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Cancer patient awarded $9 million after health insurance policy cancelled during treatment

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Patsy Bates was originally approved for health insurance by Health Net effect August 1, 2003. The next month she was diagnosed with cancer. In December Ms. Bates was asked to clarify certain portions of her health insurance application, and then in January 2004 her policy was terminated. This termination occurred while Ms. Bates was receiving chemotherapy treatment and left her with a bill for $129,000, forcing her to discontinue treatment.

All of this occurred because Ms. Bates was told she could get a better deal on her health insurance if she changed to Health Net. She agreed to meet with an insurance agent to discuss options about switching insurance. Ms. Bates answered questions by the agent, and the agent filled out the application for her and Ms. Bates signed it. Ms. Bates initially told the agent her weight was what she had on her drivers license, which was 185lbs. After being told this would increase her premium, she provided a more accurate weight and both her and the agent signed off on the change.

Once Health Net received the application, it was initially approved. However, it began to raise red flags when it was reviewed and the weight change on the application caused suspicion. Health Net employed persons to review applications to determine if rescission of the policy was warranted due to any number of inaccuracies or problems with the application. Payment of bonuses and considerations for raises were directly tied to the number of policies that could be rescinded or in dollars of money saved. The rescission agent in this case had yearly goals, and during 2004 she set a goal of $6.5 million in savings for Health Net. Needless to say, this conflict of interest greatly benefited Health Net.

At the time Ms. Bates’ application was being reviewed by the rescission employee, Health Net was aware she had been diagnosed with cancer. This created an incentive to find any way possible to rescind the policy of health insurance. Focusing on the weight change on her application, Ms. Bates’ application for insurance was rescinded during her chemotherapy treatment. She was eventually able to get continued treatment from a charity, but only months after her original treatment was ceased, causing an increased risk of complications.

An independent arbitrator reviewed the claims filed by Ms. Bates for medical expenses, emotional distress, and violations of California law, and he determined she was entitled to compensation for Health Net’s actions to the tune of $9 million dollars. This is a significant rebuke of the health insurance policies which put profit and savings before people. Other health insurance companies have indicated a desire to review policies regarding rescission and cancellation of policies in light of this decision. I hope they consider the Patsy Bates’ of the world when, or if, they do make a change.