Los Angeles City Attorney Rocky Delgadillo Sues Health Net

The city of Los Angeles is suing the medical insurer Health Net for unfair business practices and misleading advertising. The Woodland Hills-based company allegedly sold policies that promised coverage, but canceled them when patients need expensive treatment. KPCC's Brian Watt has the story.

Brian Watt:The city attorney claims Health Net's scheme starts with a marketing campaign to lure customers away from other insurers. Then, says Rocky Delgadillo, Health Net tosses in a long and complicated application that asks medical questions no average consumer knows enough to answer. Delgadillo calls it a trap.

Rocky Delgadillo: Some Health Net agents have even gone so far as to fill out the form for the applicant, changing the applicant's answers without his or her knowledge or consent, to help guarantee acceptance of the application by the company. Of course, that's when they get compensated.

Watt: Delgadillo says Health Net gets that compensation because it spends very little time checking its applications for accuracy. That way, it can start collecting monthly premiums from customers immediately. Delgadillo says when those customers file claims for medical services, that's when Health Net starts looking into their medical history.

Delgadillo: Health Net's goal? To uncover errors or omissions in the misleading application that can be used as an excuse to cancel coverage.

Watt: Delgadillo says Health Net canceled the coverage of at least 1,600 policyholders over four years, often just when a patient needs medical care. He estimates the cancellations have saved the company about $35 million. The city attorney has also launched a separate criminal investigation of Health Net's practice of paying bonuses to employees who canceled a targeted number of policies each year.

Brad Kiefer: State regulators are currently reviewing the processes identified by the city attorney and there is nothing new in this filing.

Watt: That's Health Net spokesman Brad Kiefer reading from a statement. He says Health Net provides medical coverage to about a hundred-and-ten-thousand Californians. Kiefer says last year alone, the company paid more than $200 million in claims. Last November, state regulators said Health Net should also pay a million dollar fine for lying about its bonuses for canceling coverage policies. Health Net says it stopped that program. But that's not enough for Rocky Delgadillo.

Delgadillo: They have not reinstated any of those policies that they canceled. That has not happened.

Watt: Delgadillo says he's sure that Health Net isn't the only health insurer engaging in alleged unfair practices. The L.A. city attorney added a link to his web site where consumers can submit complaints about healthcare coverage.

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