A recent decision in the District of New Jersey addressed an auto insurer’s obligations to comply with the Medicare Secondary Payer Act. Auto insurers may wish to review their practices and procedures in light of this decision.
In Negron v. Progressive Casualty Insurance Company, 2016 U.S. Dist. LEXIS 24994 (D.N.J. Mar. 1, 2016), the plaintiff brought a qui tam suit under the False Claims Act against Progressive. The allegations focused on an online application, in which policyholders were asked to select either a “health first” policy, under which the policyholder’s health insurance coverage would be the primary medical coverage for injuries arising from an auto accident, or Personal Injury Protection (PIP) primary coverage, under which Progressive would provide the primary coverage. The application noted that the policyholder should select the PIP primary coverage if one or more drivers was insured by Medicare or Medicaid. Id. at *7-8. The plaintiff selected the health first policy, even though she was a Medicare recipient. After she was injured in an auto accident, an adjuster denied her claim because the “health first” policy was a secondary payer. One of her medical bills was conditionally paid by Medicare. Id. at *6-8. The Medicare Secondary Payer Act provides that Medicare is a secondary payer where auto insurance coverage exists. The plaintiff sued, alleging that the insurer caused the submission of a false or fraudulent claim to Medicare, in violation of the Medicare Secondary Payer Act. The United States and New Jersey both declined to intervene, and the plaintiff proceeded with the qui tam suit.
Progressive moved to dismiss the federal and New Jersey False Claims Act claims. The court denied the motion, finding that the complaint sufficiently alleged both that the defendants caused the submission of a false or fraudulent claim, and that the violation was “knowingly” made. A central part of the opinion focused on what the court concluded that the defendants could have done better:
First, Defendants 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 the Defendants 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.
Lastly, 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 Realtor 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 Realtor at the beginning of the claims adjustment process. 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. Health care providers rarely miss an opportunity to get paid for their services, and as we have noted, insurance companies rarely miss the opportunity to come in second when it comes time to pay.
Id. at *18-20.
The court rejected the defendants’ argument that there was no loss to the government because Medicare’s payment was merely conditional, explaining that “[i]f that practice regularly occurred, defendants would essentially be receiving an interest free loan from the government on claims they are obligated to pay and were always obligated to pay.” Id. at *24. The court further found that the plaintiff had sufficiently alleged a knowing violation of the False Claims Act “by alleging that Defendants failed to make reasonable and prudent inquiries to ensure compliance with the [Medicare Secondary Payer] Act.” Id. at *27.
Insurers writing auto policies similar to Progressive’s “health first” policy may want to take note of this decision.