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False Claims Act: Insurance Misrepresentation
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False Claims Act: Insurance Misrepresentation
The False Claims Act, also known as the “Lincoln Law,” allows private citizens to file lawsuits on behalf of the government against companies or people that try to cheat or defraud the government programs. These private citizens are called “whistleblowers” or “relators.” The False Claims Act imposes triple damages plus penalties on those who knowingly submit false claims for money from the U.S. government. This law has become an important tool for combatting fraud against taxpayer dollars.
One area where whistleblowers have used the False Claims Act is to go after health insurers that lie or misrepresent facts to the government health programs like Medicare and Medicaid. For example, an insurance company might falsely report how sick their patients are to get higher payments, or bill for services that weren’t necessary or even provided. This type of fraud costs taxpayers billions per year.
How Insurance Misrepresentation Happens
There are lots of ways insurers can misrepresent facts or straight-up lie to rip off Medicare and Medicaid. Here’s some shady stuff they might do:
- Upcode diagnoses to make patients seem sicker than they are
- Bill for services that weren’t medically necessary
- Bill for care that was never provided
- Pay illegal kickbacks to doctors for referrals
- Inflate costs on claims
For instance, an insurance company might claim a patient has pneumonia when they just have a cold. Or they bill Medicaid for an MRI scan that the patient didn’t need and never got. They count on the fact that government health programs handle so many claims they probably won’t catch every instance of fraud. And these schemes can really add up, especially since some big insurers submit millions of claims per year!
Using the False Claims Act Against Insurers
The False Claims Act allows whistleblowers to sue on behalf of taxpayers and receive a cut of whatever the government recovers. So if you discover an insurer defrauding Medicare or Medicaid, you can file a qui tam lawsuit and potentially get up to 30% of the money that’s clawed back plus damages and fines.
Over the past decade, False Claims Act cases have recovered several billion dollars from health insurers that lied or misled the government. For example, back in 2008 a whistleblower named James Swoben helped expose a massive fraud scheme by the insurer HealthCare Partners. The company was pressuring doctors to upcode patient diagnoses to bump them into higher-paying diagnosis groups, even when it wasn’t accurate. Swoben’s False Claims Act suit led to HealthCare Partners paying $375 million to settle the case–with Swoben receiving a nice cut for blowing the whistle.
In 2020, the insurer Blue Cross Blue Shield of Minnesota paid out $48 million in another False Claims Act settlement. The company was accused of exaggerating how sick Medicare Advantage patients were in order to overbill the government. Tons of other health insurers have also paid big-time False Claims Act settlements in recent years, including Aetna, Cigna, Humana, UnitedHealthcare, and WellCare.
Proving Insurer Fraud
While going after powerful insurance companies under the False Claims Act can lead to a nice payout, these cases also tend to be complicated and document-intensive. Whistleblowers need access to information and records to prove the fraud actually happened. This evidence often comes from current or former employees at the insurer who witness shady behavior first-hand. As an insider, they can obtain incriminating documents and provide crucial testimony on how the schemes work behind the scenes.
Without this kind of smoking gun evidence from people “in the know,” False Claims Act cases against insurers can fail. The companies have whole legal teams dedicated to fighting fraud allegations and muddying the waters around exactly what happened. But determined whistleblowers armed with rock solid proof can overcome this defense. That’s why witnesses and documentation are so vital.
The Government’s Role
Whistleblowers file False Claims Act suits under seal so the government can investigate without tipping off the insurer being accused. The Department of Justice and local U.S. Attorney’s office will dig into the whistleblower’s allegations for months to decide if the case seems strong enough to intervene on. Intervention lends the case additional resources and credibility which ups the chances of winning.
If the feds decline intervention, the whistleblower can still proceed alone with their qui tam lawsuit. But statistics show intervened cases tend to rack up higher settlements and judgments. For instance, 94% of FCA recoveries in 2020 came from cases where the government intervened on the whistleblower’s behalf.
Blowing the Whistle Isn’t Easy
Exposing fraud committed by powerful insurance companies takes major courage and sacrifice. Whistleblowers put their careers on the line and risk retaliation from angry employers. Filing a False Claims Act lawsuit is not a step to take lightly given the personal costs involved.
But thanks to the whistleblower protections in the law, those who report fraud can defend themselves from retaliation. If an insurer tries to demote or fire someone for reporting their misconduct, that person can sue to get their job back, recover lost wages, and win other remedies. These anti-retaliation provisions encourage more insiders to come forward when they witness schemes to rip off Medicare and Medicaid.
The monetary rewards for successful False Claims Act cases also help offset the risk whistleblowers face. An insurer forced to cough up hundreds of millions in a fraud settlement must pay the whistleblower 15-30% of that amount for bringing the scam to light. So while blowing the whistle always requires courage, the financial upside and anti-retaliation measures can make that decision a little less daunting.
Deterring Future Fraud
Beyond recouping stolen funds and rewarding whistleblowers, False Claims Act cases also aim to deter future fraud by making examples out of the companies caught cheating taxpayers. Triple damages and per claim penalties up to $23,000 per false claim add up quickly, creating painful incentives for insurers to stay honest going forward.
The avalanche of big False Claims Act settlements against health insurers in recent years seems to be having a deterrent effect. More companies are now investing in compliance programs to detect and prevent fraud internally before whistleblowers or the feds come knocking. They’ve seen the astronomical sums their competitors have coughed up after getting nailed, which motivates them to clean up their own acts proactively.
The threat of False Claims Act liability has made ripping off government health programs more risky and less profitable. This trend should continue as whistleblowers and prosecutors remain aggressive in pursuing new cases against dishonest insurers. Taxpayers are recouping billions lost to fraud while the industry receives a clear message–cheat the government at your own peril!
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