Health Net Slapped with Lawsuit for Denying Legitimate Claims for Potentially Life-Saving Medical Treatments

LOS ANGELES, Sept. 13, 2012 /PRNewswire/ -- Insurance giant Health Net routinely and illegally denies patients' claims to important, and sometimes life-saving, medical treatments, according to a lawsuit filed late Wednesday by two patient victims and the Los Angeles County Medical Association (LACMA), a nonprofit that represents more than 6,500 physicians in Los Angeles county.

The lawsuit, filed in Los Angeles County Superior Court, charges Health Net with unfair and unlawful business practices. These practices "present a continuing threat to the public's health, safety and welfare," according to the suit. "Unless Health Net is permanently enjoined and restrained they will continue to commit acts … to cause irreparable harm and injury to the public."

It alleges that the multi-billion-dollar insurance provider systemically refuses legitimate patient claims by employing its own definition and set of criteria for "medical necessity," violating well-established standards set forth by California law. According to the suit, Health Net is "the leader" in this calculated corporate practice to avoid paying claims.

"Once again, we see a health insurance company putting profits ahead of patient health and lives," said Rocky Delgadillo, CEO of LACMA and the former Los Angeles City Attorney. "By deciding which medical treatments are necessary and which ones it will cover, Health Net is dictating medical care from the boardroom. Patient care should be decided by doctors, not business suits."

"This is a huge problem for thousands of policyholders who are routinely refused coverage for necessary medical procedures, like surgery, leaving patients holding the bag for medical bills," said William Shernoff, lead attorney on the lawsuit, and partner at Shernoff Bidart Echeverria Bentley, LLP.

Today's announcement was made at the offices of LACMA where Delgadillo and Shernoff were joined by LACMA President Dr. Samuel Fink and patients who were recent victims of this unlawful practice.

The complaint alleges breach of good faith and fair dealing, and breach of contract on behalf of plaintiffs Robert Mendoza, Kalana and David Penner as well as LACMA. The suit seeks an end to the unlawful business practices by Health Net with an injunctive relief, and damages for Mendoza and the Penners for denial of their claims to medically necessary procedures.  

A separate lawsuit has been filed on behalf of another victim, Bonnie Scott, against Health Net.

LACMA is part of the lawsuit because it is working to stop the wrongful conduct of all California health insurers, including Health Net, because its member doctors are prevented by the acts of these companies from providing medically necessary care and treatment to their patients.

LACMA joined the complaint because it believes physicians across the state also suffered and will continue to suffer from Health Net's practices. "Organizations such as LACMA have had to devote significant time and resources in order to curtail these practices, rather than focusing on advocating quality health care for all patients," said Dr. Samuel Fink, president of LACMA.

Along with this lawsuit, the coalition is issuing a call to action to the many patients, employers and physicians who have been denied coverage by Health Net. The coalition has established a page on LACMA's website, LACMAnet.org, for those to share their experiences.

Plaintiff Robert Mendoza's story

When Mendoza was diagnosed with an extremely rare and aggressive form of prostate cancer, Adenocarcinoma with Signet ring cells, his chance of survival was deemed very low. Dr. Gary Lieskovsky, the head of USC's Norris Cancer Hospital, recommended a radical procedure as the best course of action to save his life.

Mendoza worked with Dr. Lieskovsky to obtain a pre-authorization from Health Net for the procedure. Health Net denied the claim, stating the procedure was not medically necessary. Instead of providing any evidence or medical qualification for its opinion, the company noted that it was unreasonable or contrary to community medical standards. In subsequent communications, it continually failed to provide an explanation of its denial to the patient.

"My life was at stake with months to live. I had no time to fight the bureaucratic red tape with Health Net," said Mendoza. "It's a shame and inhumane that it wouldn't even approve a procedure that could've saved my life. A procedure that cost a fraction of the premiums I paid." 

Mendoza was a long-time member of Health Net, paying more than quarter of a million dollars in insurance premiums over 10 years.

"We had no choice, but to act quickly. We cashed a family life insurance policy to pay for the $30,000 procedure ourselves," he added. "I'm here today because of that procedure and speaking out to ensure this does not happen to others when they need insurance the most."

Plaintiffs Kalana and David Penner's story

The Penners were another victim of Health Net's unlawful business practices. For the last 13 years, Kalana suffered from occipital neuralgia, a medical condition characterized by intense chronic pain in the upper neck, back of the head and behind the eyes. Over time, her condition deteriorated and forced her to stop pursuing schooling and career goals, and even prevented her from caring for her young child on her own.

Over the years, Kalana exhausted all forms of medicine, including 30 treatments and 60 medications, until she was referred to Dr. Jamie Henderson, director of neurosurgery at Stanford Hospital for a trial procedure. 

"When you spend half of your waking hours in bed in debilitating pain, it feels like there is no hope, and no one out there who has the answers," said Kalana. "The treatment by Dr. Henderson was a miracle for me, and for the first time in 13 years, I was pain-free."

The success of the trial treatment led Dr. Henderson to recommend and seek a pre-authorization for the permanent procedure. However, despite already approving the trial procedure, Health Net denied the claim for the permanent one because it contended it was not medically necessary. The suit claims Health Net relied on medical literature that was, in some instances, at least 10 years old rather than basing it on recent findings that support the procedure's safety and effectiveness.

Similar to Mendoza's case, Health Net failed to show evidence or medical qualification that the procedure was unreasonable or contrary to community medical standards.

As a result, Kalana's condition worsened, and she suffered from major depression with thoughts of suicide due to the chronic pain and denial of treatment. Over the next six months, Health Net continued to deny the procedure despite multiple appeals by the Penners and Dr. Henderson.

It wasn't until the California Department of Insurance ruled, in the Penners' favor, that Health Net had improperly denied coverage, that Kalana finally received the procedure to which she was entitled.

The surgery was a success and Kalana is now permanently pain-free; however the surgery came six months too late. During the delay, she not only suffered intense pain, but she and her family experienced emotional stress, anxiety and trauma. Her husband, David, had to drop out of a graduate studies at Stanford University to care for his wife and their young child.

"The Mendozas and Penners are two families that we know of who were victims of Health Net's unlawful practices. There are many thousands more patients and families that are needlessly suffering," added Delgadillo. "We cannot leave health care decisions to financial services companies who are primarily concerned about the bottom line. LACMA is taking this fight on to preserve a physician's right to provide the best care for their patients."

Health Net, through its subsidiaries, provides and administers health benefits to approximately 5.5 million individuals across the country, including 2.3 million members in California. Based in Woodland Hills, Calif., Health Net reported $11.9 billion in revenues last year.

"Medical necessity is the next crusade, and we need to address this issue to bring about insurance reform," said Shernoff. "Too many insurance companies are overruling treatments by doctors, and this goes against good public policy and sound health care practice."

LACMA and the plaintiffs are being represented by the law firms, Shernoff Bidart Echeverria Bentley, LLP and Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP.

About the Los Angeles County Medical Association:

The Los Angeles County Medical Association is a professional association representing 6,500 physicians from every medical specialty and practice setting as well as medical students, interns and residents.

Press Contacts:
Ann D'Amato, (310) 963-2981, [email protected] for LA County Medical Association
Christie Ly, (213) 802-1153, [email protected] for LA County Medical Association

SOURCE Los Angeles County Medical Association