Patsy Bates, a 52-year-old breast cancer patient, just learned of a court order that awards her $9 million dollars in damages after her healthcare provider, Health Net Inc., one of California’s largest private medical insurance providers, cancelled her coverage just when she needed it the most.

Health Net to pay $9 million to a cancer patient

Bates, a grandmother and hair salon owner, was undergoing chemotherapy for breast cancer in January 2004 and had accrued medical expenses in excess of $129,000 when Health Net cancelled her coverage. She was forced to forego medical care until a charitable organization pitched in several months later.

A private arbitration judge, Sam Cianchetti, who is retired from the Los Angeles County Superior Court, ruled on the case, saying Health Net acted in bad faith and broke state laws. The ruling is the first of its kind and is expected to send a strong message to healthcare providers for the “egregious” and controversial practice of weeding out policyholders who accrue large medical bills.

The weeding-out policy is standard practice in the industry although insurers say it happens only on an infrequent basis. The company which operates Blue Cross of California, the state’s largest for-profit insurer, issued a statement saying they are in favor of changing the policy that calls for such cancellations. Comment was declined by Blue Shield of California.

Steve Poznier, California’s insurance commissioner applauds the ruling, saying the practice is “illegal, immoral and will not be tolerated.” Other insurance regulators and patient advocates were pleased but stunned by the ruling.

Defending its decision to cancel Bates’ coverage, Health Net officials claim they’d never have insured her in the first place if she’d revealed her true weight and the presence of a pre-existing heart condition when she filed for coverage.

Bates claims her application was completed by an aggressive broker for the healthcare provider who hinted at a lower monthly premium. At the time the application was completed, Bates’ hair salon was enjoying a busy day and she didn’t have time to complete the form herself. Bates says she was satisfied with the insurance coverage she already had and had not been shopping for another carrier.

During arbitration, Health Net revealed a quota-based internal program that rewards employees with bonuses for meeting a quota of cancellations measured by the amount of money the cancellations save the company.


  • Do you think the insurance company did the right thing by denying coverage to Ms. Bates? Or did they drop her coverage unfairly?
  • Is the court’s ruling fair? Is $9 million acceptable? Too little? Too much?