One of the state's largest health insurers set goals and paid bonuses based in part on how many individual policyholders were dropped, money saved

Health insurer tied bonuses to dropping sick policyholders | By Lisa Girion, Los Angeles Times Staff Writer | November 9, 2007

One of the state's largest health insurers set goals and paid bonuses based in part on how many individual policyholders were dropped and how much money was saved.

Woodland Hills-based Health Net Inc. avoided paying $35.5 million in medical expenses by rescinding about 1,600 policies between 2000 and 2006. During that period, it paid its senior analyst in charge of cancellations more than $20,000 in bonuses based in part on her meeting or exceeding annual targets for revoking policies, documents disclosed Thursday showed.

The revelation that the health plan had cancellation goals and bonuses comes amid a storm of controversy over the industry-wide but long-hidden practice of rescinding coverage after expensive medical treatments have been authorized.

These cancellations have been the recent focus of intense scrutiny by lawmakers, state regulators and consumer advocates. Although these "rescissions" are only a small portion of the companies' overall business, they typically leave sick patients with crushing medical bills and no way to obtain needed treatment. ...
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The documents show that in 2002, the company's goal for Barbara Fowler, Health Net's senior analyst in charge of rescission reviews, was 15 cancellations a month. She exceeded that, rescinding 275 policies that year -- a monthly average of 22.9.

More recently, her goals were expressed in financial terms. Her supervisor described 2003 as a "banner year" for Fowler because the company avoided about "$6 million in unnecessary health care expenses" through her rescission of 301 policies -- one more than her performance goal. ...