Health Net Settles New Jersey Investigation for $41 Million

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August 27, 2008 Wednesday 10:55 AM EST

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Health Net Settles New Jersey Investigation for $41 Million

Fran Lysiak

TRENTON, N.J.

Health Net of New Jersey will pay $41 million in unpaid claims, interest and fines for insufficiently reimbursing 88,000 members for out-of-network medical services, the state Department of Banking and Insurance said.

The settlement follows a 21-month examination into claims paid by Health Net and predecessors First Option Health Plan of New Jersey and Physics Health Services of New Jersey for out-of-network services between 1996 and 2006, the department said. Health Net's vendors for chiropractic and mental health services also underpaid claims, according to the regulator.

The HMO is resolving the matter by paying $14 million in unpaid claims, $12 million in interest, $2 million in examination fees and a "record" $13 million fine, the department said.

"I am pleased that we were able to obtain the return of this money to Health Net's Net Jersey members, together with interest, since this is what Health Net promised to pay but did not," said Insurance Commissioner Steven M. Goldman in a statement. "The fine represents an appropriate penalty for this improper business practice."

In a statement, Health Net, a unit of California-based Health Net Inc. (NYSE: HNT), said it corrected the claims-processing issues identified in the department's examination and has implemented controls and practices to monitor and maintain claims-processing accuracy in the future.

"Health Net continues to work cooperatively with DOBI and is pleased that today this matter is fully resolved," the company said.

In July, a federal judge in New Jersey approved a $255 million settlement in three class-action lawsuits against Health Net Inc. that alleged the company used a flawed database that under-reimbursed members' out-of-network insurance claims.

Under the deal, approved by U.S. Judge Faith S. Hochberg of the U.S. District Court of New Jersey, Health Net is to pay $215 million to more than 2 million members in its health plans in several states. It must also make changes to its business practices valued at $40 million, according to Wilentz, Goldman & Spitzer, the law firm representing the plaintiffs (BestWire, July 25, 2008).

The database Health Net used was created by Ingenix Inc., a unit of UnitedHealth Group (NYSE: UNH). Health Net didn't admit liability.

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])

August 28, 2008