Small Groups Win Insurance Ruling
By Judy Silber, Contra Costa Times, Walnut Creek, Calif., Contra Costa Times, Walnut Creek, Calif.
Dec. 22–Siding with a lawyers’ association, a state appeals court ruled that Health Net of California must continue to insure the lawyers unless the courts or a state agency rules otherwise.
Starting in 2003, Health Net sought to discontinue coverage for the San Francisco Trial Lawyers Association, saying the group did not have enough members to legally qualify for insurance. But the three-member panel disputed Health Net’s logic and this week upheld a preliminary decision made in September 2003.
Final resolution of the case is expected to affect other associations, made up of small businesses and self-employed workers that purchase insurance collectively. Association coverage is generally cheaper and better than what can be obtained through individual or small business markets.
“We’re obviously thrilled with the decision,” said Terry Coleman, a partner with Pillsbury & Levinson, the firm representing the lawyers. “It is really good news for SFTLA, as well as all of the other associations that Health Net has either canceled outright or threatened to cancel.”
In addition to the SFTLA, Pillsbury & Levinson is representing the Organization of Women Architects and a woman who belonged to the Bay Area Chambers of Commerce. Coleman said that several other association plans have called, saying that Health Net canceled their coverage as well.
The decision sends the dispute back to the lower court for trial. Under the Court of Appeal ruling, Health Net may also request arbitration as a way of resolving the dispute. In addition, the insurer can ask the Department of Managed Health Care to clarify the law.
“We are disappointed that the appeals court upheld the preliminary injunction,” said Brad Kieffer, spokesman for Health Net, referring to the court’s 2003 decision that required the insurer to continue coverage. “Nonetheless, we will continue pursuing our position either in the courts or in the regulatory realm.”
Health Net provided coverage to the SFTLA for five years, starting in 1998. But beginning in 2003, Health Net told the group that it could not renew coverage because it was not a “guaranteed association,” or a group with 1,000 or more members. It said it would be illegal to do so.
Under state law, insurers are required to insure guaranteed associations.
However, in its decision the court said Health Net never addressed opponents’ arguments that the law does not prohibit issuing contracts to smaller groups.
A clause in SFTLA’s contract states that Health Net cannot terminate or fail to renew coverage without “good cause.” The case is a contract dispute, the court said. And because Health Net did not offer evidence to support its contention that offering coverage would be illegal, it said the lower court ruled correctly.
Judy Silber covers biotechnology and the business of health care. Reach her at 925-977-8507 or jsilber@cctimes.com.
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