Health Net 2014 Annual Report Download - page 164

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-54
The third October 2012 suit alleges misclassification under the FLSA on behalf of a nationwide class, as well
under several state laws on behalf of MFLCs who worked in California, New Mexico, Hawaii, Kentucky, New York,
Nevada, and North Carolina. On October 24, 2013, the parties agreed to toll the statutes of limitations for overtime
violations in the following states: Alaska, Colorado, Illinois, Maine, Maryland, Massachusetts, Montana, New Jersey,
North Dakota, Ohio, and Pennsylvania.
On November 1, 2012, we moved to compel arbitration in the Northern District of California, and the court
denied the motion on April 3, 2013. We noticed our appeal of that decision to the United States Court of Appeals for the
Ninth Circuit on April 8, 2013. On April 25, 2013, the district court granted Plaintiffs’ motion for conditional FLSA
collective action certification to allow notice to be sent to the FLSA collective action members. The court stayed all
other proceedings pending an outcome in the Ninth Circuit appeal. On December 17, 2014, a divided (2-1) Ninth
Circuit panel affirmed the district court's decision denying our motion to compel arbitration. On January 14, 2015, we
petitioned for rehearing en banc, and the Ninth Circuit denied the petition on February 9, 2015. On February 13, 2015,
the Ninth Circuit granted our motion to stay the proceedings, and the proceedings will remain stayed until the final
disposition by the U.S. Supreme Court of our petition for a writ of certiorari.
On March 28, 2014, the original Washington case was transferred to the Northern District of California to relate it
to the two FLSA suits pending there. On April 11, 2014, we moved to stay the suit pending the Ninth Circuit appeal. We
also filed two alternative motions seeking an order to either compel the case to arbitration or dismiss Plaintiffs’ class
claims and California Labor Code section 226.8 claims. On June 3, 2014, the court granted our motion to stay, and
denied the later alternative motions without prejudice to renewal after the stay is lifted.
We intend to vigorously defend ourselves against these claims; however, these proceedings are subject to many
uncertainties.
Miscellaneous Proceedings
In the ordinary course of our business operations, we are subject to periodic reviews, investigations and audits by
various federal and state regulatory agencies, including, without limitation, CMS, DMHC, the Office of Civil Rights of
HHS and state departments of insurance, with respect to our compliance with a wide variety of rules and regulations
applicable to our business, including, without limitation, the Health Insurance Portability and Accountability Act of
1996, rules relating to pre-authorization penalties, payment of out-of-network claims, timely review of grievances and
appeals, and timely and accurate payment of claims, any one of which may result in remediation of certain claims,
contract termination, the loss of licensure or the right to participate in certain programs, and the assessment of
regulatory fines or penalties, which could be substantial. From time to time, we receive subpoenas and other requests
for information from, and are subject to investigations by, such regulatory agencies, as well as from state attorneys
general. There also continues to be heightened review by regulatory authorities of, and increased litigation regarding,
the health care industry’s business practices, including, without limitation, information privacy, premium rate increases,
utilization management, appeal and grievance processing, rescission of insurance coverage and claims payment
practices.
In addition, in the ordinary course of our business operations, we are party to various other legal proceedings,
including, without limitation, litigation arising out of our general business activities, such as contract disputes,
employment litigation, wage and hour claims, including, without limitation, cases involving allegations of
misclassification of employees and/or failure to pay for off-the-clock work, real estate and intellectual property claims,
claims brought by members or providers seeking coverage or additional reimbursement for services allegedly rendered
to our members, but which allegedly were denied, underpaid, not timely paid or not paid, and claims arising out of the
acquisition or divestiture of various business units or other assets. We also are subject to claims relating to the
performance of contractual obligations to providers, members, employer groups and others, including the alleged
failure to properly pay claims and challenges to the manner in which we process claims, and claims alleging that we
have engaged in unfair business practices. In addition, we are subject to claims relating to information security
incidents and breaches, reinsurance agreements, rescission of coverage and other types of insurance coverage
obligations and claims relating to the insurance industry in general. In our role as a federal and state government
contractor, we are, and may be in the future, subject to qui tam litigation brought by individuals who seek to sue on
behalf of the government for violations of, among other things, state and federal false claims laws. We are, and may be