Health Net Attempts to Silence Patients; Consumer Group Says Lax State Regulators Fail to Protect Patients from False Advertising

SANTA MONICA, Calif. Aug. 8 -- A consumer group urged the California Supreme Court to overturn a decision that could remove a patient’s right to take an HMO to court for failure to pay doctor bills - a ruling that if left unchallenged would put more patients at risk of medical bankruptcy, according to the Foundation for Taxpayer and Consumer Rights (FTCR). Health Net and other HMOs are attempting to place sole oversight and enforcement of fraudulent marketing and other violations of state consumer protection law in the hands of the Schwarzenegger Administration’s Department of Managed Health Care (DMHC).

In the court case under review by the Supreme Court, plaintiff Robert Cohen argued that his insurer, Health Net’s, failure to pay Emergency Room bills amounted to false advertising of his insurance policy. To view a copy of FTCR’s letter urging the Supreme Court to overturn the ruling go to: http://www.ConsumerWatchdog.org/resources/cohen_amicus.pdf

“California’s 23 million consumers enrolled in HMOs can’t afford to wait for lax regulators when HMOs refuse to pay for necessary care. Insurers are attempting to put their friends in the Schwarzenegger Administration in charge of all oversight and enforcement. The court’s are often a patient’s only ally when an HMO breaks the law,” said Jerry Flanagan of FTCR. “We urge the Supreme Court to protect patient rights and overturn the lower court’s misguided and flawed decision.”

FTCR and other patient advocates have been critical of the DMHC’s treatment of patients and patient rights in dealings with HMOs. Health Net has contributed $46,200 to Governor Schwarzenegger’s various fundraising committees. In total, Schwarzenegger has received $561,000 from HMOs and health insurers.

FTCR, which played a lead role in crafting landmark Patients’ Bill of Rights Legislation, has received dozens of phone calls and emails from patients who have been illegally billed by their doctor when an insurer refuses to pay for all or a part of the cost of medical treatment. Often patients feel trapped because huge unpaid medical bills can result in bankruptcy and ruined credit. The practice, known as “balance billing,” is illegal under Section 1379 of the Knox Keene Act, which states that “...the contracting provider shall not collect or attempt to collect from the subscriber or enrollee sums owed by the plan.”

In Cohen v. Health Net of California Inc., the Fourth District Court of Appeals misstated the law in holding that a patient could not sue to enforce the Knox-Keene Act – the central law governing HMOs and health insurers regulated by the Department of Managed Health Care (DMHC). In Cohen, the court of appeals found that the DMHC has sole jurisdiction to enforce violations of the Knox-Keene Act. However, the decision is contrary to well-established case law upholding a patient’s right to go to court when state regulators fail to end illegal activity. In fact, the appellate court decision conflicts with a recent decision of the 2nd District court that allowed doctors to sue when a health insurer fails to pay them. FTCR filed a “friend of the court” letter in support of the plaintiff’s petition urging the Supreme Court to review and overturn the 4th District Court of Appeal’s decision.

In the letter, FTCR wrote:

“In sum, as the Cohen opinion would have it, consumers can never sue their health care service plans for deceptive advertising because such claims purportedly fall within the exclusive jurisdiction of the DMHC. However, that is not the law. The courts have long recognized a health care plan member’s right to seek injunctive relief in court for acts made unlawful under the Knox- Keene Act. Moreover, the DMHC itself has supported private enforcement of the Act.”

Plaintiff Robert J. Cohen brought suit for fraud, unfair business practices, and insurance bad faith after receiving several emergency room bills following treatment for his son at Los Alamitos Medical Center that Health Net was responsible for paying. The ER doctors eventually sent threatening notices and referred the matter to a collection agency. Cohen had asserted that by paying the co-payment required by Health Net for ER services, he was not liable for portions of the bill that Health Net had failed to pay.

The California Supreme Court is expected to consider the plaintiff’s petition for review of the appellate court’s decision within the next several weeks.

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The Foundation for Taxpayer and Consumer Rights (FTCR) is the state’s leading nonpartisan consumer advocacy organization. For more information, visit FTCR on the Web at http://www.ConsumerWatchdog.org

Contact Information

Jerry Flanagan

Media Contact

The Foundation for Taxpayer and Consumer Rights

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