Rafael Gonzalez, Esq.
Vice President, Strategic Solutions, Helios
On March 1, 2016, the United States District Court for the District of New Jersey published its opinion on Negron v. Progressive Casualty Insurance Company, finding that based on the claim filed pursuant to the Medicare Secondary Payer Act and False Claims Act, Negron has sufficiently plead that Progressive presented or caused to be presented to an agent of the United States a claim for payment; that the claim was false or fraudulent; and that Progressive knew the claim was false or fraudulent. By remaining ignorant of the fact that Negron did not have health insurance, other than Medicare/Medicaid, Progressive caused Negron’s health providers to treat Medicare as the primary payer of her auto-related medical costs. Because, Medicare never was, nor by law could it ever be, a primary payer given the existence of her no-fault policy, Progressive caused Negron’s health providers to submit bills to Medicare. This resulted in economic loss to the United States government, even if Progressive eventually reimbursed Medicare, since allowing Medicare to pay for Negron’s auto-related medical costs would essentially permit Progressive to receive an interest free loan from the government on claims they are obligated to pay and were always obligated to pay.
The Facts and Allegations
While purchasing an auto insurance policy online at Progressive.com in December 2009, Elizabeth Negron had the choice of selecting a health first policy or a Personal Injury Protection (“PIP”) primary insurer policy. Under a health first policy, a policyholder’s private health insurer is responsible for medical bills resulting from an auto accident. Medicare and Medicaid recipients are not eligible for this type of coverage. Under the more expensive PIP primary insurer policy, the auto insurer assumes this medical coverage as the primary payer. Using this online application, Negron selected a health first policy even though she was a Medicare recipient.
On May 14, 2010, while she was covered by this policy, Negron was involved in a motor vehicle accident and incurred medical expenses. When her health care providers submitted bills to Progressive, Progressive’s claims adjuster sent denial letters to Negron’s medical providers which explained that Negron had selected a health first policy and instructed that all medical bills should be submitted to her primary health insurer, which for Negron was Medicare. Oxford Healthcare and Aria Health System did not submit bills to Medicare; Diagnostic Imaging, Inc. and City of Philadelphia ambulatory services did. Medicare denied Philadelphia’s claim as untimely but conditionally paid Diagnostic’s claim which was later reimbursed by Progressive.
As a result, Negron brought this action pursuant to the False Claims Act, 31 U.S.C. § 3729 et seq. and the False Claims Act of the State of New Jersey, N.J.S.A. 2A:32C-1 et seq. In her complaint, Negron alleges Progressive Casualty Insurance Company and Progressive Garden State Insurance Company allowed Medicare and Medicaid beneficiaries to elect a “health first” automobile insurance policy in an online application which caused health care providers to submit medical claims to Medicare and Medicaid in violation of secondary payer laws. The Federal False Claims Act prohibits the submission of false or fraudulent claims for payment to the United States and authorizes qui tam actions, by which private individuals may bring a lawsuit on behalf of the Government in exchange for the right to retain a portion of any resulting damages award.
The Medicare and Medicaid Secondary Payer Act
Prior to 1980, Medicare, a joint federal and state program, generally paid for medical services for beneficiaries regardless of whether the beneficiary was covered by another health plan. The Medicare Secondary Payer (MSP) Act was enacted to cut health costs and lower Medicare disbursements by assigning primary responsibility for medical bills of Medicare recipients to private health plans, where such plans exist. The private plans are thus considered “primary” under the MSP Act and Medicare serves as the “secondary” payer only when the primary payer does not provide coverage.
Congress enacted two provisions to support this goal: First, the MSP bars Medicare payments where “payment has already been made or can reasonably be expected to be made promptly (as determined in accordance with regulations)” by a primary plan. 42 U.S.C. §1395y(b)(2)(A). “Prompt” payment is defined in the applicable regulations as payment made within 120 days of either the date on which care was provided or when the claim was filed with the insurer, whichever is earlier. See 42 C.F.R. §§ 411.21, 411.50. The MSP defines a “primary plan” as “a workmen’s compensation law or plan, an automobile or liability insurance policy or plan (including a self-insured plan) or no fault insurance.” 42 U.S.C. § 1395y(b)(2)(A)(ii). This provision “is intended to keep the government from paying a medical bill where it is clear an insurance company will pay instead.”
