On May 1, the federal government brought a False Claims Act (“FCA”) suit against three health insurers, as well as three insurance brokers. The Justice Department’s suit alleges that the insurers paid millions of dollars in kickbacks to brokers in exchange for obtaining enrollments into their Medicare Advantage (“MA”) plans in the form of “marketing,” “co-op,” or “sponsorship” payments. In the same suit, two of the insurers were also accused of discriminating against disabled MA beneficiaries.
Although the suit was brought under the FCA, the complaint alleges that the payments made by the insurers violated the federal Anti-Kickback Statute (“AKS”). The complaint alleges that those AKS violations, in turn, resulted in the insurers making or causing to be made material false claims to the government in the form of enrollment data, which resulted in capitation payments from Medicare to cover Medicare beneficiaries under their MA plans. The Justice Department also alleged that two of the insurance companies threatened to withhold such payments in order to push brokers to enroll fewer individuals with disabilities, who the complaint alleges are not as profitable to the insurers, into their plans.
The Justice Department lawsuit appears to be based on the same or similar concerns regarding the marketing of Medicare Advantage plans that the Office of the Inspector General for the US Department of Health and Human Services (“OIG”) and the Centers for Medicare and Medicaid Services (“CMS”) expressed under the Biden Administration.
On December 11, 2024, the Office of the Inspector General (“OIG”) issued a Special Fraud Alert related to marketing arrangements between Medicare Advantage Organizations (“MAO”) and health care professionals, as well as marketing arrangements between health care professionals and Medicare Advantage plan agents and brokers. The OIG noted that it has observed an “increase in abusive marketing practices in recent years[,]” including practices in which a health care provider is paid by a MAO in exchange for referrals by the provider to enroll in a particular MA plan. In the alert, the OIG identified a list of “suspect characteristics” related to marketing arrangements that might suggest a heightened risk of potential fraud and abuse.
Similarly, CMS promulgated rules addressing these concerns which were intended to go into effect in late 2024. The rules aimed to fix brokers’ commissions and close a compensation limit loophole. The rules have since been challenged in a federal district court in Texas by an insurance industry group. The Texas court issued a stay, which will keep the regulations from taking effect while the case and any appeal is pending.
The Justice Department’s action against the insurers and brokers illustrates the breadth of the Anti-Kickback Statute as well as the Justice Department’s willingness to apply the statute to activities beyond those involving health care providers and their referral sources.
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