Arbitration judge Sam Cianchetti found that by canceling the insurance policy of Patsy Bates, a breast cancer patient who used Health Net for her health insurance, the company violated numerous California laws, the Los Angeles Times said.

In his 21-page opinion, Cianchetti also criticized Health Net for rewarding its employees for saving insurance funds and canceling insurance claims like Bates's.

"It's difficult to imagine a policy more reprehensible than tying bonuses to encourage the rescission of health insurance that keeps the public well and alive," the retired Los Angeles County Superior Court judge said.

The for-profit insurance company quickly announced it would start using a third-party review process before canceling policyholders in the process, and would implement other changes to avoid potential problems in the future.