Health Net has reached an out-of-court settlement with the estate of a California woman who was denied coverage of a bone-marrow transplant, resulting in an $89 million court judgment against the health maintenance organization.
The estate of Nelene Fox, Teme-cula, Calif., won the initial $89 million award from a state court jury against the Van Nuys, Calif.-based HMO in January.
Financial terms weren't disclosed, but analysts estimated the settlement at $5 million to $10 million.
Investors apparently were relieved by the settlement, as the common stock of the company's corporate parent, Health Systems International, rose 75 cents on the New York Stock Exchange to $26.63 at the end of trading on April 6, when the settlement was announced.
Executives of Health Systems said the bulk of the settlement already had been set aside in an unspecified reserve for 1993 and would have negligible effect on future earnings.
The plaintiff sued the HMO for damages after being denied coverage for a bone-marrow transplant to treat her breast cancer in 1992 because the transplant procedure was considered experimental.
Family members refinanced their homes and church groups held bingo nights and bake sales to help pay for the $140,000 surgery.
After Ms. Fox's death last April, the case was continued by her husband and her estate. A jury decided that the HMO acted in bad faith, breached its contract and recklessly inflicted emotional distress.
The recent settlement on the award was reached after complaints were lodged that the jury award was excessive based on previous court rulings. Health Net had asked the Riverside County (Calif.) Superior Court judge to grant a new trial.
Health Net insiders said the company was confident of winning the original trial because Ms. Fox was such a high-risk candidate for the procedure.
The case also alarmed the HMO industry, which long has campaigned for more adequate testing of "investigational" treatments rather than waiting for the courts to decide complicated medical and liability issues that carried heavy emotional impact.