The 9th Circuit Court of Appeals just issued a blockbuster ruling in U.S. ex rel. Swoben v United Healthcare et al., ruling that United Healthcare, WellPoint, Aetna, and other major health insurance providers must answer to a whistleblower’s complaint that they defrauded the Medicare Advantage program.

The Medicare Advantage Program, also known as “Medicare Part C, is a capitated health insurance program offered through private insurance companies. Rather than paying fees for individual services, the Medicare program makes monthly payments based upon the health status of participants. The health status is based upon diagnosis codes for services to individual patients, as selected by physicians and other healthcare providers. The insurers, who receive the capitated payments, are required to certify the accuracy of the diagnosis codes.

The whistleblower alleged that the health insurance companies performed one-sided retrospective reviews that were structured to identify services that were under-coded, allowing the insurer to increase their payments, but not to identify over-coded services. As a result, the whistleblower alleged, the insurers’ certification of the risk adjustment data was false and caused the government to over-pay the capitation rate.

The defendant’s argued that they could not be held accountable for the accuracy of codes submitted by healthcare providers, and that there was no duty to affirmatively act to identify unsupported codes.

The Court rejected both of the arguments. First, it stated that it was not suggesting that the insurance company could be held responsible for incorrect coding by providers, but for falsely certifying that the coding was correct. And second, it stated that the insurers had an affirmative duty to have effective compliance programs in place and that they could be liable under the FCA for submitting certifications with reckless disregard for, or deliberate ignorance of, their accuracy, if the whistleblower’s allegations were true.

The insurance companies’ error was in creating one-sided reviews calculated to identify under-coding and conceal over-coding. By creating such a review, the Court ruled, the companies could be acting in deliberate ignorance of the truth or falsity of their certifications, or were acting in reckless disregard for the truth or falsity of their certifications.

The Court ruled that the whistleblower’s Fourth Amended Complaint stated a claim and was sufficiently pled, and reverse the trial court’s dismissal with prejudice. The insurance companies will now have to answer and defend against the whistleblower’s allegations.