Insurer misconduct alleged in California

From today's Modern Healthcare:

Calif. insurance chief probes report of cancellations

California’s insurance commissioner is investigating a report that Health Net rewarded an analyst more than $20,000 in bonuses tied to canceling individual health insurance policies, thereby saving the company millions in medical expenses.

“We certainly view this as a serious breach,” said Byron Tucker, spokesman for state Insurance Commissioner Steve Poizner.

The Los Angeles Times reported that Health Net revoked 1,600 policies between 2000 and 2005, saving the Woodland Hills, Calif.-based insurer $35.5 million in medical payments. The company set policy rescission targets, which the senior analyst in charge of cancellations regularly exceeded, earning her praise and monetary rewards, according to the newspaper.

Tying compensation of claims reviewers to their actions is illegal under state law.

“The characterization of our compensation programs is inaccurate and misleading,” Health Net said in a written statement.

The bonuses were disclosed during an arbitration hearing on a $6 million lawsuit brought by a 51-year-old hairdresser from the Los Angeles area whose Health Net policy was revoked during her chemotherapy treatments for breast cancer. The Times’ lawyers intervened to have the documents unsealed, according to the newspaper.

Here's a link to the LA Times article that broke the story. The picture quality is pretty bad, but you can see from copies of the insurance analyst's performance review (above) that she was being evaluated, at least in part, on the basis of the number of rescissions she produced and the corresponding contribution she made to the company's bottom line.