Second, the MSP provides that when Medicare makes a payment that a primary plan was responsible for, the payment is merely conditional and Medicare is entitled to reimbursement for it. Section 1395y(b)(2)(B) provides: “Any payment under this subchapter with respect to any item or service to which subparagraph (A) applies shall be conditioned on reimbursement to the appropriate Trust Fund established by this subchapter when notice or other information is received that payment for such item or service has been or could be made under such subparagraph.” 42 U.S.C. §1395y(b)(2)(B)(i). Medicare payments are subject to reimbursement to the appropriate Medicare Trust Fund once the government receives notice that a third-party payment has been or could be made with respect to the same item or service.
In short, the Court indicates that Medicare is the secondary payer where a primary plan exists, including an automobile insurance plan. 42 U.S.C. § 1395y(b)(2)(A)(ii). Medicare will not pay for any item or service for which “payment has been made, or can reasonably be expected to be made” by a primary plan. Id. The MSP Act allows Medicare to conditionally pay medical expenses if the primary plan does not pay promptly, but is later entitled to reimbursement if the primary plan is responsible. 42 U.S.C. § 1395y(b)(2)(B)(i)-(ii). The Federal Medicaid statute also has secondary payer requirements. 42 U.S.C. §§ 1396k(a)(1), 1396a(a)(25).
New Jersey Insurance Regulations
Pursuant to N.J.A.C. 11:3-14.5, for policies issued after January 1, 1991, automobile insurers must give policyholders the option of using their personal health insurance as the primary payer of medical bills resulting from a car accident. The regulation further states that policyholders who receive health insurance exclusively through Medicare or Medicaid are ineligible for this option. Id.; see also New Jersey Auto Insurance Buyer’s Guide, New Jersey Department of Banking and Insurance, available at
https://www.njm.com/AutoBuyersGuide/Personal-Injury-Protection.htm (“Cost savings can also be achieved by using your own health insurance as a primary source of coverage in the case of injury related to an auto accident . . . MEDICARE and MEDICAID cannot be used for the Health Care Primary option.”). This appears to be designed to make New Jersey law consistent with federal law in that under the MSP Act Medicare and Medicaid can never be the primary payer where secondary insurance exists.
The Federal False Claims Act
To state a claim under the FCA, a plaintiff must show that: “(1) the defendant presented or caused to be presented to an agent of the United States a claim for payment; (2) the claim was false or fraudulent; and (3) the defendant knew the claim was false or fraudulent.” Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 182 (3d Cir. 2001). “The False Claims Act seeks to redress fraudulent activity which attempts to or actually causes economic loss to the United States government.” Id. at 184.
False or Fraudulent Claims
Progressive assert that the claims submitted were not false or fraudulent and were not submitted knowingly. The Court however finds Negron has sufficiently alleged that the claims submitted were false or fraudulent.
Here, Negron alleges Progressive caused a claim to be submitted to Medicare which violated the Medicare Secondary Payer Act. Specifically, Negron alleges Progressive denied her medical bills and instructed her health care providers to bill her health insurer as the primary payer. Negron further alleges that as a result of Defendants’ instructions, her health care providers submitted claims to Medicare, implicitly certifying their compliance with Medicare secondary payer laws which were a precondition for payment. Based on these allegations, the Court finds that Negron has sufficiently pled that Progressive submitted a false claim.
The court indicates that by remaining ignorant of the fact that Negron did not have qualifying health insurance (i.e. a non-Medicare/Medicaid health insurance policy) for a health first policy, her auto insurer caused her health providers to treat Medicare as the primary payer of her auto-related medical costs. The Court points out however, that Medicare never was, nor by law could it ever be, a primary payer given the existence of Negron’s no-fault policy. Stated differently, the Court concludes that Progressive caused Negron’s health providers to submit bills to Medicare that Medicare could never be responsible for.
The Court notes as important here, and also for purposes of intent, that Progressive had at least three opportunities to prevent the sale of health first policies to Medicare and Medicaid enrollees or, even if such sales had occurred, to prevent the submission of claims to Medicare and Medicaid. First, Progressive could have constructed their online application to prevent Medicare and Medicaid enrollees from purchasing health first policies. This could have been accomplished through pop-up warnings, by requiring applicants to disclose the name of their health insurance carrier or provide a certification that they are not Medicare/Medicaid recipients, or by any number of other modifications to the online application process.
Second, it seems reasonable to assume that the online application process resulted in further post-application underwriting review and further communications between Progressive and purchasers of health first policies such as the issuance of a formal policy and declarations, the issuance of permanent insurance cards, premium notices, and renewal processes. Each of these communications or interactions presented a separate opportunity to ensure that health first policies were not held by Medicare/Medicaid enrollees.
