Health Net Inc. has agreed to settle with the California Department of Insurance to pay a fine as well as reimburse affected customers in unlawful medical insurance rescissions case.

The Woodland Hills, CA healthcare company has been ordered to pay $3.6 million in fines, $7.2 million in waived insurance premiums and $14.2 million to reimburse medical charges in the case of 926 people whose medical insurance policies were unfairly cancelled by Health Net after they became ill.

The California Department of Insurance is investigating five major Calif. health insurance policy companies for improper rescission of insurance. California Insurance Commissioner Steve Poizner said that "The health insurance industry is on notice that I will not tolerate illegal rescissions, but my ultimate goal is to protect consumers by changing the way future rescissions are decided and prevent improper rescission practices.”

Although Health Net have agreed to co-operate with the CDI, they haven’t admitted to any wrongdoing: "While we do not necessarily agree with the California Department of Insurance's allegations, we do believe it is time to move forward and make sure these affected individuals can obtain coverage," said Health Net Chief Executive Jay Gellert.

The company is also ordered to operate changes to its application form, underwriting process, agent training and consumer notifications, as well as to issue new insurance policies for those customers whose policies were unfairly rescinded. Health Net are passable for an additional penalty of up to $3.6 million if a subsequent inspection finds that they have failed to comply and correct all deficiencies.

NYSE stock values for Health Net were down by 16 cents today, selling at $26.33