The U.S. Securities and Exchange Commission fined Health Net $340,000 Tuesday after discovering the health insurer prohibited departing employees from pursuing financial rewards tied to the government's whistle-blower program.
From August 2011 to October 2015, Health Net had language in its severance agreements that stopped employees from “filing an application for, or accepting, a whistle-blower award” from the SEC, according to a cease-and-desist order from the SEC. Health Net was a publicly traded insurer before Centene bought it in March for $6 billion.
Similar to False Claims Act cases, whistle-blowers in securities cases who expose material wrongdoing are entitled to receive between 10% and 30% of the money the government recoups.
Health Net's severance agreements did not ban employees from participating in government-led investigations, but they stipulated that employees had to waive their rights to any money that was recovered from a whistle-blower program, according to the SEC. Roughly 600 Health Net workers signed severance agreements from August 2011 to June 2013 that included that language.
The SEC argued this had a chilling effect on employees and deterred them from becoming potential whistle-blowers.
“Financial incentives in the form of whistle-blower awards, as Congress recognized, are integral to promoting whistle-blowing to the commission,” Antonia Chion, an associate director at the SEC, said in a news release. “Health Net used its severance agreements with departing employees to strip away those financial incentives, directly targeting the commission's whistle-blower program.”
In addition to paying the fine, Health Net agreed to contact the former employees who signed those severance papers and notify them they are entitled to SEC whistle-blower rewards.
Centene did not immediately respond to a request for comment relating to Health Net's practices.
