VULTURES CAUGHT IN THE HEALTH NET

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, had been left with more than $129,000 in unpaid medical bills when Health Net Inc. canceled her policy in 2004.

On 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.

Health Net said it was implementing a freeze on policy cancelations that would last until the company sets up a third-party review panel to scrutinize cases.

"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 targets of policy cancelations.

Health Net acknowledged that such a program existed in 2002 and 2003 but was subsequently 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."

Health Net also said it would review its practices and the way its brokers and agents are trained.

LOS ANGELES -- Health Net Inc., a Woodland Hills-based insurance company, engaged in a secret and illegal scheme to drop patients if they needed expensive medical treatment, according to a lawsuit announced Thursday by the Los Angeles city attorney.

A representative for Health Net denied the accusations, saying the insurance company properly investigates claims that might not be appropriate in order to ensure fairness for the company's 135,000 California policyholders.

The lawsuit, filed Wednesday in Los Angeles Superior Court, accuses Health Net of "unlawful, unfair and fraudulent acts" by designing a confusing and ambiguous application to maximize the possibility that policyholders will make errors or omissions the insurance company can later use to rescind coverage.

In the last four years, benefits were denied to 1,600 Health Net customers in serious or critical need of health care, said City Attorney Rocky Delgadillo.

"This is an industry with a history of putting profits before people," Delgadillo said. "Their practices are not only illegal, they are immoral and we are going to hold them accountable."

In addition to the civil complaint, which names two Health Net subsidiaries, Delgadillo's office is pursing a criminal investigation against individual employees who received bonuses based in part on canceling policies of people who have submitted substantial medical claims.

Delgadillo said those employees may have violated the state's Knox-Keene Health Care Service Plant Act, which regulates managed care plans.

The lawsuit "is not going to achieve anything in terms of increasing access to low-cost coverage for thousands of Californians, which is what we're in the business of doing," said Health Net spokesman David Olson.

In 2007, Health Net insured 135,000 Californians and paid $200 million in medical claims, Olson said.

"We work hard to approve applications, we work hard to investigate where we think there may be issues and we rescind only after a thorough process," Olson said. "(The) process is very open. We communicate to members frequently, and they have rights of appeal."

The city is asking the court to fine Health Net $2,500 for each violation of the Unfair Competition Law and False Advertising Law, and another $2,500 for each Unfair Competition violation related to a senior citizen or disabled person.

Documents that were produced at an arbitration hearing on November 8th reveal a company-wide practice of pulling policies once a major medical claim is made and then looking back at the claimant’s original health insurance application for even minor flaws in order to justify cancellation of the policy.

In a lawsuit against Health Net, one of California’s largest health insurers, it was also revealed that bonuses were paid in part for how many policies were cancelled and how much money was saved as a result.

These revelations come at a time when major health insurers, such as Blue Cross, Blue Shield, and Kaiser Permanente, are coming under increased scrutiny in California for canceling policies once expensive treatments are authorized. Policies are often scrutinized for even minor flaws in the original application for health insurance. If a flaw is found, the policy can be canceled, leaving the policyholder with overwhelming medical bills and no coverage.

These practices are being challenged in courts by policyholders throughout California. Lawmakers and regulators are looking very closely at whether or not insurers have broken the law, both by canceling policies where the application did not show a clear intent to defraud the insurer, and by tying compensation (i.e. bonuses) of claims reviewers to their claims decisions.

Health Net was sued by Patsy Bates of Gardena, California when the insurer canceled her policy in the middle of her chemotherapy treatments for breast cancer. Ms. Bates is seeking $6 million in damages in her Health Net lawsuit.

Health Net sought to keep the documents from going public, but the arbitrator in the case, Judge Sam Cianchetti, ruled that the proceedings would be open to reporters and that all documents produced for arbitration would be public, citing public interest as a reason for allowing the exposure of potentially very embarrassing information about HealthNet practices and procedures.

Health Net lawyers defended the company, claiming the company had not run afoul of state law because the employee for whom bonuses were paid was not a claims reviewer, but an underwriter. Time will tell if Health Net’s defense is convincing enough for Judge Cianchetti.

Top of Form 1 Bottom of Form 1
Institution Name	Shs Held	Shs Chg	%Chg	$Chg*	% Out	% Port	Rpt Date
Wellington Management Company, LLP	10,368,532	-387,428	-3.6	-7,495,533	9.4	0.2	09-30-07
Fidelity Management & Research	4,408,735	915,220	26.2	53,834,536	4.0	0.0	09-30-07
AIM Management Group, Inc.	4,152,961	-378,531	-8.4	-14,795,236	3.8	0.4	09-30-07
Renaissance Technologies Corp.	3,468,600	2,650,100	323.8	144,261,024	3.1	0.3	09-30-07
Snow Capital Management, L.P.	3,289,766	-107,198	-3.2	-24,710,206	3.0	2.9	12-31-07
Vanguard Group, Inc.	3,178,165	299,332	10.4	19,777,436	2.9	0.0	09-30-07
State Street Global Advisors (US)	2,694,668	-68,088	-2.5	-226,712	2.4	0.0	09-30-07
T. Rowe Price Associates, Inc.	2,083,280	-2,870,690	-57.9	-148,968,336	1.9	0.0	09-30-07
AXA Rosenberg Investment Management LLC	1,690,270	38,117	2.3	4,125,416	1.5	0.2	09-30-07
OppenheimerFunds, Inc.	1,583,661	43,336	2.8	4,267,717	1.4	0.1	09-30-07
Analytic Investors, LLC	1,452,953	-273,306	-15.8	-12,614,365	1.3	0.8	09-30-07
Jacobs Levy Equity Management, Inc.	1,422,900	-199,200	-12.3	-8,739,135	1.3	0.4	09-30-07
RiverSource Investments, LLC	1,395,605	26,549	1.9	3,146,293	1.3	0.1	09-30-07
Calamos Advisors LLC	1,360,384	-4,616	-0.3	1,456,755	1.2	0.3	09-30-07
Oppenheimer Capital L.L.C.	1,169,242	-779,201	-40.0	-39,680,260	1.1	0.2	09-30-07

