It’s the kind of story that makes Europeans look at the American health care system and shake their heads.

The Los Angeles Times reports that one of California’s largest health insurers set goals and paid bonuses based in part on how many individual policy holders were dropped and how much money was saved.

Times reporter Lisa Girion writes that Health Net Inc. avoided paying $35 million in medical expenses by rescinding about 1,600 policies between 2000 and 2006. During that period, it paid the senior analyst in charge of cancellations more than $20,000 in bonuses based in part on her meeting or exceeding annual targets for revoking policies.

The Times had to get its lawyers involved to pry the documents backing up these claims out of Health Net’s clutches, even though the company had to produce them for a law suit brought by one of those dumped policy holders.

Health Net tried to keep them secret, arguing that they would embarrass the company. (Perhaps they should have thought of that before complimenting their analyst for her “banner year” in 2003 when she exceeded her performance goal and helped the company avoid “$6 million in unnecessary health care expenses.”) But in the end, the newspaper won, and so was able to show, for the first time, how an insurer linked cancellations to employee performance goals and to its bottom line.

The suit was brought by Pasty Bates, a 51-year-old hairdresser whose coverage was rescinded by Health Net in the middle of chemotherapy treatments for breast cancer, leaving her with $200,000 in medical bills.

Three years later, she still has a catheter embedded in her chest where the chemo was pumped in and is unable to afford tests to determine whether the cancer is gone.

Health Net contended that Bates failed to disclose heart problems and shaved 35 pounds off her weight on her application.

Bates’ lawyer, William Shernoff, claims that the analyst’s performance goals show that Health Net was bent on finding any excuse to cancel the coverage of people like Bates to save money.

“I haven’t seen this kind of thing for years,” Shernoff said. “It doesn’t get much worse.”