Over 100 CIGNA Administered Self-insured ERISA Health Plans Sued for Embezzlement-Health Plan Litigation Tsunami

Just eight days after a federal court slammed CIGNA with a $13M judgement, 113 of CIGNA’s self-insured clients, along with their Plan Administrators have been named as defendants in a massive fraud lawsuit, alleging the plansparticipated in a conspiracy and pattern of unlawful, reckless, and deceptive conduct to conceal an embezzlement and/or skimming scheme”.

According to court documents:

“Defendants never monitored or tracked the specific fees that Cigna was paying to itself and never required Cigna to itemize and account for the financial transactions made by Cigna in sufficient detail. Thus for any given claim, Defendants blindly permitted Cigna to withdraw plan funds for payment of the claims, but failed to track the true, actual amounts Cigna paid to itself.

This massive lawsuit comes on the heels of an unprecedented $13.7M ruling against CIGNA with $11.4M for underpaid claims and an additional $2.3M in statutory penalties. In that case, CIGNA’s fee forgiving protocol and claim for reimbursement of “overpayments” came under fire by the courts, ultimately ruling that CIGNA’s interpretation of plan’s “exclusionary language” provision as the basis for it’s fee forgiving protocol, was “flawed” and “legally incorrect“. The court also ruled that CIGNA’s claim for reimbursement of overpayments “fail as a matter of law” reasoning no lien or constructive trust was created and tracing requirements were not met.

Case info: True View Surgery Center One LP et. al v. MILA National Health Plan et.al, Case Number: 4:2016 cv01648 in the United states District Court for the Southern District of Texas, Houston office Court, Filed June 9, 2016.

This case is filed against CIGNA administered health plans and names the plan administrators individually. Among the defendants are many large, well known, national companies that reach across different sectors of the economy, from banking to manufacturing to retailers. Household names such as,  JP Morgan Chase, Chevron, Macy’s, Valero, BASF, Waste Management, Stanley Black and Decker and even Teach for America, were named as well as other smaller less recognized organizations. All have one thing in common: all are CIGNA administered self-insured health plans.

This latest case seems to be the culmination of a spate of recent cases alleging similar violations. This troubling pattern may be an indication that no employer sector is immune to possibly fraudulent claims processing practices. All of this seems to provide more evidence of increased scrutiny for self-insured health benefits, that has long been commonplace for retirement benefits.

The complaint alleges:

Defendants processed claims and determined that certain claim amounts were allowed under the Plans, yet those allowed claims payments were never made to Plaintiffs and instead [were] withheld by Cigna.

The complaint further alleges that the plans and their co-fiduciary Cigna advised patients and plaintiff medical providers, through the EOB’s, that if patients failed to pay the full cost-sharing, or out of pocket liabilities, at the time of their admission, the benefit claims payment would be withheld indefinitely by Cigna until medical providers submitted proof of full payment of the patient’s cost-sharing or out of pocket liabilities. And in a particularly nefarious maneuver, the plans and their co-fiduciary Cigna simultaneously advised patients they had no obligation to pay! Consequently, the medical provider plaintiffs would have nothing to forgive upfront or nothing to collect from the patient, according to the complaint.

The medical provider plaintiffs further argue: “In spite of the glaring conflict of interest and inherent breach of fiduciary duties, defendants allowed the wrongful withholding of plan benefit payments from Plaintiffs and agreed to an unlawful compensation structure that financially rewards Cigna.”, according to court records.

Most troubling are accusations that the Plans, even after being alerted to these potentially illegal practices and despite formal complaints being lodged with the DOL, astonishingly continued to delegate and authorize Cigna, to investigate its own alleged wrongdoing!

The complaint also alleges, “When defendants were confronted about this “withholding” of the Entitled Amount, instead of outright refuting the assertion, their co-fiduciary’s counsel stated “Replete throughout your letter is [plaintiff’s] contention that Cigna does not have the legal right or authority to withhold the payment benefits . . . [i]n fact, Cigna has every right to do so.

The complaint goes on to say, “Defendants allow funds from the Plans to be withdrawn under the guise of a “savings” compensation structure as a means to cloak blatant misappropriation of funds. That is defendants colluded with Cigna to apply a fake 100% “negotiated discount” of Plaintiff’s billed charges. Defendants, through Cigna, applied a fabricated contractual Obligation (“CO”) code.”

All ERISA health plans, medical providers and patients must educate themselves in order to understand the facts of these cases. For years, Cigna’s “fee forgiving protocol” has been a thorny issue for out-of-network providers across the nation and now, self-insured plans are starting to feel the pain of these potentially illegal practices.

Medical providers must be proactive and adopt compliant practices and policies. Health plans must also be proactive in validating that plan assets get returned to their plan, and not applied to cover shortfalls in another plan.

Avym Corp. has advocated for ERISA plan assets audit and embezzlement recovery education and consulting. With new Supreme Court guidance on ERISA anti-fraud protection, we are ready to assist all self-insured plans recover billions of dollars of self-insured plan assets, on behalf of hard-working Americans. To find out more about Avym Corporation’s Fiduciary Overpayment Recovery Specialist (FOR) and Fiduciary Overpayment Recovery Contractor (FORC) programs contact us.

Cigna Fraud Lawsuit Against Hospital Backfires- Cigna slammed with $13M Judgement in Medical Claims Dispute

In a monumental decision for Out-Of-Network Providers nationwide, on June 1, 2016, U.S. District Judge Kenneth Hoyt of the Southern District of Texas ruled against Cigna and ordered the insurer to pay $11.4 million to cover underpaid claims and, an additional $2.3 million in ERISA penalties, in perhaps the first instance where a claims administrator was ordered to pay ERISA penalties to a medical provider.

U.S. District Judge Hoyt, after a nine day bench trial, ruled that Cigna’s claims of overpayment and fee forgiveness fraud failed, as did its arguments against Humble Surgical Hospital’s (Humble) ERISA claims. According to court records:

Based on the analysis and reasoning set forth herein, the Court determines that Cigna’s claim(s) for reimbursement of overpayments made pursuant to ERISA and/or common law fail, as a matter of law;”.

The court goes on to say, “The Court further concludes that Cigna’s defenses to Humble’s ERISA claims fail and Humble is entitled to recover damages under § 502(a)(1)(B)1 and penalties under § 502(c)(1)(B).

Case info: Connecticut General Life Insurance Co. et al. v. Humble Surgical Hospital, LLC, (Cigna v. Humble) Case number 4:13-cv-03291, in the U.S. District Court for the Southern District of Texas. Entered June 01, 2016

This decision represents a major paradigm shift in Out-of-Network benefits and claim processing for all health care providers and health plans in the nation and establishes clear guidance on critical issues such as cross-plan offsetting, Cigna’s fee forgiveness protocol, SIU practices and ERISA disclosure requirements. The decision sheds light on the payor initiated “out-of-network fraud” enigma and is one of a series of critical court decisions which address the typical scenario for out-of-network providers: payors refusal to pay claims which leads to “catch-all” out-of-network lawsuits seeking total overpayment refunds of claims previously paid to providers , all based on broad and vague allegations of fraud.

At its core, this court decision provides the entire managed care and plan benefits industry with basic, yet comprehensive legal reasoning and essentially offers a roadmap to addressing modern-day healthcare litigation.

In his ruling, U.S. District Judge Kenneth Hoyt wrote that the health insurer initiated the litigation seeking $5.2 million in restitution and filed claims against the hospital, alleging it engaged in fraudulent out-of-network billing practices, which resulted in “overpayments”.  

Humble denied the allegations and countersued Cigna for (a) nonpayment of current member/patient’s claims, underpayment of certain claims, and delayed payment of all claims in violation of ERISA § 502(a)(1)(B); (b) failure to provide a full and fair review under ERISA; (c) breach of fiduciary duties of loyalty and care under ERISA; and (d) penalties pursuant to ERISA § 502(c,), according to the court documents.

This landmark decision has the potential to save millions of Americans from medical bankruptcy. Additionally, it illustrates one of the most pressing issues facing out-of-network patients and providers across the nation.  Payor initiated Deductible and Co-Pay waiver claim denials and overpayment recoupments or offsets is the No. 1 out-of-network claim denial, contributing to increases in the number of personal bankruptcies. According to many recent surveys, reports and case studies, one in five American adults will struggle to pay medical bills. In fact, medical bills are the leading cause of personal bankruptcy, affecting even those with health insurance. Subsequently, approximately 76% of Americans paid for out-of-network coverage through their employer-sponsored health plans, according to a December 2013 National Composition Summary from DOL Bureau of Labor Statistics. It’s clear that the epidemic of out-of-network deductible balance billing wrongly imposed by ERISA plans has inevitably contributed significantly to unexpected medical bills and personal bankruptcy.

