Last week an arbitrator, a retired trial court judge in California, awarded $9 million to Patsy Bates for the wrongful rescission by her health insurer, Health Net, of her insurance policy. The great majority of the award, $8.4 million, was punitive damages.
Bates was in the middle of being treated for breast cancer back in 2004 when Health Net retroactively cancelled her policy. She was left with more than $129,000 in medical bills. She stopped her chemotherapy for several months until, through charity, she was able to get the bills paid.
The arbitrator, Sam Cianchetti, had no kind words for the insurer. "Health Net was primarily concerned with and considered its own financial interests and gave little, if any, consideration and concern for the interests of the insured." The arbitration brought to light company documents showing that bonuses were paid to Health Net employees based on how much they saved the company in rescinding policies. On that score, the arbitrator stated, "It’s difficult to imagine a policy more reprehensible than tying bonuses to encourage the rescission of health insurance that keeps the public well and alive."
The arbitrator also refused to accept Health Net’s argument that the damage Bates went through as a result of the rescission was minimal. "It’s hard to imagine a situation more trying than the one Bates had to endure. She had valid health insurance, thinks she’s making a change 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."
In response to the arbitration award, Health Net announced that it was suspending rescission of all insurance policies until it had reviewed its practices. Courtesy of the L.A. Times, you can see a PDF copy of the arbitration award here.