Seyfarth Synopsis: Employer subsidized healthcare is one of the largest cost centers for small and large businesses. This post provides a primer on what to do if you suspect that your healthcare costs are rising because your healthcare plan is under siege by fraudsters.
With the rising costs of healthcare, some employers choose to self-insure to reduce claims and premium expenses factored into third-party claims administration, including policy overheads, assumption of risk, and underwriting profit. Using self-insurance is supposed to bring reduced costs—or so you thought. But what if the reduction in health care costs seemingly disappear overnight as the number of claims spike year after year without reason? The likely culprits are fraudsters, operating in something reminiscent of an Ocean’s 11 scheme, siphoning off the savings into a web of shell companies and making out like bandits.
Not Your Parents’ Healthcare Fraud
Gone are the days when claimants submitting fraudulent disability claims were the main perpetrators of fraud in a health care plan. Today, healthcare fraud schemes are as complex as the financial crimes that make the front page. In one recent, well-publicized case, a team of fraudsters advertised on Facebook and set up tables at a California University, offering students potential jobs if they took part in a clinical trial. The catch: the students needed to disclose their personal information to participate in the clinical trial. The fraudsters then used the personal information to submit fraudulent insurance claims. According to the court file, one podiatrist wrote 600 prescriptions, in a single day, billing $1.7 million in claims. In total, the University paid almost $12 million in fraudulent claims arising from this single scheme. And the kicker: the fraudsters did it all with information from just 500 students.
With the potential for a Las Vegas casino-sized jackpot, it is not surprising that the California Department of Insurance reported that California suffered nearly $1.4 billion in potential losses from disability and healthcare fraud in 2017 alone. That’s more than four times the estimated losses in 2010.
What Are My Options?
Step 1: Protect Your Plan. There are many administrative changes that self-insured plans can make to prevent fraud before it starts and to enable recovery under the terms of the Plan. Experienced counsel can assess potential exposure points in the administrative process and propose reasonable solutions to prevent a breach.
Step 2: Claims Analysis. Third-party administrators often employ a Special Investigations Unit to analyze claims and find signs of fraud, but law firms steeped in prosecuting these types of claims in civil court can also assist in finding fraudulent patterns through the use of data analytics.
Step 3: Engage Counsel and Contact Law Enforcement. When you suspect fraud, contact law enforcement. Contacting counsel before, or at the same time, as law enforcement is a good practice because some healthcare payors must make certain disclosures.
Step 4: Consider Joining a Government Action or Sue Independently. A number of statutes enable the government and victims of fraud to recover monetary losses from healthcare fraud. Two powerful statutes are the federal False Claims Act (FCA) and California’s Insurance Fraud Prevention Act (IFPA). Both laws permit victims of fraud to join lawsuits brought by the government or to sue independently if the government declines to take the case, subject to certain provisions, including disclosure requirements (see Step 3). In either scenario, the victim of fraud would be entitled to a monetary judgment if the prosecution is successful.
A good defense is a good offense. A robust anti-fraud program that includes a willingness to litigate will deter fraudsters who target for the most vulnerable plans. There is also the potential for a significant monetary recovery because the FCA, IFPA, and similar statutes have provisions that allow victims to recover multiples of what was lost in actual damages.
Workplace Solutions: The Seyfarth Health Care Fraud and Provider Billing Litigation Team has substantial experience in conducting comprehensive analyses of healthcare plans to determine if adequate fraud, waste, and abuse controls are in place and if the plan is being attacked by sophisticated fraudsters, as well as in litigating these issues for companies and in conjunction with governmental authorities. Please don’t hesitate to reach out to our team if you are in need!