According to the court records, the evidence clearly demonstrated that Cigna flagged Humble’s claims, for SIU processing, never told the hospital and “did not –and by its conduct—could not provide a reasonable meaningful opportunity for a full and fair review of its decision regarding Humble’s claims.”

“Cigna’s method for processing Humble’s claims was simply disingenuous and arbitrary, as it was focused more on accomplishing a predetermined purpose — denying Humble’s claims,”

Cigna argued that it could assert its claim based on the plans “overpayment” provisions, according to the court documents: “Here, Cigna relies on a provision within many of its plan documents entitled, “Recovery of overpayment,” which provides, “When an overpayment has been made by Cigna, Cigna will have the right at any time to: recover that overpayment from the person to whom or on whose behalf it was made; or offset the amount of that overpayment from a future claim payment.”

However, the court rejected that argument, “However, this provision, standing alone, is insufficient to create a lien or constructive trust as it does not: mention the words “lien” or “trust”; state that any overpayment shall constitute a charge against any particular proceeds; give rise to a security interest in such proceeds; even suggest that a trust is being sought for Cigna’s and/or the plan’s benefit on any particular provider payments; or advise of the need for any particular provider to preserve, segregate or otherwise hold such funds or proceeds in trust…Therefore, the Court determines that Cigna has failed to establish that the “Recovery of Overpayment” provision contained in its plan documents creates a constructive trust or equitable lien by agreement.”

Of critical importance is the court’s analysis and decision on Cigna’s “tracing” arguments as well. According to court records, “Cigna is not entitled to equitable restitution of any alleged overpayments based on the “tracing” method, as it cannot identify any specific res separate and apart from Humble’s general assets. See Health Special Risk, 756 F.3d at 366 (reasoning that “Sereboff did not move away from any tracing requirement; it distinguished between equitable liens by agreement—which do not require tracing—and equitable liens by restitution—which do.”). As the Court explained in Knudson, the basis for petitioners’ claim is “that petitioners are contractually entitled to some funds for benefits that they conferred. The kind of restitution that petitioners seek, therefore, is not equitable…but legal—the imposition of personal liability for the benefits that they conferred upon respondents.”Knudson, 534 U.S. at 214.”

The court also weighed in on Cigna’s “fee forgiving “argument, “The plan language does not support denying Humble’s claims based on waiver, due to Humble’s alleged fee-forgiving policy, or, in Cigna’s own novel view, pursuant to a proportionate share analysis.”

Next, the court weighed in on Cigna’s arguments that Humble’s claims were not covered by the plans based on Exclusionary language in the plan documents: “Cigna has not offered evidence that any of the services billed by Humble were not covered by the plans or that they were improperly billed Therefore, Cigna’s interpretation of the “exclusionary” language as rejecting covered services, was improper and violative of the plans’ terms.” “For these reasons, the court determines that Cigna improperly applied the exclusionary language contained in the plans and, in the process, abused its discretion, especially since Cigna admittedly has never used the exclusionary language to reject covered services before and was relentless in engaging in an arbitrary manner with regard to Humble and its claims.”

“Finally, the evidence suggests that Cigna failed to explain to the plan sponsors and/or members/patients/insureds that it was applying a proportionate share analysis to Humble’s claims. Thus, Cigna breached its fiduciary duty when it strayed from the terms of the plans and interpreted its ASO Agreements with plan sponsors as conferring authority upon it that was not specifically set forth in and/or was contrary to the various plans.”

Fallen black chess king on chess board.Essentially, CIGNA was “Checkmated” on all their arguments

Ultimately, the court ruled against Cigna on every major argument and consistent with previous appellate court decisions, provides step by step guidelines on whether Cigna’s “fee forgiveness protocol” and “overpayment offsets” are legally correct,
“Therefore, the Court holds that Cigna’s claims processing procedure and appeals review process violated ERISA and concomitantly, its fiduciary duty of care and loyalty to the members/patients and the plan sponsors. Indeed, Cigna earned handsome returns as a result of its aberrant and arbitrary claims processing methodology. The evidence establishes that it was subject to a double heaping from the plan sponsors’ pockets—first, in receiving a fee for claim processing services–and second, in receiving fees based on “savings,” regardless of how garnered. In the process, however, Cigna forfeited its objectivity and violated its fiduciary duties of care and loyalty by making benefit determinations that did not consider UCR or conform to the plans’ terms in violation of ERISA.”

The court also made an interesting observation regarding Cigna’s third party vendor negotiation and Cigna’s claim that Humble misrepresented the charges: “Cigna’s assessment of Humble’s disclosure duties is fallacious, at best. The fallacy is manifested in several respects. First, Cigna has not publicly disclosed its ASO Agreements with plan providers to any of its members/patients or third-party healthcare providers because it considers such documents to be proprietary as well. To this end, Cigna cannot expect unfettered access to contracts maintained by third-party healthcare providers without permitting them unrestricted access to the same. To require otherwise would be to reward Cigna’s duplicitous conduct.”

Finally, Humble claimed that it was entitled to ERISA penalties, arguing “Cigna’s refusal to provide such plan documents placed it at a serious disadvantage–both in defending against Cigna’s claims for overpayment and in recovering on its own claims for underpayment. “

The court agreed and issued a substantial penalty on Cigna for failing to Disclosure the Plan Terms reasoning: “The Court is of the opinion that, after October 2010, Cigna became more than a third-party “claims administrator” because of the manner in which it processed Humble’s claims. While the evidence establishes that Cigna is not the “designated” or named plan administrator it, nevertheless, became the de facto plan administrator by way of its conduct and admissions under an ERISA-estoppel theory.”

The court concluded:  “Without plan documents, Humble could not know whether Cigna was even processing its claims pursuant to the terms of the plans…In these respects, Cigna interfered with and frustrated the contractual relationship between the plan sponsors and the members/patients by imposing a methodology for claim processing that was not part of any plan.

In essence, Cigna “hijacked” the plan administrator’s role and subverted it for its personal benefit. Indeed, Cigna’s unprecedented claims processing methodology and incessant related acts were extraordinary acts of bad faith.”

All Out-of-Network providers and self-insured health plans must understand this landmark case in order to protect members and beneficiaries from inappropriate medical debt and bankruptcy and to safeguard and protect self-insured health plan assets from possible conversion or abstraction.  Education and understanding of this landmark court decision will bring peace, harmony and compliance to the healthcare industry, especially when health plans are determined to contain healthcare costs and healthcare providers are dedicated to providing all patients with high quality, affordable healthcare when exercising their freedom of choice and right to seek out-of-network care.

For over 6 years, Avym Corp. has advocated for ERISA plan assets audit and embezzlement recovery education and consulting. Now with the Supreme Court’s guidance on ERISA anti-fraud protection, we are ready to assist all medical providers and self-insured plans recover billions of dollars on behalf of hard-working Americans. To find out more about Avym Corporation’s Fiduciary Overpayment Recovery Specialist (FOR) and Fiduciary Overpayment Recovery Contractor (FORC) programs click here.

United HealthCare Administered ERISA Plan Sued for Embezzlement in Medical Claims Overpayment Offset Dispute

On May 10, 2016, in the southern district of Texas Federal Court, United HealthCare administered self-insured ERISA plan, GAP Inc. and its Plan Administrators, Cynthia Radovich and Lesley Dale, were sued for alleged ERISA plan assets “self-dealing and embezzlement”, deceptively concealed through an “illegitimate recoupment scheme that financially rewards United for wrongfully recouping valid benefits”.

As we have written about before and as part of a growing trend, another self-insured health plan is being sued for alleged embezzlement and self-dealing. United HealthCare administered self-insured ERISA plan, GAP Inc. and plan administrators, Cynthia Radovich and Lesley Dale, were sued by out-of-network (OON) hospital, Redoak Hospital, LLC, for alleged ERISA plan assets “Self-dealing and embezzlement”, based on its co fiduciary, United HealthCare’s (UHC) alleged cross plan overpayment offset practices, according to court documents.

This extraordinary and multifaceted ERISA lawsuit will impact all ERISA self-insured plans, employer sponsored plan employees, and healthcare providers, resulting in uncertainties for every healthcare claim. Overpayment refund demands and cross-plan offset practices are the nation’s most insidious claim denials and may ultimately determine the fate of the entire U.S. ERISA healthcare system. 

