates’ policy because she had not disclosed a pre-existing heart condition in her application. Bates said any information left off the application was inadvertent. Bates, whose treatment was partially funded by charities, still cannot afford tests to find out if her cancer has returned, the paper says. She is suing the company, who turned over documents revealing their bonus policy in court proceedings. Do you have a tip for Brian Ross and the Investigative Team?

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