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Suit Targets Carrier Rescission Incentives

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A lawyer has filed a suit against a California health insurer over the insurer’s decisions to cancel some health insurance policies retroactively.

The insurer, Health Net Life Insurance Company, a unit of Health Net Inc., Woodland Hills, Calif., cancels policies when it finds that applicants for individually underwritten policies have given incomplete information on their applications.

William Shernoff, a Claremont, Calif., contends in a suit filed in a state court in Riverside, Calif., that the approach Health Net is using to rescinding policies violates California law.

Shernoff, who is trying to organize a class action representing former Health Net customers whose policies were rescinded by Health Net, says Health Net has produced internal documents showing that, in 2002, it offered to pay a bonus if an employee involved with investigating policies rescinded 15 policies per month.

“We believe our rescission policies are consistent with the laws and requirements in California, and we plan to defend ourselves vigorously in this and other matters related to the rescission issue,” Health Net spokeswoman Laura Perry says.


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