New Frontiers in False Claims Act Litigation

Transcription

1 New Frontiers in False Claims Act Litigation Liability for Fraud Related to Health Benefit Exchanges Under the Patient Protection and Affordable Care Act of 2010 by Suzanne E. Durrell, Esq. Boston, Massachusetts March 2011 Who should read this paper Presented by Atty. Suzanne E. Durrell at Suffolk University Law School s Advanced Legal Studies Center for CLE & Academic Conferences on March 24 and 31, 2011 when she joined the NEW FRONTIERS IN WHISTLEBLOWER LITIGATION panel, this paper offers valuable insights to qui tam relators, defendants, federal and state governments, and others. In this paper, Atty. Durrell explores the enhanced liability to come from defrauding health exchanges under the Patient Protection and Affordable Care Act of 2010.

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3 New Frontiers in False Claims Act Litigation Liability for Fraud Related to Health Benefit Exchanges Under the Patient Protection and Affordable Care Act of 2010 by Suzanne E. Durrell DURRELL LAW OFFICE an affiliate of the Whistleblower Law Collaborative A central component of the health care reform legislation enacted in 2010 is the requirement that each State establish an American Health Benefits Exchange ( Exchange ) by January 1, See the Patient Protection and Affordable Care Act, March 23, 2010 ( PPACA ), Pub. L , Sections , 1321, codified at 42 U.S.C , (colloquially known as ObamaCare ); In very basic terms, a Health Insurance Exchange (as they are now known, with the acronymn HIX) are state-regulated entities from which certain individuals will be eligible to purchase health insurance that is subsidized by the federal government. The concept is that these Exchanges will offer consumers more choices and bargaining power while allowing private insurance companies to compete for the business; in other words, a competitive marketplace The government will subsidize insurance premiums for individuals with income up to 400% of the poverty line, as well as single adults. The subsidy will be provided as an advanceable, refundable tax credit, and is based on a formula and the type of plan chosen. Recognizing the potential for fraud, Congress took steps to ensure federal False Claims Act liability to fraud involving any federal monies in the Exchanges, and enacted enhanced damages/ penalties provisions. 1

4 The Exchanges must be operational by January 1, 2014, with federal funding for annual grants to help the States establish such Exchanges. When PPACA was enacted in March, 2010, only a few State run health insurance exchanges across the country were operational; among them were the Massachusetts Connector, the Utah Health Exchange, and HealthPass, a New York-based, non-profit exchange.while Obamacare calls on the States to create or join exchanges, the federal government may step in for States that aren't ready or refuse to do so (fewer than 20 states are projected to have exchanges by Oct. 1, 2013, when they go online for uninsured people to shop for coverage for 2014, according to the Henry J. Kaiser Family Foundation com/2012/11/15/health-insurance-exchange-deadline_n_ html. See also The Exchanges must be self-sustaining beginning on January 1, 2015, and to do so, may charge assessments or user fees to participating health insurance issuers, or to otherwise generate funding, to support operations. Congress included a number of provisions in PPACA designed to ensure the financial integrity of the Exchanges. See PPACA Section 1313, codified at 42 U.S.C One of these provisions is section 18033(6) which extends federal False Claims Act liability to the Exchanges with enhanced damages or penalties exposure. This section provides: (6) Application of the false claims act. (A) In general.--payments made by, through, or in connection with an Exchange are subject to the False Claims Act (31 U.S.C et seq.) if those payments Include any Federal funds. Compliance with the requirements of this Act concerning eligibility for a health insurance issuer to participate in the Exchange 2

