You receive the devastating news that you have cancer. It is operable, and with prompt care, you have a chance to survive. You make it through the surgery and begin chemotherapy treatments. Then the insurance company suddenly cancels your insurance retroactively. The reason? They allege that you lied about your weight on the insurance application. Now you are left with hundreds of thousands of dollars in medical bills, unable to afford the rest of your chemotherapy schedule, and facing an uncertain prognosis.
This is the situation Patsy Bates, a 51-year-old hair stylist from Gardens, California, found herself in after her health insurance was "rescinded." Bates health insurance company, Health Net, Inc., rescinded her policy in the middle of her treatment for breast cancer, saying she provided inaccurate information in her insurance application.
Insurers such as Health Net and Anthem Blue Cross of California have been accused of illegally retroactively canceling, or rescinding the policies of people whose conditions are expensive to treat. The cancellation usually happens when people are in the middle of their treatment. Los Angeles City attorneys sued Anthem Blue Cross to try to stop the company rescinding insurance policies. The city's attorney's claimed that "[t]he insurance company has engaged in an egregious scheme not only to delay or deny the payment of thousands of legitimate medical claims but also to jeopardize the health of more than 6,000 customers by retroactively canceling their health insurance when they needed it most."
Bates already had health insurance when an agent from Health Net walked into her hair salon promising he could lower her monthly premiums if she would buy a policy with Health Net. The agent asked questions from the application while Bates worked on clients' hair. She answered the questions as best she could and her application was approved.
Not long after, Bates was diagnosed with breast cancer and began aggressive treatment that included surgery to remove the tumor and months of chemotherapy. The night before her surgery, a hospital administrator walked into her room and told her that the hospital could not allow her surgery to proceed because it was not authorized by Health Net. The company would only authorize the procedure if she paid the next three months of premiums immediately.
Following the surgery, Bates began chemotherapy treatment. Not long after, Bates was notified that Health Net was canceling her insurance policy, saying she lied about her weight on her application and did not disclose that she had been screened for a heart condition in the past. The rescission left Bates saddled with medical bills and forced her to suspend chemotherapy for months until she found a charity to pay for it.
Documents disclosed at Bates' arbitration hearing revealed that Health Net rewarded employees who rescinded sick patients. The company paid bonuses to employees who met cancellation goals and even commended one employee for having a "banner year" when she allowed the company to avoid "$6 million in unnecessary health expenses." Retired Los Angeles Superior court Judge Sam Cianchetti, who arbitrated Bates' case, called Health Net's behavior "egregious," saying the company "was primarily concerned with and considered its own financial interests and gave little, if any, consideration and concern for the interests of the insured."
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