In the healthcare provider arena the No. 1 health care claim denial in the country today is the overpayment recoupment and claims-offset.  Correspondingly, for self-insured health plans, the No. 1 hidden cost is overpayment recoupment and plan assets embezzlement.

The Court Case Info: Redoak Hospital, LLC v. Gap Inc., Gap Inc. Health and Life Insurance Plan, Cynthia Radovich, and Lesley Dale,  in the United States District Court for the Southern District of Texas, Houston Division, Case 4:16-cv-01303, Filed on 05/10/16.

According to court documents, Redoak Hospital Plaintiff filed a DOL EBSA Complaint on the alleged overpayment offset by the Defendants Plan, Gap, Inc, and the plan’s co-fiduciary, UHC, prior to filling this ERISA lawsuit, alleging:

 “This dispute arises out of Defendants’ ongoing and systematic ERISA violations consisting of an elaborate scheme to abstract, withhold, embezzle and convert self-insured Plan Assets that were approved and allegedly paid to Plaintiff for Plaintiff’s claim, to purportedly, but impermissibly, satisfy a falsely alleged ―overpayment‖ for another stranger claim, especially when the stranger is a plan beneficiary of a fully-insured plan that is insured by the Plan’s co-fiduciary, United Healthcare (hereinafter, ―United‖). Defendants knew or should have known that the Plan’s overpayment recovery provisions cannot be triggered until there is an allegation of overpayment by the Plan to the Plan Beneficiary subject to this action, and that converting the Plan Assets by a fiduciary or co-fiduciary of the Plan, in this case United, to the use of another and his own use, to ultimately pay to United’s own account is absolutely prohibited under ERISA statutes. Regardless, Defendants and United recklessly conspired, orchestrated and authorized to this kind of self-dealing and embezzlement even while being under active investigation by the Department of Labor and after repeated detailed alerts and notices from Plaintiff regarding the aforementioned.” according to the Court Documents.

In the Compliant, the Plaintiff makes the following:


The Plaintiff, as a statutory defined Claimant with a valid and unchallenged Assignment of Benefits, is entitled to ERISA rights ―to bring a civil action under section 502(a) of the Act following an adverse benefit determination on review‖ after Plaintiff has legally and administratively exhausted any and all appeal remedies.14 Therefore the Plaintiff is entitled to pursue Benefit claims: (i) to recover benefits due for already approved claims but abstracted and converted by the Defendants’ co-fiduciary, United; (ii) breach of fiduciary duty claims under 29 U.S.C. § 1132(a)(2) in violation of 18 U.S.C. § 664, 29 U.S.C. § §1104, §1105, §1106(b)(1)(d); injunctive relief to enjoin the Defendants from engaging in prohibited transaction 29 U.S.C. § 1132(a)(3); and (iii) injunctive relief to permanently remove the Defendants Cynthia Radovich and Lesley Dale from serving as fiduciaries to the Plan permanently under 29 U.S.C. § 1132(a)(3).” according to the Court Documents.

Avym Corp. announces a timely new ERISA Compliance Forum on May 17, 2016. At this new ERISA Compliance Forum, through Pittsburgh Business Group on Health (PBGH) Legislative Updates Forum, we will brainstorm, assess and demystify the potential impact of this unprecedented ERISA lawsuit for all interested parties.  PBGH is “The only employer-led, non-profit coalition of large, mid-size, and small organization representing various business segments including private and public employers, government and academia.”

According to industry estimates, the total dollar amount at issue nationwide is tremendous. Successful industry overpayment recoveries have reached into the billions of dollars nationwide over the past 5 to 7 years and involve many large carriers.  Thus recoupment through offsetting, when used as an anti-fraud initiative, has become an increasingly popular source of revenue for some insurers. While there is a need for anti-fraud initiatives in healthcare today, it is critical that every health plan comply with all applicable federal laws, ERISA and PPACA claims regulations, as well as statutory fiduciary duties. Insurers and Health Plans must comply with all applicable federal laws, ERISA and PPACA claims regulations, as well as statutory fiduciary duties before recouping one single dollar.

Over the past 6 years, Avym has closely followed decisions from the Supreme Court and federal appeals courts on ERISA prohibited self-dealing against ERISA plan TPA’s for managed care savings.

This latest lawsuit against a self-insured plan and plan administrators, for alleged plan assets embezzlement by the ERISA plan’s third party claim administrator (TPA), comes less than 6 months after a Cigna administered self-insured plan was sued in federal court for similar violations.

The Court Case info: True View Surgery Center One L.P., v.Chicago Bridge And Iron Medical Plan, Chicago Bridge And Iron Company, And Dennis Fox, Case #: 3:15-CV-00310, filed on Oct. 29, 2015, in the United States District Court For The Southern District of Texas.

In the Oct 29, 2015 lawsuit filed by OON provider True View Surgery Center, against the Cigna administered ERISA plan, the Plaintiff alleged in part:

“Specifically, in spite of the glaring conflict of interest and inherent breach of fiduciary duties, Defendants agreed to an unlawful compensation structure that financially rewards Cigna for wrongfully denying and underpaying benefits claims. Under this backdrop, together Defendants and Cigna concocted an intricate scheme to transfer and embezzle plan funds. Transfers are first concealed by processing out-of-network claims under a fabricated Preferred Provider Organization (PPO) “contractual obligation,” even though Defendants and Cigna are fully aware that no such contract exists. Then, Defendants and Cigna knowingly implemented a system to willfully and wrongfully refuse payments to the out-of-network provider under a sham “fee-forgiveness” protocol. As a result of the wrongful claims denials, the transferred plan funds are ultimately misappropriated by Cigna, who then fraudulently pays itself with the plan funds, falsely declaring the embezzled funds as compensation generated through managed care and out-of-network cost containment “savings,” when in truth the claims were never paid and the plan beneficiaries were left exposed to personal liability for their unpaid medical bills.”

On Oct 21, 2015, in a separate but similar lawsuit filed by an ERISA plan against a separate ERISA plan TPA, the Plaintiff alleged in part:

“MagnaCare represented to Plaintiffs in a written contract between the parties that providers of diagnostic laboratory and ancillary services had “accepted” a “fee schedule” which included a “management fee” for MagnaCare. In fact, the providers had never “accepted’ a fee schedule containing a “management foe” for MagnaCare. Rather, the providers had agreed to a fee schedule, which was a fraction of the amounts collected by MagnaCare from Plaintiffs. MagnaCare – without disclosure to Plaintiffs or the providers – simply misappropriated the difference between what Plaintiffs paid MagnaCare and what MagnaCare negotiated to pay the providers.” 

Court case info: UNITED TEAMSTER FUND, et al v. Magnacare Administrative Services, LLC et al, Case 1:13-CV-06062-WHP-FM, First Amended Complaint (FAC), filed on Oct. 29, 2015, original Complaint, filed on august 27, 2013,  in United States District Court Southern District Of New York.

These lawsuits come on the heels of the Oct. 20, 2014 U.S. Supreme Court decision to deny all appeals on a BCBSM’s $6.1 million fraud judgment for a self-insured ERISA plan by the U.S. Court of Appeals for the Six Circuit, upholding the decision by the District Court for the Eastern District of Michigan.

On May 14, 2014, the federal appeals court (Sixth Cir. 2014) upheld the district court’s $6.1 million decision for Hi-Lex, a self-insured ERISA plan, against BCBSM for violating ERISA in prohibited transactions and fiduciary fraud, according to court documents.

Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Michigan, (SC Case #. 14-168, 6th Cir. Case #: 13-1773, 13-1859).

These cases together with the pending ERISA cases listed below, offer insight into the healthcare industry’s prevalent overpayment offset wars:  

Peterson, D.C. et al v. UnitedHealth Group Inc. et al, U.S. District Court, U.S. District of Minnesota (DMN) CIVIL DOCKET FOR CASE #: 0:14-cv-02101-PJS-BRT,

Riverview Health Institute v. UnitedHealth Group Inc. et al, U.S. District Court, U.S. District of Minnesota (DMN), CIVIL DOCKET FOR CASE #: 0:15-cv-03064-PJS-BRT

These new ERISA embezzlement cases are part of a growing trend consistent with the court’s Hi-Lex decisions. This lawsuit in particular should serve as a warning and wake up call for all Plan Administrators to continually monitor their TPAs in accordance with the Plan Administrator’s statutory fiduciary duties and to discharge its duties with respect to a plan solely in the interest of the participants for the exclusive purpose of providing benefits to them.

