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About POGO's Federal Contractor Misconduct Database (FCMD)
The government awards contracts to companies with histories of misconduct such as contract fraud and environmental, ethics, and labor violations. In the absence of a centralized federal database listing instances of misconduct, the Project On Government Oversight (POGO) is providing such data. We believe that it will lead to improved contracting decisions and public access to information about how the government spends hundreds of billions of taxpayer money each year on goods and services. Report an instance of misconduct »
Ranking: 17
Health Net, Inc.
Health Net, Inc. is among the nation's largest publicly traded managed health care companies. Its mission is to help people be healthy, secure and comfortable. The company's HMO, POS, insured PPO and government contracts subsidiaries provide health benefits to approximately 6.6 million individuals in 27 states and the District of Columbia through group, individual, Medicare, Medicaid and TRICARE and Veterans Affairs programs. Health Net's behavioral health subsidiary, MHN, provides mental health benefits to approximately 7.3 million individuals in all 50 states. The company's subsidiaries also offer managed health care products related to prescription drugs, and offer managed health care product coordination for multi-region employers and administrative services for medical groups and self-funded benefits programs.
Federal Contract $: $3145.3m
Total Number of Instances: 22
Total Misconduct dollar amount: $ 690.7m
- Annual Report
- Ethics Page
- Hoovers Profile
- Lobbying Information
- Political Activity
- Press Page
- SEC 10-K
- Contracting Information
- Website
Instances of Misconduct
1. Arizona Insurance Law Violations
The Arizona Department of Insurance fined Health Net for a series of health insurance law violations in 2007 and 2008 involving health care appeals, claims handling and health care provider grievances. The state ordered Health Net of Arizona, Inc., and Health Net Life Insurance Company to pay civil penalties of $83,500 and $153,000, respectively, and to take immediate action to correct health care appeals and claims handling violations and healthcare provider grievances.... more»
2. New York State Insurance Law Violations
Health Net of New York, Inc., and Health Net Insurance of New York paid $1.9 million fine to settle allegations of not providing consumers with the required information on “explanation of benefit” forms and other state insurance law violations. The companies admitted that their forms violated the law from October 2003 to September 2008 and that they failed to promptly process or pay interest on some claims.... more»
3. Medicare Suspension
The Department of Health and Human Services Centers for Medicare and Medicaid Services (CMS) suspended Health Net from Medicare enrollment and marketing activities. CMS determined that Health Net was “significantly impaired” with respect to its ability to maintain and administer a prescription drug formulary in its national prescription drug plan (PDP) and local Medicare Advantage prescription drug plan (MA-PD) contracts. CMS imposed the suspension immediately because “it has determined that Health Net’s conduct poses a serious threat to the health and safety of Medicare beneficiaries.” The suspension will remain in effect until “CMS is satisfied that the deficiencies upon which the determination was based have been corrected and are not likely to recur.”... more»
4. Improper Payment of Provider Claims
The California Department of Managed Health Care (DMHC) imposed nearly $5 million in fines against the seven largest health plans in the state, including Health Net, for violations in paying claims to health care providers statewide. A state audit found Health Net engaged in unfair payment practices between April and June 2008. Health Net’s share of the fine was $750,000.... more»
5. Security Breach Lawsuit (Vermont)
Vermont Attorney General William Sorrell sued Health Net, Inc., and Health Net of the Northeast, Inc., over the company’s loss of a hard drive holding the personal information of approximately 1.5 million people, including 525 Vermonters. The hard drive disappeared from a Health Net office in Shelton, Conn., on May 14, 2009. The state alleged violations of HIPAA (the Health Insurance Portability and Accountability Act), and Vermont’s Security Breach Notice Act and Consumer Fraud Act. As part of a settlement reached with the state, Health Net agreed to pay $55,000, submit to a data security audit, and file reports with the state regarding the company’s information security programs for the next two years. (See related Health Net, Inc. instance, “Connecticut Security Breach Lawsuit”).... more»
6. Policy Rescission (California Hospital Association Lawsuit)
The California Hospital Association, representing roughly 200 California hospitals, filed a class action lawsuit against Health Net over its decision to revoke patients' coverage between February 2004 and October 2007. In May 2009, Health Net settled the lawsuit, denying all allegations of wrongdoing and agreeing to pay over $1.9 million to settle the hospitals’ claims.... more»
7. Connecticut Security Breach Lawsuit
