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3/17/2011
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Health Net Criticized For Data Loss Notification Delay

Nine computer drives containing personal data on nearly 2 million customers, employees, and healthcare providers apparently went missing Jan. 21, but the managed care organization didn't reveal the loss until March 14.

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Health Net, one of the nation's largest managed care providers, has come under fire for failing to quickly disclose that nine computer drives are missing, drives that contain health and other personal data on nearly 2 million customers, employees, and healthcare providers. It appears that Health Net was told on Jan. 21 that the drives went missing from its data center in Rancho Cordova, Calif., but didn't reveal the loss until March 14.

State officials in California and Connecticut have launched investigations into the data loss and Health Net's security procedures and policies. It is the second time in two years that Health Net has suffered a major loss of customer data.

The missing drives contained "personal information of some former and current Health Net members, employees, and healthcare providers, [which] may include names, addresses, health information, Social Security numbers, and/or financial information," the company said in a statement.

Health Net said on its data breach hotline that IBM, which manages the company's IT infrastructure, told it about the missing drives on Jan. 21, according to a story in the San Diego Union Tribune and other news stories. By Wednesday evening, the hotline recording made no mention of the Jan. 21 date.

It was unclear how IBM discovered that the drives were missing, or whether the IT vendor was managing and monitoring Health Net's Rancho Cordova data center with on-site personnel or remotely. The company referred all questions to Health Net. IBM in 2008 won a five-year contract valued at more than $300 million to manage Health Net's entire IT infrastructure. In announcing the deal, IBM said it would "provide full IT infrastructure management services including: data center services, IT security management, help desk, and desk side support. AT&T, an IBM partner, will provide network, voice, and data management services."

Health Net has refused to disclose any details of the loss, other than a short press release it issued Monday. The company said it would provide two years of free credit monitoring services, including fraud resolution and restoration of credit files, as well as identity theft insurance, through the Debix Identity Protection Network.

State and federal laws require companies, especially healthcare companies, to notify potential victims of data loss and identify theft. Health Net's statement suggested that the drives may have been misplaced, not stolen. A spokesman called them "unaccounted-for server drives." The company said it was continuing to investigate, and "out of an abundance of caution" it decided to notify "the individuals whose information is on the drives."

Health Net spokesman Brad Kieffer declined Wednesday to answer questions about the missing drives, referring a reporter to the company statement. "The information that's in our press release, that's the information that we are making available," Kieffer said.

He declined to say how many people may be affected by the loss of the drives, but California's Department of Managed Health Care put the number at 1.9 million. That department is investigating Health Net's security practices.

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