For over 6 years, Avym Corp. has advocated for ERISA plan assets audit and embezzlement recovery education and consulting. With new Supreme Court guidance on ERISA anti-fraud protection, we are ready to assist all self-insured plans recover billions of dollars of self-insured plan assets, on behalf of hard-working Americans. To find out more about Avym Corporation’s Fiduciary Overpayment Recovery Specialist (FOR) and Fiduciary Overpayment Recovery Contractor (FORC) programs click here.

Inside Corporate America’s Campaign to Ditch Workers’ Comp

One Texas lawyer is helping companies opt out of workers’ compensation and write their own rules. What does it mean for injured workers?

STANDING BEFORE A GIANT MAP in his Dallas office, Bill Minick doesn’t seem like anyone’s idea of a bomb thrower. But backed by some of the biggest names in corporate America, this mild-mannered son of an evangelist is plotting a revolution in how companies take care of injured workers. His idea: Let them opt out of state workers’ compensation laws — and write their own rules.

ProPublica and NPR obtained the injury benefit plansof nearly 120 companies who have opted out in Texas or Oklahoma — many of them written by Minick’s firm — to conduct the first independent analysis of how these plans compare to state workers’ comp. The investigation found the plans almost universally have lower benefits, more restrictions and virtually no independent oversight.

Already in Texas, plans written by Minick’s firm allow for a hodgepodge of provisions that are far different from workers’ comp. They’re whyMcDonald’s doesn’t cover carpal tunnel syndrome and why Brookdale Senior Living, the nation’s largest chain of assisted living facilities, doesn’t cover most bacterial infections. Why Taco Bell can accompany injured workers to doctors’ appointments and Searscan deny benefits if workers don’t report injuries by the end of their shifts.

And it’s Minick’s handiwork that allows Costco to pay only $15,000 to workers who lose a finger while its rival Walmart pays $25,000.

Unlike traditional workers’ comp, which guarantees lifetime medical care, the Texas plans cut off treatment after about two years. They don’t pay compensation for most permanent disabilities and strictly limit payouts for deaths and catastrophic injuries.

The list of what the plans don’t cover runs for pages. They typically won’t pay for wheelchair vans, exposure to asbestos, silica dust or mold, assaults unless the employee is defending “an employer’s business or property,” chiropractors or any more than 75 home health care visits. Costco won’t cover external hearing aids costing more than $600. The cheapest external hearing aid Costco sells? $900.

The plans in both Texas and Oklahoma give employers almost complete control over the medical and legal process after workers get injured. Employers pick the doctors and can have workers examined — and reexamined — as often as they want. And they can settle claims at any time. Workers must accept whatever is offered or lose all benefits. If they wish to appeal, they can — to a committee set up by their employers.

Dallas attorney Bill Minick is leading a national effort, backed by some of the biggest names in corporate America, to let companies “opt out” of workers’ comp and create their own injury benefit plans. (Dylan Hollingsworth for ProPublica)

In many cases, ProPublica and NPR found, the medical director charged with picking doctors and ultimately reviewing whether injuries are work-related is Minick’s wife, Dr. Melissa Tonn, an occupational medicine specialist who often serves as an expert for employers and insurance companies.

Workers’ comp was founded on the premise that employers owed a duty to injured workers and their families. And laws in every state require them to pay workers’ medical bills and some of their lost wages until they recover — or for life if they can’t.

Earlier this year, a ProPublica and NPR investigation detailed how states have chipped away at these guarantees. A series of new laws has cut benefits, given employers and insurers more control over medical care, and made it more difficult for workers to qualify for coverage. But other than Texas and Oklahoma, no state has allowed companies to simply opt out.

Minick, 55, markets his vision as a cure for the endless cycle of cuts.

“It’s not about reducing benefits,” he said. “We can objectively show you that we have saved our clients over a billion dollars against Texas workers’ comp over the past decade. When you’re saving that kind of money, you don’t have to get hung up on squeezing the employee.”

Yet Minick’s push has united an unlikely set of allies — unions, trial lawyers and insurance companies. They say his idea isn’t progress, but a return to the Industrial Age before workers’ comp, when workers and their families had to sue their employers or bear the costs of on-the-job injuries themselves.

“That’s the system we had in place 100 years ago,” said Trey Gillespie, senior workers’ comp director for the Property Casualty Insurers Association of America. “This is not an innovative concept.”

Mike Pinckard, a Fort Worth truck driver for 31 years, remembered when his employer, Martin-Brower, McDonald’s largest distributor, announced last November that it would be switching to an opt-out plan.

“They told us this was going to be the best thing, that this was going to be better than workers’ comp,” he said.

Two months later, Pinckard said, he was pulling a cart loaded with frozen French fries when he slipped on some ice in his trailer and suffered a hernia. He had previously had two hernias on the job that were covered by workers’ comp and figured this time would be no different.

But the denial letter said the plan for Reyes Holdings, which owns Martin-Brower, only covers two types of hernias — not the kind Pinckard suffered.

“The only way it was covered was if it was directly under my belly button,” he said. “Mine was slightly above my belly button.”

In this instance, as in others ProPublica and NPR found, the costs of the injury were shifted to the employee, group health or government programs.

Pinckard, 58, said he’s spent over $10,000 in deductibles and copays after getting the hernia covered by his health plan.

“I gave my body and soul to the company, and they were doing the same back until last year,” he said. “It’s just an easy way for the company to get out of when you get hurt. It’s all it is.”

The Texas Way

Texas has always allowed employers to opt out of workers’ comp. But until insurance premiums started rising rapidly in the late 1980s, most companies considered it foolish because carrying workers’ comp protected them from lawsuits.

Minick was a young lawyer for one of Dallas’ oldest firms in 1989, when some of the firm’s business clients, gambling that the cost of any lawsuits would be cheaper, began dropping workers’ comp. The senior partners assigned Minick and several colleagues to come up with an alternative.

They found it in the Employee Retirement Income Security Act, a federal law passed in the early 1970s to protect workers as employers were shedding their pensions.

ERISA had been applied similarly to other worker benefits, such as health plans and disability policies. Minick and his colleagues decided it could provide a legal framework for plans covering on-the-job injuries.

Texas courts agreed, even though, compared to workers’ comp, the ERISA-based plans gave employers critical advantages. Under ERISA, appeals are heard in federal court, rather than state workers’ comp courts. And in general, judges could rule only on whether a denial was reasonable — not whether it was fair. This gave employers far greater control.

As more and more companies adopted plans, in 1994 Minick struck out on his own. His consulting firm, PartnerSource, soon became a one-stop shop for companies looking to drop workers’ comp. For a flat fee, PartnerSource hooks companies up with insurance carriers, claim administrators, medical networks and defense lawyers. It also serves as the first line of defense, reviewing claims and advising companies how to avoid lawsuits.

Already, such plans cover nearly 1.5 million workers in Texas and Oklahoma — more than are covered under 21 states’ workers’ comp systems. PartnerSource writes about 50 percent of the opt-out plans in Texas and nearly 90 percent in Oklahoma, alone covering more workers than 14 state programs.

Bill Minick’s company PartnerSource writes about 50 percent of the opt-out plans in Texas and nearly 90 percent in Oklahoma. “We’re talking about reengineering one of the pillars of social justice that has not seen significant innovation in 100 years,” he said. (Dylan Hollingsworth for ProPublica)

PartnerSource’s offices overlook a posh part of Dallas. The firm’s walls are a monument to Minick’s success, decorated with framed thank you letters from companies who’ve hired him. Inside his office, the mementos are different, reflecting his values. There are pictures of Boy Scouts trips he’s led and letters from charities he’s supported. The radiant plumage of a pheasant he shot is stuffed and mounted next to the doorway.

Minick sells his idea earnestly, speaking with a matter-of-fact certainty that disarms skeptics and defies arguments to the contrary.

With practiced ease, he rattled off the common gripes about workers’ comp: Companies dig in their heels at the first sign of a claim and turn workers into adversaries. Insurers don’t communicate about benefits, causing workers to hire lawyers. Doctors are often picked based on discounts rather than quality. And the system, he said, has created a huge bureaucracy in the name of protecting workers’ rights.

As a result, injured workers no longer have any accountability, he said. They can report claims late, skip doctors’ appointments and appeal every perceived wrong to workers’ comp court rather than trying to work it out with their employers.

