Louisiana Supreme Court Sides with States in Case Against HMO

The Louisiana Supreme Court has ordered Health Net Inc., a major health maintenance organization, to cover more than $180 million in claims by consumers, health care providers and creditors in Louisiana, Oklahoma and Texas.

Louisiana Insurance Commissioner Jim Donelon told The Advocate that Louisiana will get the smallest portion of the payout.

“We have about $12 million coming to us to policyholders, providers and general creditors, meaning companies who sold them supplies or that rented them space,” Donelon said.

Donelon said the unanimous ruling, issued April 1, will reimburse all of AmCare Louisiana HMO’s members, providers, and creditors for any losses caused by Health Net’s conduct.

Health Net sold health plans in the three states to AmCareco Inc. in 1999. In 2002, the troubled health plans were placed under state supervision. Each of the state’s insurance departments sued AmCareco and Health Net, alleging fraud, negligence, conspiracy and breach of fiduciary duty.

In 2005, a state district court jury awarded the Texas plaintiffs around $100 million in damages. In 2005, a state judge in Baton Rouge issued similar verdicts against Health Net and awarded $30 million to the Louisiana and Oklahoma plaintiffs.

The Supreme Court reversed a state appeals court decision that threw out those verdicts.

“It has been a long, hard fought battle for recovery,” J.E. Cullens, the lead attorney for the Louisiana and Oklahoma claimants, said in a prepared statement.

In 2010, Health Net, a publicly traded managed care company, reported net income of $204.2 million, or $2.62 per share, on revenue of $13.6 billion. Health Net said that the Louisiana Supreme Court ruling will cut its 2012 earnings by at least $1.40 per share.