California-based Health Net paid its senior analyst in charge of policy cancellations more than $20,000 in bonuses based in part on meeting or exceeding targets for rescinding individual health insurance policies, according to court documents released Thursday, the Los Angeles Times reports. According to the documents, Health Net canceled about 1,600 policies between 2000 and 2006, and as a result, avoided paying a total of $35.5 million in medical expenses.

State law prohibits insurers from providing compensation to claims reviewers based on their claims decisions. William Helvestine, Health Net's lawyer, said the insurer did not violate the law because the employee who received the bonuses was an underwriter, not a claims reviewer. He added that only a small portion of the bonuses were based on the cancellation target. According to the documents, the annual bonuses ranged from $1,654 to $6,310, and Helvestine said no more than $276 in any year was tied to cancellations.

The records were publicly disclosed upon request from lawyers for the Times during an arbitration hearing in a lawsuit involving a policyholder whose coverage was revoked. Health Net sought to keep the documents confidential, arguing that they contained proprietary information and could embarrass the company, the Times reports.

Byron Tucker, a spokesperson for state Insurance Commissioner Steven Poizner, said the commissioner "has made it clear he will not tolerate illegal rescissions" of health insurance policies. He added, "We are going to take a hard and close look at this case."

Insurers argue that policy cancellations are needed to prevent fraud and ensure that premiums are affordable. Other insurers that rescind coverage, including Blue Cross of California and Blue Shield of California, contend that they do not have similar policies linking employee performance reviews to cancellations (Girion, Los Angeles Times, 11/9).