If this article from the Los Angeles Times doesn’t make you sick, then nothing will:

Health insurer tied bonuses to dropping sick policyholders

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.

The article goes on to relate the story of one such patient, a hairdresser named Patsy Bates:

Bates, who filed the suit against Health Net, owns a hair salon in a Gardena mini-mall between a liquor store and a doughnut shop. She said she was left with nearly $200,000 in medical bills and stranded in the midst of chemotherapy when Health Net canceled her coverage in January 2004.

Bates, 51, said the first notice she had that something was awry with her coverage came while she was in the hospital preparing for lump-removal surgery.

She said an administrator came to her room and told her the surgery, scheduled for early the next day, had been canceled because the hospital learned she had insurance problems. Health Net allowed the surgery to go forward only after Bates’ daughter authorized the insurance company to charge three months of premiums in advance to her debit card, Bates alleged. Her coverage was canceled after she began post-surgical chemotherapy threatments.

“I’ve got cancer, and I could die,” she said in a recent interview. Health Net “walked away from the agreement. They don’t care.”

Health Net contended that Bates failed to disclose a heart problem and shaved about 35 pounds off her weight on her application. Had it known her true weight or that she had been screened for a heart condition related to her use of the diet drug combination known as fen-phen, it would not have covered her in the first place, the company said.

“The case was rescinded based on inaccurate information on the individual’s application,” Health Net spokesman Brad Kieffer said.

Bates said she already had insurance when a broker came by her shop in the summer of 2003, and said she now regretted letting him in the door. She agreed to apply to Health Net when the broker told her he could save her money, Bates said.

She added that she never intended to mislead the company. Bates said the broker filled out the application, asking questions about her medical history as she styled a client’s hair in her busy shop and he talked to another client waiting for an appointment at the counter. She maintained that she answered his questions as best she could and did not know whether he asked every question on the application.

Bates’ chemotherapy was delayed for four months until it was funded through a program for charity cases. Three years later, she can’t afford the tests she needs to determine whether the cancer is gone.

So she is left to worry. She is also left with a catheter embedded in her chest where the chemotherapy drugs were injected into her bloodstream. Bates said she found a physician willing to remove it without charge, but he won’t do it without a clear prognosis. That remains uncertain. [full text]