It is the first of its kind ruling against Big Insurance.
Health Net says after a $9.4 million dollar judgment, it got the message and will stop canceling health policies.
The change in direction stems from the case of 52-year old hairdresser, Patsy Bates who was suffering from breast cancer, diagnosed in 2004.
A salesman had signed Bates up for the policy, even though she already had coverage. She thought Health Net would cover her surgery and chemotherapy. But after two chemo treatments the insurer stopped paying.
Bates had $129,000 in unpaid medical bills and since she couldn’t afford it, doctors stopped treating her.
"I was devastated. I didn't know what was going to happen," Bates told ABC News. "It's boggling that someone can do that to you."
Bates sued her insurer and Friday a California judge ordered Health Net to pay her the amount which includes $8 million in punitive damages.
In the landmark ruling, the outraged judge wrote: "She had valid health insurance … when the rug was pulled from underneath, and that occurred at a time when she is diagnosed with breast cancer, one of the leading causes of death for women."
Judge Sam Cianchetti called Woodland Hills-based Health Net’s actions “egregious” in a 21-page ruling. And he said they acted in bad faith, had no concern for the interests of the insured and broke state law.
Bates was represented by attorney William Shernoff. During arbitration he presented internal company documents that showed employees were rewarded for canceling patient’s policies.
He argued that Health Net saved more than $35 million between 2002 and 2006 by dropping policies.
Health Net, California’s largest for-profit insurer made more than two billion in gross profit last year. Initially the company argued that Bates had failed to reveal a pre-existing heart condition and her true weight. Bates says the salesman filled out the form while she styled a client’s hair and she answered the best she could.
Bates had completed her breast cancer treatment through a state-funded program. She still has about $130,000 in unpaid bills. Her cancer is in remission.
Health Net’s Chief Executive Jay Gellert made the policy change and told the Los Angeles Times that “I felt bad about what happened to her, I feel bad about the whole situation.”
Other insurers such as WellPoint Inc says it too is considering changing its cancellation practices. #