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Reversal of court decision will cost Health Net $180 million

NEWS IN BRIEF — Posted April 18, 2011

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The Supreme Court of Louisiana has unanimously reversed a decision and Health Net will have to pay $180 million.

The April 1 ruling said Health Net was liable in part for losses incurred by three HMOs that it sold in 1999 to a newly created company called AmCareco. When the HMOs failed, state regulators sued based on documents suggesting that Health Net conducted irregular accounting schemes to pull millions of dollars in cash out of the HMOs during the sale, leaving them with no way to pay claims. The HMOs operated in Louisiana, Oklahoma and Texas.

The Louisiana Court of Appeal overturned the original verdict against Health Net, but the Supreme Court found that the lower court had misunderstood the facts of the case, which the ruling said constituted a "sophisticated deception." The money will be paid to consumers, creditors, physicians and others with claims against the company.

Health Net's filing said the company could pay the judgment from available cash reserves but that the year's earnings would be reduced by about $1.40 per share.

Note: This item originally appeared at http://www.ama-assn.org/amednews/2011/04/18/bibf0418.htm.

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