Health Net tried to block employee whistleblowers, SEC says

The U.S. Securities and Exchange Commission seal can be seen at its headquarters in Washington, D.C.
The U.S. Securities and Exchange Commission seal can be seen at its headquarters in Washington, D.C.
(Andrew Harnik / Associated Press)

For years, insurance provider Health Net Inc. used illegal severance agreements to try to keep departing employees from talking to state and federal officials about company violations, the U.S. Securities and Exchange Commission said Tuesday.

The Woodland Hills company agreed to pay a $340,000 penalty to settle the SEC’s allegations. It also agreed to contact former employees who had signed the severance agreements between Aug.12, 2011, and Oct. 22, 2015, and inform them that they were not prohibited from blowing the whistle about potential securities violations.

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Health Net did not respond to requests for comment. The SEC said the company had agreed to the settlement without admitting or denying the commission’s findings.

The health insurer changed language in its severance agreements after the Dodd-Frank financial reform legislation was enacted in 2010. The law encourages whistleblowers to report possible securities law violations by providing financial awards and other incentives.

Under Health Net’s amended severance agreements, former employees waived their right to any monetary recovery that came from becoming a whistleblower. The SEC’s order does not address non-securities-related whistleblower lawsuits.

“Financial incentives in the form of whistleblower awards, as Congress recognized, are integral to promoting whistleblowing to the commission,” said Antonia Chion, associate director of the SEC’s enforcement division. “Health Net used its severance agreements with departing employees to strip away those financial incentives.”

Hundreds of former Health Net employees signed the agreements, the SEC said.

Health Net merged with Centene, a St. Louis-based health insurer, earlier this year.

Twitter: @melodypetersen



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