Prudential Insurance of America and Health Net agreed in a settlement dated May 3, 2005 to pay more than 80 million dollars to settle a national class action lawsuit.

Under the settlement, which still must be approved by the U.S. District Court in Miami, Health Net will pay an $39 million to a settlement fund for payments to physicians, $20 million in legal fees, and $1 million to a fund to be used to ensure compliance with the settlement. They will also develop and implement plans to improve how they do business with physicians, including speeding up claims processing and creating an external board to resolve billing disputes.

Prudential, which sold its health care subsidiary to Aetna in 1999, agreed to pay $22.2 million....

The schools' new hire wins
praise for her leadership and
her background in health

Kamehameha Schools' new chief executive officer was hired for her leadership and healing qualities as well as her understanding of the $6 billion dollar trust's mission, trustees said yesterday.

Dee Jay Mailer is a 1970 Kamehameha graduate and former CEO of Kaiser Permanente Hawaii who started her career as a nurse at Kapiolani and Kaiser Medical Centers. Her two daughters also graduated from Kamehameha.

"We have been through some difficult times," trustee J. Douglas Ing said. "We see Dee Jay as bringing stability to our organization."

Ing said he hopes Mailer's hiring will bring "closure to years of controversy and crisis."

Just last week the school settled a lawsuit and allowed a non-Hawaiian seventh-grader to continue to attend Kamehameha. Another lawsuit challenging the schools native Hawaiian preference admissions policy is likely to be appealed to the 9th Circuit.

In May, former CEO Hamilton McCubbin resigned after the school conducted two investigations into allegations that McCubbin had an inappropriate relationship with a female staffer. McCubbin has denied the allegations.

Mailer was not at the press conference yesterday. She is finishing work at her current job as chief operating officer of The Global Fund, a public-private multibillion-dollar trust based in Geneva, Switzerland, that raises and distributes money to fight AIDS, tuberculosis, and malaria.

The Kamehameha Schools is the state's largest private landowner and one of the nation's wealthiest charities. The will of Princess Bernice Pauahi Bishop created the nonprofit trust in 1884. Kamehameha and its programs spent more than $222 million last year to provide educational services to about 16,000 children, mostly of native Hawaiian ancestry.

In a written statement, Mailer cited a desire to give back to Hawaii as a reason for taking the CEO position.

"It's been a dream for me to find a fitting way to return home to my Kamehameha family," Mailer said.

"Pauahi was loving and wise," she said. "And we must now protect her gift and focus on educating Hawaiian children. And once Hawaiian children receive this gift, they must -- and will -- repay it by helping others.

"So, as keiki o ka aina, I am excited to have found my way back to repay the gift given to me."

Ing said Mailer is committed to the Kamehameha's strategic plan to provide more outreach and education to native Hawaiian children.

Trustee Nainoa Thompson said Mailer understands the mission of the schools to provide for Hawaiians living in poverty, "to meet the needs of those that we serve the least."

Mailer received her nursing degree at the University of Hawaii at Manoa in 1975 and went back to UH to get a master of business administration in 1985. She worked in hospital management at Kaiser Hawaii from 1986 through 1999 and was named CEO in 1995.

She left to become chief administrative officer for Health Net, a California network model health plan serving 2.3 million members.

Ing said Mailer's health background may help with pre-natal education initiatives that have been discussed by the trustees. He said she also may be able to get hospitals involved in giving Kamehameha's students opportunities in health care.

Mailer's salary is not being released. Trustee Chairwoman Constance Lau said Mailer does not have an employment contract. McCubbin earned more than $350,000 a year.

Colleen Wong, who had been acting CEO, will return to her position as Kamehameha's vice-president for legal affairs.

Lau said Mailer emerged as the top candidate after 11 hours of interviews with the trustees.

"Dee Jay is a leader who can lift people up to perform at a level they never realized themselves," said trustee Robert Kihune. "She was a person that could lead the charge and not be the person standing behind with a stick, moving people by beating them up to get them to move forward."

The selection process took seven months and began with nominations from Kamehameha alumni, parents, teachers and community members. Mailer was nominated by both the search firm and alumni, Lau said.

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