Under opt-out plans, Minick said, companies must be engaged in the process, educating new workers about their benefit plans and managing their medical care if they get hurt. This control allows employers to better monitor workers’ progress and ensure they return to work as soon as possible, he said.

“This is not the Industrial Age,” he said. “Workers’ compensation systems grew up at a time when employers did not care about their employees. If one got hurt, you cast him aside and brought in the next immigrant to fill that job. Now companies are competing to be a best place to work.”

An analysis by Minick’s firm shows that opt-out plans save companies between 40 and 90 percent because they have lower costs per claim, get injured employees back to work faster and handle fewer disputes. That means greater employee satisfaction, Minick said.

If the analysis is correct, Minick’s plans would herald an important answer to the nation’s eroding workers’ comp systems.

But the only data available to assess his claims comes from his firm. More than 30 companies contacted by ProPublica either wouldn’t discuss their programs in detail or didn’t return calls.

Steve Schaal, associate general counsel of Tyson Foods, said the company opted out in Texas to give it more control over which doctors workers can see and “to try to get our injured employees the best possible medical care.” Schaal said the company hasn’t taken a position on expanding opt out to other states. Tyson wouldn’t provide an updated copy of its plan.

Employers aren’t required to submit any information about their plans with the state, since Texas doesn’t regulate opt-out plans. For several legislative sessions, employers have fought bills that would have required them to share their data.

PartnerSource’s analysis comes with some significant, unstated caveats: Employers with opt-out plans tend to work in safer industries like retail, which typically has less severe, less expensive claims. The plans also don’t offer entire categories of benefits that state laws require and give employers more options to exclude complicated claims.

For example, workers’ comp gives employees 30 days to report an injury in Texas. Under opt-out plans, employees typically must report by the end of the shift or in 24 hours or lose all benefits.

Costco, which saw its costs drop 53 percent after opting out, acknowledged in a 2012industry report that it denied some employees with legitimate work injuries because they reported late. Those workers, the report said, used their denial letters to get treatment under the company health plan.

Minick and other proponents say while plans can make exceptions, such rules ensure workers get medical care as soon as possible, speeding their recovery.

But public health experts say workers might not report minor injuries right away for valid reasons: They fear looking like troublemakers or worry about child care if they need to see a doctor or stay late filling out forms.

Or, like Rebecca Amador, they simply might not realize an injury’s severity. Amador, a nursing assistant, was helping a patient transfer to a wheelchair at a Stephenville, Texas, nursing home in November 2013, when the chair’s brake unlocked, causing her to support the patient’s weight.

“I felt like a pinch in my back and I thought well, it’s been a long day, I’m tired,” said Amador, then 51. “So I paid no mind to it. I figured it would go away. Usually it goes away.”

She took a hot shower and went to bed. By the next morning, she remembers being in so much pain she could hardly breathe.

As soon as she got to work, Amador told her supervisor, who sent her to the hospital. Only 19 hours had passed. But her employer, Fundamental Long Term Care, rejected her claim, saying she had failed to report it by the end of her shift.

The company’s decision left Amador in a Catch-22. Even though her injury happened at work, the company’s Texas plan wouldn’t cover it. But because it was work-related, neither would her health insurance or short-term disability plan. Had she worked for Fundamental in one of the other states where it operates, her injury would have been covered under workers’ comp.

Amador sought help at a publicly funded health clinic, where her doctor recommended a specialist. But she couldn’t afford one. She tried light-duty work until her doctor warned she could do further damage.

Since then, Amador said, she’s been living off her son’s Social Security benefits and borrowing from a lawsuit settlement fund set up for him after his father died of mesothelioma. Her daughters help pay for medications, and she’s applying for Social Security disability.

Sitting in her trailer nearly two years after the incident, she said her back burns like she’s in a fire, and she can’t even carry a two-liter soda bottle.

“I would probably still be working there” if Fundamental had workers’ comp, Amador said. “Maybe I could have gotten better, maybe I could have gotten my therapy done, and I wouldn’t be in the situation I’m in.”

Reading the Fine Print

The fine print of opt-out plans contains dozens of opportunities for companies to deny benefits. Employers can terminate workers’ benefits for being late to doctors’ appointments, failing to check in with the company or even consulting their personal doctors.

One truck driver for a food and beer distributor complained in court documents that his direct supervisor accompanied him to medical appointments for his hernia — a requirement under the plan.

Some plans have restrictions that read like the terms of criminal probation. While they’re healing, injured workers at W. Silver, a steel products manufacturer in El Paso, are prohibited from leaving the area, even temporarily, or engaging in any “pleasure” that may delay recovery.

Sometimes the plans of PartnerSource and others abandon fundamental principles of workers’ comp.

For nearly 40 years, every state has covered occupational diseases and repetitive stress injuries, recognizing medical research that some conditions develop over time. But in Texas, a number of companies, including McDonald’s and the United Regional Health Care System, don’t cover cumulative trauma such as carpal tunnel. U.S. Foods, the country’s second largest food distributor, also doesn’t cover any sickness or disease “regardless of how contracted,” potentially allowing it to dodge work-related conditions such as heat stroke, chemical exposures or even cancer.

Since its beginning, workers’ comp has paid benefits regardless of whether the employer or worker was at fault. But several companies, including Home Depot, Pilot Travel Centers and McDonald’s, exclude injuries caused by safety violations or the failure to obtain assistance with a particular task.

Under workers’ comp, employees can’t be fired in retaliation for a claim. But employers that opted out argued that their workers weren’t entitled to that protection, and in 1998 the Texas Supreme Court agreed.

Gillespie, of the insurance association, said such provisions blatantly shift costs to taxpayers, in the form of Social Security disability, Medicare and Medicaid. Some plans state it explicitly: The plan for Russell Stover Candies said its benefits are secondary to all other sources of benefits. Home Depot requires its employees to “take whatever benefits are available,” including enrolling in Social Security disability.

And as Joe Becker, a truck driver in Abilene, Texas, discovered, workers no longer have the promise of lifetime medical care for on-the-job injuries.

After truck driver Joe Becker herniated discs in his back on the job, his employer, Dent Truck Lines, paid for surgery. But when he needed a second operation to remove screws causing him pain, Dent refused to pay, saying it was past the two-year time limit. Becker, who lives in Abilene, Texas, now lives on Social Security disability. (Dylan Hollingsworth for ProPublica)

Becker said he herniated several discs in his lower back in June 2012 when he hopped off his flatbed trailer after adjusting a load. His employer, Dent Truck Lines, paid for surgery that put rods and screws in his back. The surgery helped, but the screws dig into his back, occasionally hitting a nerve.

The doctor recommended surgery to remove the screws in 2014, medical records show. But because Dent’s benefit plan provides only two years of medical care, Becker was out of luck.

His boss, Cliff Dent, said he’d go out of business if he had to carry workers’ comp and doesn’t think Becker is “deserving.”

“The whole deal is just kind of silly, like most of these deals are — people looking for free money,” he said.

On the edge of being homeless, Becker, 44, applied and qualified for Social Security disability. He struggles to pay bills. For several weeks this spring, he said, he subsisted on a half a can of ravioli or SpaghettiOs a day.

“Sometimes I have to make a choice,” he said, sitting uncomfortably on his worn sofa. “Do I buy my pain meds or whatever other medicine that I need or do I buy groceries?”

So, Sue Me — Or, Rather, Arbitrate

Under the bargain of workers’ comp, employees gave up their right to sue their employers in return for guaranteed care and wages. The tradeoff in Texas is that injured workers covered by opt-out plans can sue their employers for negligence, potentially winning millions of dollars.

This risk is why many companies cap medical benefits at two years, Minick said. When injuries are severe enough to require lengthy medical care, many companies settle with workers, giving them a lump sum to cover future medical expenses and permanent disabilities.

On a more basic level, the threat of lawsuits, Minick and other proponents assert, creates a healthy incentive for companies to keep their workplaces safe.

But over the years, large companies have found a series of ways to reduce the risk of lawsuits.

Under workers’ comp, employees denied benefits can typically get hearings before administrative law judges. They can appeal further to a workers’ comp commission and even up to the state supreme court.

Under opt-out plans, workers’ only avenue of appeal is a committee set up by their employers for what is largely a paperwork review. Lowe’s hardware and Albertsonssupermarkets have contracted out their appeals to a Pennsylvania company called ELAP Services, which describes its mission as helping employers “control employee health care costs.”