Last, both sides describe a claims adjustment process which involved a real human being. Yet, nowhere is it explained why the adjustor did not ask the health providers submitting the claims the simple question of what other insurance Negron presented to the health care provider when the services were rendered. Further, no reason is given why that same simple question was not asked of Negron at the beginning of the claims adjustment process. The Court points out that patients of health care providers are routinely asked for proof of insurance and insurance companies routinely ask insureds to provide information about other available and potentially primary or overlapping coverage.
Additionally, the Court rejects Defendants’ arguments that Medicare permissibly paid the claims pursuant to Medicare’s conditional payment provision and that the claims did not result in a loss to the government. The Court rejects the notion that it was acceptable for Medicare to pay Negron’s claim because Progressive eventually reimbursed Medicare. If that practice regularly occurred, Progressive would essentially be receiving an interest free loan from the government on claims they are obligated to pay and were always obligated to pay.
Knowing the Claim Was False or Fraudulent
The Court concludes that Negron has sufficiently alleged Progressive knew the claim was false or fraudulent or acted in reckless disregard of that knowledge.
In her complaint, Negron alleges Progressive sold health first policies to Medicare beneficiaries, recklessly disregarded the requirement that they determine if Medicare insures their policyholders, and failed to make reasonable and prudent inquires to ensure compliance with governing regulations. Progressive argues that Negron does not allege they knew her insurer was Medicare before it denied payment or instructed that the claim be submitted to her health insurer.
To satisfy the third prong of an FCA claim, Negron must allege that Progressive knew the claim was false or fraudulent. The term “knowingly” is defined in the FCA as (A) mean that a person, with respect to information–(i) has actual knowledge of the information;(ii) acts in deliberate ignorance of the truth or falsity of the information; or(iii) acts in reckless disregard of the truth or falsity of the information; and (B) require no proof of specific intent to defraud. 31 U.S.C.A. § 3729(b)(1).
The Court finds Negron has fulfilled this pleading requirement by alleging that Progressive failed to make reasonable and prudent inquiries to ensure compliance with the MSP Act. Further, Negron alleges it was unreasonable for Progressive’s application to permit applicants to select a health first policy, a cheaper option, then fail to ask the applicant to identify their insurer in order to ensure the applicant has the appropriate coverage to be eligible for that policy. Alternatively, Negron alleges Progressive could have also asked whether the applicant was insured by Medicare or Medicaid, instead of putting this explanation in fine print.
New Jersey False Claims Act
Negron also alleges that the State of New Jersey is paying many of the false claims submitted by Progressive by way of Medicaid. The secondary payer laws which form the gravamen of Negron’s complaint applied to Medicaid recipients as well. 42 U.S.C. §§ 1396k(a)(1), 1396a(a)(25). The Court therefore finds that Negron has satisfied Foglia because she has sufficiently alleged the particular details of Progressive’s scheme, paired with reliable indicia that lead to a strong inference that claims were actually submitted and paid by the State of New Jersey based on the language of the application and the result it had for Negron as a Medicare recipient. Foglia, 754 F.3d at 157-58.
Because Negron has sufficiently alleged Progressive made a claim and knew the claim was false or fraudulent or acted in reckless disregard of that knowledge, the Court denies Progressive’s motion to dismiss.
For those of us involved in MSP compliance issues on a daily basis, we had hoped that the end of the Takemoto case also meant the end of False Claims Act attempts resulting from MSP activities. However, although the Takemoto False Claims Act allegations were recently dismissed by a New York Federal Court as lacking appropriate allegations, basis, foundation, and evidence, this case clearly shows that Medicare Secondary Payer Act non-compliance will not just end with an MSP Private Cause of Action for double damages, but may continue on to False Claims Act qui tam complaints seeking triple damages. This case, and the many others pending before various federal courts around the country, should serve as a warning to all primary payers that the stakes have gotten significantly higher. This case should awaken all self-insureds and insurers who bear responsibility for payment of claims that the potential exposure on every claim where you may be dealing with a Medicare or Medicaid beneficiary is real, is serious, is here, and is not going away. MSP compliance is serious business, not just for the US government but for the private entities engaged in the process. Cases like this one clearly show that it isn’t just the federal government enforcing compliance, it is private industry, the very same private players involved in the case, that are enforcing compliance in a new and complicated world. Helios Settlement Solutions offers MSP compliance products and services aimed at preventing and protecting from such scenarios. To speak with us about our mandatory insurer reporting, conditional payment resolution, and set aside allocations, approval, and administration MSP compliance services, please contact us at 888.672.7674, or at firstname.lastname@example.org.