Health Net has been fined $1 million by California regulators for lying about an internal employee bonus program tied to policy cancellations during a state investigation.
The Woodland Hills, Calif.-based insurer paid an analyst $20,000 in bonuses based in part for meeting or exceeding company goals for canceling individual insurance polices. The company avoided paying $35.5 million in medical claims between 2000 and 2006 by revoking more than 1,000 individual policies. The bonus program was disclosed in court documents and is illegal under state law.
Its a penalty for a failure to be truthful, said Cindy Ehnes, director of the California Department of Managed Health Care, which issued the fine. The department is investigating policy cancellations made by Health Net and other major insurers. Ehnes said Health Net failed to disclose the bonus program to investigators on two separate occasions this fall under direct questioning. A final report on Health Nets policy cancellation practices is expected in late January and could result in further fines and penalties, Ehnes said.
Jay Gellert, Health Nets chief executive officer, said in a written statement that compensation rewards for canceled policies are not part of the companys current practices, adding that he is sorry for any misunderstanding. -- by Rebecca Vesely
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