ELAP’s president said the goal is to provide an objective review of the claim outside of the company’s basic business model of reducing medical bills.

But Gillespie said, “It’s potentially still somebody who either has a vested interest or is employed by somebody who has a vested interest.”

If the claim is still denied, workers can file an ERISA lawsuit in federal court. But the judge is typically limited to deciding if the company followed its plan or acted arbitrarily and capriciously — not whether the company was right.

A number of rulings by Texas courts have added to employers’ leverage, creating a higher bar for workers to prove their employers were negligent for common slip-and-fall and lifting injuries.

Many companies have further limited the risk by requiring employees to sign arbitration agreements. Instead of going before a jury, workers’ disputes are handled confidentially, out of court, before an arbitrator, typically a former judge or defense lawyer.

A 2010 survey of large employers with opt-out plans by a Stanford law professor found that 85 percent used arbitration agreements. Arbitration appeared to save companies money. Only a quarter of those companies had paid a claim over $500,000. And only 10 percent had paid more than one claim over $500,000 — compared with 38 percent of companies that didn’t use arbitration.

More strikingly, 81 percent of employers reported having no or hardly any “trouble with litigation.”

For many years, several companies that opted out required new employees to sign pre-injury waivers saying they wouldn’t sue the company if they got hurt. Texas banned that practice in 2001.

But many large meat and poultry companies, such as Tyson Foods, Cargill and Pilgrim’s Pride, continued to use post-injury waivers. After reports of workers signing waivers at hospitals — sometimes while still bleeding — the legislature tried to ban that too.

The debate over waivers presented a turning point for Minick to demonstrate his political savvy.

The largest group for employers that opted out, the Texas Association of Responsible Nonsubscribers, decided to support the ban, considering such practices abusive.

That rankled several members of the state’s business chamber, who had opted out and wanted to preserve their ability to avoid lawsuits.

With Minick’s help, they drafted legislation in 2005 that allowed waivers so long as there was a cooling off period of 10 days after the injury. Following the success of that measure, Minick helped chamber members form a new group for employers with opt-out plans. They called it the Texas Alliance of Nonsubscribers and hired the chamber’s longtime lobbyist, Richard Evans, who had been deputy legislative affairs director for George W. Bush when he was governor.

For the first time, Minick became his clients’ political partner, guiding their ambitions to shape legislation and the future of workplace injury benefits.

Recognizing the growth potential, the global insurance brokerage Arthur J. Gallagher & Co. acquired PartnerSource in 2009 in a deal that left Minick in charge. The financial terms weren’t disclosed, but documents filed with securities regulators in 2012 reveal that Minick and his partners, which included two charities, received $7 million in Gallagher shares as a bonus payment.

Minick would soon begin justifying the investment. Spurred by Texas clients eager to opt out in other states, PartnerSource started looking at opportunities elsewhere.

Their first target was due north: Oklahoma.

Sweepin’ Down the Plain

Year after year, Oklahoma’s legislature had tried to overhaul its workers’ comp system to lower insurance rates, which were higher than those in surrounding states. But the changes only brought modest drops.

In 2011, Minick brought a group of his frustrated clients together in the Oklahoma Injury Benefit Coalition, led by Hobby Lobby and the Unit Corp. drilling company. The group recruited Steve Edwards, the former state Republican Party chairman, as its lobbyist.

“Our claims process in Texas was a lot quicker and resolved a lot faster than anything we ever had in Oklahoma,” said Mark Schell, Unit’s senior vice president and general counsel. “We’ve had claims in other states including Oklahoma that are two to three years old because we can’t get them resolved. You have no control over them and they just drag on and on.” (Unit recently opted back in in Texas after a spate of serious injuries during the oil boom increased their legal costs. But Schell said he still believes in opt out.)

The group’s first effort to pass an opt-out bill was narrowly defeated in 2012. But they returned in 2013 with a new partner, the State Chamber of Oklahoma, and a more ambitious plan — not only to pass an opt-out option, but to rewrite the entire Oklahoma workers’ comp law.

The bill differed from Texas’ version in two ways. Employers would have to provide a minimum level of benefits matching state law. And, unlike Texas, employers would get to keep their immunity from lawsuits.

A chamber lobbyist and a Unit lawyer wrote the bill, incorporating language from various interests, including Minick. “I was one of the primary drafters,” Minick said.

“Is there a potential conflict of interest between our desire to see workers’ comp options adopted in other states and our firm’s revenue model? Yes,” he said. “But the conflicts of interest are only a problem when they’re not disclosed.”

One thing not disclosed: the Oklahoma bill copied language nearly verbatim from PartnerSource plans — making the definition of “accident” more restrictive than it was in traditional workers’ comp.

Walmart’s Texas plan, which Minick wrote the year before, defines “accident” as “an event involving factors external to the participant which was unforeseen, unplanned and unexpected,” that “occurred at a specifically identifiable time and place,” and “occurred by chance or from unknown causes.”

The Oklahoma bill defined it as “an event involving factors external to the employee that was unintended, unanticipated, unforeseen, unplanned and unexpected,” that “occurred at a specifically identifiable time and place,” and “occurred by chance or from unknown causes.”

Gillespie, of the insurance association, said the wording could be used to deny almost any claim because nearly every injury has a cause.

Since the law took effect last year, 59 companies, covering an estimated 22,500 workers, have opted out, ranging from small home health care agencies to national brands likeMacy’s and Swift Transportation. Fifty-three have plans that were written by PartnerSource.

On paper, the benefits look similar to — or even better than — state workers’ comp. Both replace at least 70 percent of workers’ wages. Some plans pay 90 or even 100 percent of wages.

But there’s one big difference. Benefits under opt-out plans are subject to income and payroll taxes; under workers’ comp, they’re not. As a result, 80 percent of the plans actually provide lower benefits, ProPublica and NPR’s analysis found.

Minick said that the analysis missed a key point: Because the plans that offer benefits above the minimum are larger employers, the majority of workers under opt-out plans receive equal or higher benefits. In addition, he said, those companies start benefits on the first day of the injury instead of waiting three days, like workers’ comp does.

And their plans don’t have wage limits. As part of the 2013 law, the Oklahoma legislature capped benefit payments under workers’ comp at $561 a week. In March, ProPublica and NPR profiled an injured Goodyear Tire worker whose family was evicted from their home when his income dropped so much they could no longer afford the rent.

But the Oklahoma plans incorporate many of the rigid rules from Texas. As opt-out got underway, injured workers, lawyers and even the insurance commissioner quickly learned what that meant.

Learning the Hard Way

Rachel Jenkins, 32, was denied further treatment after a doctor hired by her company said she had a shoulder condition caused by aging, not her work accident. “What’s age got to do with anything?” she asked. (Nick Oxford for ProPublica)

Last March, Rachel Jenkins was working as a job coach and personal care aide for ResCare, the nation’s largest private provider of services for the physically and mentally disabled, when a man attacked her client at an Oklahoma City facility.

While trying to pull the assailant off her client, she was thrown to the ground, injuring her shoulder. ResCare told her to bring her client home, and after finishing her shift, Jenkins went to the emergency room. The doctor prescribed pain medication, which knocked her out, she said.

The next day, ResCare sent Jenkins to its doctor, where she called the company’s claims hotline. The adjuster told her the injury wouldn’t be covered because she called 27 hours after it happened — instead of the required 24.

“They told me that I should have called the next morning at 10 o’clock. But I was asleep. I was on meds,” said Jenkins, a single mother with four kids, ages 1 through 12.

Jenkins’ supervisor, who witnessed the incident, complained to the corporate office, and a week later, ResCare reversed its decision.

To ResCare and Minick, who wrote the company’s plan, Jenkins’ case illustrates the discretion that companies have, in this case to accept claims even when they’re not reported on time.

“The system worked and took care of her and fully paid her benefits,” Minick said.

Not so, said Jenkins. Her shoulder remains in constant pain, she said, preventing her from returning to work fulltime.

In May, the company sent her for an MRI of her shoulder. Reading it, the doctor ResCare sent her to — an ear-nose-and-throat doctor at an urgent care clinic — noted inflammation and recommended that she see an orthopedic specialist, medical records show.

But ResCare’s adjuster wouldn’t authorize it. Instead, the company scheduled an independent medical exam with a doctor flown in from Arizona to review her case.

That doctor said the MRI didn’t reveal any evidence of an acute injury that could be causing the pain and instead showed a wearing of her rotator cuff caused by aging.

Jenkins is 32.

