The California Department of Managed Health Care has imposed a $1 million fine on a managed care company in connection with allegations about policy cancellations.
Officials at the California DMHC say Health Net Inc., Woodland Hills, Calif., failed to respond adequately to department questions about bonus programs Health Net used to reward employees involved in efforts to cancel individual health insurance policies.
The DMHC has been looking into the practice of “post-claims underwriting” at individual health plans in California since late 2005, department officials say.
Canceling or rescinding individual health insurance policies is illegal, unless carriers can show that applicants “willfully misrepresented” themselves on the original health applications, officials say.
DMHC investigators held on-site interviews at Health Net on Oct. 17 and again Nov. 6, officials say.
Investigators asked Health Net officials “about the existence of any compensation or bonus programs,” DMHC officials say. “On both occasions, the answer was no.”
On Nov. 8, in response to a court order stemming from a private class-action lawsuit, Health Net “disclosed to regulators the existence of compensation based in part on rescission of health care policies paid to a company employee,” DMHC officials say.