Connecticut Attorney General Richard Blumenthal sued Health Net of Connecticut over the company's loss of a hard drive holding the personal information of 446,000 enrollees. The hard drive disappeared from a Health Net office in Shelton, Conn., on May 14, 2009. The lawsuit alleged the company failed to encrypt the data and failed to promptly notify state officials after learning of the hard drive’s disappearance. In July 2010, Health Net and its affiliates paid $250,000 in fines to settle the lawsuit. Health Net also agreed to implement a “corrective action plan” to better protect health information and other private data in compliance with the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA). Should it be established that the hard drive was accessed and personal information was used illegally, Health Net will be required to pay the state an additional $500,000. In November 2010, the Connecticut Insurance Department (CID) fined Health Net $375,000 for the breach. CID levied the fine because it believed Health Net did not notify authorities and members in a timely manner. In July 2012, Health Net agreed to pay an additional $25,000 after CID found that Health Net did not “exhibit evidence of good management,” conform to state confidentiality laws, or fully safeguard the personal information of approximately 24,000 members.... more»
8. Shane v. Humana, et. al. (Underpayment to Providers for Services)
On May 3, 2005, Health Net entered into an agreement settling the case Shane v. Humana, et. al. This action alleged that Health Net, among other defendants, "systematically underpaid providers for medical services to members, have delayed payments to providers, imposed unfair contracting terms on providers, and negotiated capitation payments inadequate to cover the costs of the health care services provided." As part of this settlement agreement, Health Net will pay $40 million to a general settlement fund and over $20 million for the plaintiffs' legal fees.... more»
9. Breach of Stock Purchase Agreement
In October 2003, Health Net and subsidiary Foundation Health Corporation entered into a settlement agreement with Superior National Insurance Group to settle claims that "FHC made certain misrepresentations and/or omissions in connection with the sale of Business Insurance Group (BIG) and breached the stock purchase agreement governing the sale." As part of the settlement agreement, Health Net agreed to pay the plaintiff $132 million.... more»
10. Claim Underpayments
On Feburary 11, 2005, Health Net, Inc. entered into a settlement agreement with Tenet Healthcare Corporation to resolve claims that Health Net was responsible for $45 million in claim underpayments to 39 hospitals. As part of the settlement agreement, Health Net agreed to pay Tenet $28.5 million and establish a "procedure for adjudication and resolution of other claims for hospital services."... more»
11. Monacelli v. Gem Insurance Company, et al. (Bad Faith and Misrepresentation)
In December 1994, a lawsuit was filed against Health Net subsidiary Gem Insurance Company for bad faith and misrepresentation. The claims "arose from the rescission of their health insurance policy based on their alleged failure to disclose an X-ray, taken one year before the Plaintiffs filled out their insurance application, which revealed an undiagnosed mass on [the plaintiff's] lung." A jury ruling in 1997 awarded $16 million to the plaintiffs, however, an appeal and subsequent settlement in May 1998 reduced the damages to $3 million ($1 million in compensatory damages and $2 million in punitive damages). The court also awarded plaintiffs approximately $233,000 in attorneys' fees and interest.... more»
12. Breach of Fiduciary Duty, Fraud, Unfair or Deceptive Acts or Practices and Conspiracy
Receivers overseeing the liquidation of health plans in Louisiana, Texas and Oklahoma that were previously owned by former Health Net subsidiary Foundation Health Corporation (FHC) filed suit against Health Net and various officers and directors of AmCareco, Inc., the company to which FHC sold its interest in the plans in 1999. The plaintiffs sued Health Net for breach of fiduciary duty, fraud, unfair or deceptive acts or practices, and conspiracy in regard to the sale of the health plans. The receivers' claims were consoldiated and simultaneously tried in Louisiana. On August 2, 2005, the court entered judgment on the jury's verdict as to the receiver for the Texas plan and awarded damages that were eventually reduced to $36.7 million in compensatory and $45.5 million in punitive damages. On November 4, 2005, the court entered judgment as to the Oklahoma and Louisiana receivers, awarding damages totaling $26.5 million... more»
13. McCoy/Wachtel/Scharfman ERISA Lawsuits
Three separate lawsuits were filed in New Jersey federal court by beneficiaries in POS plans administered by Health Net. The lawsuits claimed Health Net violated the Employee Retirement Income Security Act (“ERISA”) by systematically under-reimbursing out-of-network service providers, requiring beneficiaries to pay unreasonably high out-of-pocket costs. In November 2007, it was reported that Health Net settled the three lawsuits. In July 2008, the court gave final approval to the settlement. Under the agreement, Health Net did not admit liability and will pay $215 million and make $40 million worth of improvements in its business practices.... more»
14. Illegally Collecting Money from Enrollees’ Personal Injury Awards
On October 19, 2005, the Connecticut Attorney General announced a settlement with Health Net resolving charges that the company "illegally collected money from its enrollees' personal injury awards." The charges were brought because, "under state law, insurance companies that cover the cost of medical care in personal injury cases are prohibited from later recovering those costs from enrollees who receive money through personal injury settlements or judgments." The company agreed to pay 98 of its members a total of $166,671.... more»
15. Withholding Mandated Benefits and Improper Reimbursement