5 shall be a material condition of an issuer's entitlement to receive payments, including payments of premium tax credits and cost-sharing reductions, through the Exchange. (B) Damages<<NOTE: Penalty.>>.--Notwithstanding paragraph (1) of section 3729(a) of title 31, United States Code, and subject to paragraph (2) of such section, the civil penalty assessed under the False Claims Act on any person found liable under such Act as described in subparagraph (A) shall be increased by not less than 3 times and not more than 6 times the amount of damages which the Government sustains because of the act of that person. (emphasis added). Through subparagraph (A), Congress sought to ensure that PPACA would not fall victim to strained court interpretations of the FCA that had limited its usefulness and caused Congress to enact corrective amendments in 2009 ( through The Fraud Enforcement and Recovery Act of FERA ) and 2010 (through other sections of PPACA). 1 Through subparagraph (B), Congress added an enhanced recovery for the United States over and above the standard FCA recovery of treble damages and a civil penalty of between $5,500-$11,000 per violation (i.e. false claim). Now, on top of that would be added a penalty of not less than 3 times and not more than 6 times the amount of the Government s damages. In other words, the Government s potential recovery could be FCA treble damages, plus the FCA $5,500-$11,000 penalties plus the FCA/PPACA penalty of an amount equal to 3-6 times the Government s single damages. This would mean the maximum recovery could reach 9 times the 1 For example, in FERA, Congress amended the FCA to correct the Supreme Court s decision in Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662 (2008). See S. Rep. No (March 23, 2009) at In PPACA, Congress amended the Medicare Medicaid Anti-Kickback Act ( AKS ) to clarify that a claim that includes items or services resulting from a violation of the AKS is a false or fraudulent claim within the meaning of the FCA; it did so in response to one or more district court opinions that had constrained the applicability of the FCA to kickback tainted claims. 3

6 damages plus the $5,500-$11,000 penalties per false claim or violation. Congress hope was that an enhanced damages and penalty provision would act as a further deterrent to potential wrongdoers. If past is prologue, it is safe to predict that the Exchanges will be fertile ground for fraud given: the wide ranging functions and responsibilities of the Exchanges; the number of individuals they will be serving; the number of health insurance plans and brokers who will be vying for business; the sheer magnitude of the federal money in play; the history of health care fraud scams; and the government s constant lack of adequate enforcement resources. For example, health insurers may misrepresent their qualifications and eligibility to participate in an Exchange, but nevertheless receive federal subsidies, or insurers may seek to enroll individuals who do not meet the income guidelines and thus are not eligible to receive subsidies. It is also safe to predict that given the broad language and scope of the section applying the FCA to Exchanges, there will be fertile ground for vigilant whistleblowers and their lawyers to bring valuable information to the government and make such information the subject of FCA qui tam lawsuits. Such vigilance will be much needed in order to help keep down the costs of health care and health care reform. 4

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8 New Frontiers in False Claims Act Litigation By Suzanne E. Durrell, Esq. About Suzanne E. Durrell, Esq. Suzanne E. Durrell, founder and principal of Durrell Law Office, has represented relators in False Claims Act qui tam cases for over a decade. She associates with attorney Robert M. Thomas, Jr. of Thomas & Associates in Boston as part of the Whistleblower Law Collaborative. Their success rate and notable cases can be found at the firm s website listed below. Ms. Durrell is the former Chief, Civil Division of the United States Attorney's Office in Boston. During her distinguished 12 years career with the Department of Justice, she supervised all of the office s False Claims Act litigation, and prosecuted a number of such cases including a then record setting health care fraud case. She received several honors including the Attorney General s Award for Exceptional Service, the most prestigious recognition bestowed by the Department of Justice. She also held the position of Deputy Associate Attorney General at the Justice Department in Washington, D.C. Prior to joining the U.S. Attorney's Office, Ms. Durrell was an Assistant Attorney General for the Commonwealth of Massachusetts, an associate at the Boston law firm of Hill & Barlow in Boston ( ), and a Staff Assistant to the Honorable Patrick J. Leahy, United States Senator (D VT) ( ). Ms. Durrell is a 1978 cum laude graduate of Georgetown University Law Center and a graduate with honors from Swarthmore College in She is a member of the bar of the Commonwealth of Massachusetts, the United States District Court for the District of Massachusetts, the United States Court of Appeals for the First Circuit, and the United States Supreme Court. Atty. Durrell can be reached by phone at or by fax at Additional contact information is available at For other information, legal services and contact numbers, please visit our website. Whistleblower Law Collaborative 20 Park Plaza, Suite 438 Boston, MA USA The Whistleblower Law Collaborative is the association of Thomas & Associates and Durrell Law Office to represent whistleblowers nationwide under the United States False Claims Act and other federal and state whistleblower/qui Tam Laws. Headquartered in Boston Massachusetts, the collaborative offers whistleblower clients a commanding and unique collaboration of two preeminent attorneys: Robert M. Thomas Jr. and Suzanne E. Durrell. The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice. Copyright All Rights Reserved. 8/2015