Rachel Jenkins praises her daughter’s good grades at their home in Boley, Oklahoma. Jenkins, who works with disabled adults, was initially denied care for an on-the-job injury because she reported it in 27 hours — instead of the required 24. (Nick Oxford for ProPublica)

“What’s age got to do with anything?” she asked. Until the incident, “I didn’t have no problems with my shoulder at work.”

Workers’ lawyers in Oklahoma also noticed that many companies, including ResCare, were using a Dallas physician, Dr. Melissa Tonn, as the medical director responsible for managing workers’ care.

Tonn, they learned, not only once shared an office with PartnerSource, she was Minick’s wife.

The situation had been an open secret in Texas, where lawyers grumbled privately for years. “Melissa Tonn has a vested interest in PartnerSource making more money,” said James Grantham, a Houston lawyer who has handled about 700 opt-out cases in the last few years.

As medical care is often the most expensive part of a claim, Tonn can greatly influence how much claims cost. And that ultimately affects how much money PartnerSource saves employers, allowing it to keep clients happy and recruit more business.

“So if Melissa Tonn says you don’t need back surgery, PartnerSource will profit from that,” Grantham said. “It’s absolutely rigged.”

Tonn insisted her assessments were based on workers’ conditions and were unaffected by the interests of employers or PartnerSource.

“The decisions I make are not based on how much money is going to be saved,” Tonn said.

Minick said his wife stood on her own credentials as the former director of two hospitals’ occupational health programs and as past president of both the Texas College of Occupational and Environmental Medicine and a national organization of physicians who evaluate disabilities.

The couple were already independently successful, Minick said, when they met at a workers’ comp opt-out conference. As their businesses grew and they started having clients in common, they took steps to keep them separate, he said. Tonn moved to an office one floor up in the same building. And Minick discloses the relationship in client contracts.

“They can visit with whatever vendor they want to,” Minick said. And Tonn is “one of them that they should consider.”

While opt-out plans have to be submitted to Oklahoma’s insurance commissioner, there is little review.

ProPublica and NPR obtained more than 2,000 pages of internal emails between the Oklahoma Insurance Department and companies that wanted to opt out.

The emails regarding a chain of long-term care facilities are typical. An insurance department lawyer notes that a paragraph is missing a period, causing a run-on sentence. But he fails to point out that the paragraph promises “no interference” with the doctor-patient relationship while at the same time warning workers that seeing their own doctor “may result in a complete denial” of benefits.

Gordon Amini, the department’s general counsel, said the insurance commissioner doesn’t have the power to question such provisions and can’t reject plans under the law.

“We are supposed to confirm; it never uses the word ‘approve,’ ” he said.

The law also states that settlements must be voluntary. But our review of Oklahoma plans written by PartnerSource showed that nearly every one contains a section titled “Mandatory Final Compromise and Settlement,” which instructs workers that “no further benefits will be payable” if they refuse the company’s offer.

After being made aware of the inconsistency by NPR and ProPublica, Amini said the insurance department “immediately took action” and contacted PartnerSource to revise it.

“The reality is, under the current scheme there is no regulation of these plans,” said Bob Burke, a longtime Oklahoma workers’ comp attorney. He said it’s setting a dangerous precedent. “We can’t as a society say, ‘Okay, employers, write whatever plan you want to write, provide what benefits or lack of benefits you want to, set up whatever scheme you want to award those benefits, and by the way, no one is looking over your shoulder.’ ”

‘Where Else Can We Do It?’

Studying the map in PartnerSource’s office, Minick surveyed the country like a commander strategizing the next offensive.

“Tennessee,” he said. “There’s more dots there than anywhere else. You get all these Tennessee companies that know what it’s like to have better care, lower costs. So then they start saying, ‘Where else can we do it?’ ”

In 2012, Tennessee seemed primed to allow employers to opt out of workers’ comp. For the first time in at least a century, Republicans controlled both legislative chambers and the governor’s office. Employers were already pushing for major changes to the workers’ comp system. And the new governor’s family owned Pilot Travel Centers, which had opted out in Texas.

But after a series of public meetings, the state workers’ comp division hired consultants who produced a scathing report, raising concerns that letting companies opt out would shift costs to government programs.

“Giving firms this option would have potentially significant consequences on some injured workers, other Tennessee employers, and the state taxpayers generally,” the consultants wrote.

The legislature passed an overhaul of workers’ comp in 2013, but it contained nothing about opting out.

Despite the defeat, Minick started pulling together employers and others. In December 2013, they formed a group called the Association for Responsible Alternatives to Workers’ Compensation.

K. Max Koonce, Walmart’s senior director of risk management became chairman. Nordstrom’s vice president of risk management was appointed president, Lowe’s vice president of risk management was vice president, and the chief executive of the Combined Group insurance company was treasurer. Minick became secretary.

The rest of the board was made up of top managers at Kohl’s, J.B. Hunt, Big Lots, Sysco, Safeway, Brookdale Senior Living and others in the insurance industry. Joined by Macy’s, Whole Foods and Brinker International (owner of Chili’s Grill & Bar), they paid as much as $25,000 each to finance ARAWC’s efforts, according to association webpages.

The group planned to go state by state to pass opt-out legislation, starting with the South.

The association’s address was the lobbying firm of Richard Evans, whom Minick had worked with at the Texas alliance. In addition, the group hired Edwards, who ran the successful Oklahoma effort. In each new state, they would team up with connected local lobbyists to navigate the politics.

In February 2015, a bill pushed by ARAWC was introduced in the Tennessee legislature that contained a mix of the Texas and Oklahoma laws. Like Oklahoma, employers had to provide a minimum level of benefits — up to three years of medical care, or $500,000. That was less than the benefits provided by the state’s workers’ comp law, which set no limits on medical care.

But, like Texas, catastrophically injured workers could sue for higher benefits. Their employers would face limited damages and have additional legal defenses that Texas employers don’t.

The bill stalled in April, after it failed to be endorsed by the state’s workers’ comp advisory council. But supporters plan to revive it in the next legislative session.

With the Tennessee push underway, ARAWC settled on its next target: South Carolina.

As lobbyists, it hired former political directors of the national and state GOP.

A bill was introduced in the state assembly in May, with the goal of generating discussion before the legislature reconvenes next year.

Rep. David Hiott, a small business owner frustrated with workers’ comp, said he sponsored it after receiving a synopsis of the bill from another legislator and ARAWC’s lobbyists. “They told me they would tell me more about it this fall,” he said.

The bill represented a new gambit for ARAWC and Minick.

The Tennessee campaign “drew so much criticism from employee advocates saying that we were trying to reduce benefits,” Minick said, “that we said fine, just to prove that’s not the point, the South Carolina bill was introduced to say we’ll pay benefits higher than workers’ comp.”

While workers’ comp replaces 66 percent of wages, South Carolina employers that opt out would have to pay at least 75 percent, albeit taxable. They would not be allowed to cap medical benefits and would have to match the state maximum of 500 weeks of death benefits. Burial benefits are three times as high.

“The intent of this movement is to pay better benefits,” Minick said.

But in Texas, where the movement began, people like Krystle Meloy are hard-pressed to say how it has made things better for injured workers and their families.

Meloy was 23 with a 4-month-old daughter when her husband, Billy Walker, fell 180 feet from a communications tower in 2012.

Under the company’s opt-out plan, she and her daughter, Kaylee, were entitled to $250,000 for his death. She tried to sue after federal investigators found the company had violated safety laws. But the company filed for bankruptcy a few weeks later.

Under workers’ comp, she would have received 75 percent of her husband’s wages until her daughter finished college and until death if she never remarried. Based on his wages in previous years, that would have guaranteed Meloy and her daughter at least as much as the opt-out plan and likely far more — potentially $1 million or more, depending on the circumstances.

On a recent day, Kaylee, now 3, climbed up on a cushy chair and flipped through a small photo album containing pictures of the day she was born.

“See, look, mama’s going to doctor,” she said in a chipmunk voice. Turning to a picture of her father cradling her in his arms, she giggled. “Look at him. Daddy Billy.”

Meloy receives Social Security survivor benefits and is applying for food stamps. She’d like to get a job, she said, but can’t afford daycare.

“I have to go through this for the rest of my life; I’m having to teach our daughter who her daddy is through a picture,” she said. “If other states are considering not having workers’ comp, I mean, look what happened to me.”

Hearing her story, Minick, who climbed radio towers when he was in college, paused reflectively.