On January 24, 2003, the New Jersey Banking and Insurance Commissioner announced that Health Net was being cited for "failing to provide mandated infertility benefits and for using an outdated fee schedule to reimburse providers and consumers...Health Net, an HMO formerly known as PHS Health Plans, has agreed to reimburse providers and members $814,000 plus interest and has agreed to pay a $60,000 fine ordered by the Department."... more»
16. Using an Outdated Schedule for Reimbursements
On April 13, 2004, the New York State Insurance Department and Health Net reached an agreement that stated that Health Net would "refund policyholders $4.99 million for claims and interest for medical services. Also, Health Net will create an appeals process for claims that had been partially or fully denied and will offer new appeals on certain emergency room claims that had been denied. The Department’s recent Report on Examination revealed that Health Net utilized an outdated schedule to determine certain reimbursements for out-of-network physicians and other medical providers between July 1999 and December 2002." Along with the $4.99 million refund, Health Net paid a $500,000 fine.... more»
17. Failing to Correctly and Accurately Pay Claims to Health Care Providers
On January 13, 2005, Health Net was fined $250,000 by the California Department of Managed Health Care. Health Net was fined for "failing to correctly and accurately pay claims to emergency room and other hospital-based doctors not contracted with the HMO...Under [California] law, HMOs are prohibited from adopting payment practices that would result in systematic underpayment to doctors and health care providers."... more»
18. Bates v. Health Net (Policy Rescission)
Patsy Bates, who sued Health Net after the company cancelled her coverage while she was undergoing chemotherapy for breast cancer, was awarded over $9.3 million by a California arbitrator. Arbitration judge Sam Cianchetti found Health Net had failed to satisfy the obligation of good faith and fair dealing it owed to Patsy Bates and ordered Health Net to pay Bates’ unpaid medical bills, plus damages and interest. During the hearing, it was revealed that Health Net established goals and paid bonuses based in part on how many individual policies were cancelled and how much money was saved. After the decision, Health Net announced a freeze on policy cancellations “without a binding external, third-party review process” and promised a review of its broker training policies. See related Health Net, Inc. instances, “Policy Rescission Program Investigation” and “Policy Rescission (L.A. City Attorney Lawsuit).”... more»
19. Policy Rescission Program Investigation
The California Department of Managed Health Care (DMHC) fined Health Net, Inc. $1 million for failing to disclose an employee bonus program based in part on the cancellation of individual insurance policies. According to the DMHC, on two separate occasions in October and November 2007, Health Net failed to disclose to investigators the existence of the bonus program, which awarded bonuses to employees who met or exceeded goals for health insurance policies that were rescinded after large medical claims were paid. The program was discovered in the course of a lawsuit filed by Patsy Bates, a Health Net policy holder whose coverage was dropped while she was undergoing treatment for breast cancer. The DMHC continues to investigate the policy rescission practices of Health Net and other managed-care companies in the state. The probe of Health Net, scheduled to conclude sometime in early 2008, could result in more fines. See related Health Net, Inc. instance “Bates v. Health Net (Policy Rescission).”... more»
20. Policy Rescission (L.A. City Attorney Lawsuit)
Los Angeles City Attorney Rocky Delgadillo sued Health Net Inc. for allegedly engaging in unlawful and deceptive business practices by improperly rescinding coverage after patients make medical claims. In February 2009, Health Net and the City Attorney’s Office settled the lawsuit. Under the terms of the settlement, more than 800 rescission victims will receive $6.3 million in automatic payments. Health Net also agreed to pay $2 million in civil penalties, as well as to make $500,000 in charitable contributions to Padres Contra El Cancer (Parents Against Cancer) and the Children’s Health Fund. In addition, Health Net agreed to adopt a new corporate compliance program and abolish any rescission-related bonus programs. See related Health Net, Inc. instances, “Policy Rescission Program Investigation” and “Bates v. Health Net (Policy Rescission).”... more»
21. Underpaying New Jersey Subscriber Claims
Health Net of New Jersey paid $26 million in unpaid claims and interest, $2 million in examination fees and a $13 million fine for allegedly underpaying 88,000 former and current New Jersey members for out-of-network medical claims between 1996 and 2006. The payments resulted from a 21-month state investigation into Health Net and its predecessors, First Option Health Plan of New Jersey and Physicians Health Services of New Jersey. As part of an earlier investigation, Health Net paid more than $800,000 in restitution to more than 4,700 members for underpayments occurring between July 2001 and October 2002.... more»
22. Claims Handling and Rescission Practices
Health Net agreed to pay the California Department of Insurance $3.6 million in penalties, $14.2 million in reimbursement and $7.2 million in waived insurance premiums and agreed to reinstate healthcare coverage of 926 people, whose individual and family policies were rescinded during the past four years. Health Net also agreed to establish an independent, third-party review process for future rescission decisions and make significant changes to its application form, underwriting process, agent training, and notification of consumers under investigation for information on their applications.... more»
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