(Article from Insurance Law Alert, March 2016)
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A New Jersey federal district court denied an insurer’s motion to dismiss a qui tam complaint, finding that it sufficiently alleged a fraud claim pursuant to the False Claims Act. Negron v. Progressive Cas. Ins. Co., 2016 WL 796888 (D.N.J. Mar. 1, 2016).
Relator Elizabeth Negron brought a qui tam action against Progressive, alleging that it allowed enrollees to select a certain automobile insurance policy which caused health care providers to submit medical claims to Medicare and Medicaid in violation of state and federal “secondary payer” laws. Under the Medicare Secondary Payer (“MSP”) Act and applicable New Jersey statutory law, private health care plans are considered primary and Medicare serves as the secondary payer, available only when the primary payer does not provide coverage. Relator alleged that Progressive’s online policy application system allowed Medicare and Medicaid beneficiaries to enroll in a “health first” automobile insurance policy even though doing so would result in the submission of reimbursement claims to Medicare and/or Medicaid as a primary payer, in violation of the MSP Act. Progressive moved to dismiss the complaint, which the court denied.
To state a claim under the False Claims Act, a plaintiff must show that: (1) the defendant presented or caused to be presented to a government entity a claim for payment; (2) the claim was false or fraudulent; and (3) the defendant knew that the claim was false or fraudulent. The court held that the complaint sufficiently alleged each of these requirements. In particular, the court held that the complaint alleged fraud based on an “implied false certification theory,” which is premised on the notion that “the act of submitting a claim for reimbursement itself implies compliance with governing federal rules that are a precondition to payment.” The court explained that Progressive had numerous opportunities to prevent the sale of the “health first” policies to Medicare and Medicaid enrollees, or to prevent the submission of claims to Medicare and Medicaid as primary payers, but did not do so. In so ruling, the court noted that Progressive’s choice to “remain[ ] ignorant” of Relator’s qualifications caused Relator’s health care providers to submit claims to Medicare in violation of the MSP Act. Finally, the court held that the complaint sufficiently pleaded “knowledge” by Progressive by alleging that the insurer “failed to make reasonable and prudent inquiries to ensure compliance with the MSP Act.”
Shortly before the court ruled on Progressive’s motion to dismiss, Progressive moved to stay pending the United States Supreme Court’s decision in
Universal Health Services Inc. v. United States ex. Rel. Escobar, No. 15-7 (U.S. 2016), arguing that the Supreme Court will soon decide the viability and scope of the “implied certification” theory of liability under the False Claims Act. Oral arguments in
Escobar are scheduled for April 19, 2016.