“This is a difficult situation, it sounds like,” he said. “There’s no occupational injury system that we’ve found yet that will provide perfect results in a 100 percent of cases.”

What’s more important, he said, was which system would provide the best results in most cases. In an earlier interview, Minick described what drove him to launch his crusade to remake America’s system for caring for injured workers.

“All you can do is pray that the Lord gives you a calling where you can really do good for society,” he said. “That’s what gets me up every day, knowing that I’m getting better employee satisfaction and generating economic development. That’s as good as it gets.”

Update, October 15, 2015: After this article published, the Association for Responsible Alternatives to Workers’ Compensation released this statement.

NPR intern Courtney Mabeus contributed to this report. Produced by Emily Martinez.

This story was co-published with NPR.

author photoMichael Grabell covers economic and labor issues for ProPublica.

author photoHoward Berkes is a correspondent for the NPR Investigations Unit who has reported on coal mine and workplace safety.

To read article in its original form click HERE

Health Consumer Advocates, beyond ACA enrollment

Posted March 21, 2014 by Kevin Knauss

As the ACA open enrollment winds down, attention now turns to helping individuals and families in the new health plans actually get health care from their insurance. While there have been significant challenges just getting people signed up for health insurance, there will surely be additional hurdles as households now try to use the new health plans. For most people, they have no advocate to help them maneuver through the maze set up by health care professionals and insurance plans. Who will be the health insurance advocates for these families?

Health insurance gets more complicated

Regardless of the improvements to the new health plans brought about by the ACA, health insurance is still complicated. As with any insurance policy, many of us quickly forget the details of how the plan works, what is covered and what we have to pay beyond the monthly premium. The nitty-gritty details of deductibles, copayments, coinsurance, networks, and drug formularies become a fog when a family is faced with an accident or illness. If a household enrolled directly online or with the help of Covered California staff or Certified Enrollment Counselor, they will have no one to lean on to sort out the issues of their specific health insurance plan.

Advocates help with insurance problems

It isn’t a complete certainty that delegating a certified insurance agent will provide you with the advocate that you need. But here is the singular difference between a Certified Enrollment Counselor and a Certified Insurance Agent: Agents are appointed by the health plans to represent their plans AND the agent’s clients. Outside of the member of the health plan, only the designated agent can talk to the health plan to handle issues such as billing, charges, appeals, switching plans, adding a dependent, and grievances. To a limited extent, the insurance companies rely on the arduous process of contesting a charge because they understand most people will just give up and never fight.

Agents can be advocates

Unfortunately, not all health plans have made it easy for Certified Insurance Agents to become the broker of record for their members. This was a topic of my recent letter to Peter Lee, Executive Director of Covered California (see entire letter below). In short, without a designated agent or advocate most families will have no one to help them through the insurance maze when they have problem. It is deplorable that health insurance has become so complicated and convoluted that individuals and families need an advocate to fight for health care. But this is the situation we are in.

ACA complicated process

As a nation we need to move to either a simpler health insurance model with more transparency or we need to empower people to assign a health insurance advocate to help them navigate through the system when they are in rough waters. We have already experienced major issues with the open enrollment process where the carriers never received the application from the exchange, they were enrolled in the wrong plan or small application errors resulted in denial of the Advance Premium Tax Credit.

Denial and reimbursement of health care expenses

There are lots of organizations that will advocate for people in the Medi-Cal system but relatively few for people with private health insurance unless they are filing a lawsuit or have a big claim dispute. One company, AVYM, works with doctors and health plan members to get reimbursed for health care that should have been covered. With proper health insurance advocacy we can prevent denied and delayed care by working with the health plan, member and physician.

Fighting against profits before people

I can’t say that I’m overly optimistic that the current system will make room for health insurance advocates. Part of the issue with being appointed with a health plan is to acquire a small commission to compensate for such advocacy work. But the whole health care system is getting squeezed as providers and insurers look for ways to save money and keep premiums low. Ultimately, it is the plan members that suffer from cost cutting as they find themselves without proper representation when fighting the health care machine that puts profits before people.

Letter to Peter Lee of Covered California

March 21, 2014

Peter Lee
Executive Director, Covered California
560 J Street, Suite 270
Sacramento, Ca 95814

Dear Mr. Lee,

As a Certified Insurance Agent for Covered California I have not been able to live up to the agent agreement that I represent all the Qualified Health Plans fairly. My inability to represent many of the health plans beyond just the Covered California summary of benefits and quoted monthly premium results from several of the carriers failing to have any mechanism to properly appoint agents. Through the first three months of open enrollment the health plans of Alameda Alliance, Contra Costa Health Plan, L.A. Care, Molina and Valley Health Plan wouldn’t even return phone calls or emails on how to become appointed.

As an independent agent that is certified to represent Covered California plans through out the state, getting an appointment with these regional health plans shouldn’t be this difficult. A fellow agent was able to get appointed with Contra Costa Health Plan but he had to sign an agreement specifying there would be zero commission paid for his enrollments. L.A. Care is now working with a General Agent to process appointments, but they require attendance for an orientation meeting in Los Angeles. My California Health and Life license and Covered California Certificate should be enough to show that I’m capable to represent their plans. Do Certified Enrollment Counselors and Covered California staff face the same challenges in enrolling people in these plans?

When an individual, family or small business asks me to be their agent they are also asking me to be their advocate on health insurance related matters. If I’m not appointed with the health plan I can’t be of service to the member in matters such as disputing a health care charge, requesting member ID cards or resolving premium issues. Without being appointed I usually don’t have access to the important Evidence of Coverage which spells out how the health plan will be administered and other marketing collateral that might help my clients make an informed decision on which health plan to select.

The issue of appointment is directly tied to Covered California’s mission to “… improve health care quality, lower costs, and reduce health disparities through an innovative, competitive marketplace that empowers consumers to choose the health plan and providers that give them the best value.” I think you would agree that health insurance is not a topic most people want to delve into and become experts about. There are times when the most educated among us need help unraveling the various puzzle pieces of deductibles, copayments, coinsurance and networks when an illness or accident happens.

While I believe the efforts of the Covered California staff and Certified Enrollment Counselors have done an admirable job enrolling Californians in the new health plans, they can’t be advocates for the members when disputes and questions arise. If I’m not appointed with the carrier one of my clients selects, they are essentially on their own if they have to fight the health plan. Even the proposed Certified Application Counselors and Navigators will be little more than enrollment entities with no follow-up responsibilities.

I guarantee you that most people will forget my discussion with them on the differences between PPO, EPO and HMOs, tiered networks, tiered drug formulary, “in” verses “out” of network deductible, copayments, coinsurance, and annual maximum out-of-pocket expense. When a parent or child gets sick the last thing they want to do is hassle with the insurance company. I will happily carry that burden for my clients, but I can only do it if I am appointed by their respective health plan.

I hope Covered California will consider the following suggestions as we move from enrollment to implementing quality health care in California.

1. All carriers offering health plans in Covered California should automatically appoint any licensed and certified insurance agent upon receiving the necessary appointment documents such as a signed agent agreement and E&O insurance verification.

2. No health plan should be able to stipulate a zero commission rate as a condition of appointment.

3. Agents, along with CECs and any other enrollment entity, should be able to demonstrate that they understand the various parts of the health insurance plans including, but not limited to, the differences between a PPO, EPO, and HMO, deductibles, copayments, coinsurance, in-network verses out-of -network, tiered facilities, tiered drug formularies, in-patient verses out-patient designation, and the Evidence of Coverage.

4. No agent should discriminate, with respect to enrollment, between an APTC eligible individual or family and those who may be Medi-Cal eligible.

5. Agents should sign a pledge not to cross-sell any other products while discussing health plans with consumers such as home, auto, life, disability or indemnity insurance.

The easy part is enrolling people in health insurance. The difficult part will be helping these individuals and families make the most of their health plans especially when a health emergency or chronic illness strikes. I understand it is not Covered California’s mission to be a health insurance member advocate. But I would appreciate any consideration you and the Board might be able to give to the agent community to be better advocates for our clients by making the appointment process easier so we can fulfill our responsibilities of representation.


Kevin Knauss

CL# 0H12644


Justice Department Recovers $3.8 Billion from False Claims Act Cases in Fiscal Year 2013

Department of Justice
Office of Public Affairs
Friday, December 20, 2013
Justice Department Recovers $3.8 Billion from False Claims Act Cases in Fiscal Year 2013
Second Largest Annual Recovery in History Whistleblower Lawsuits Soar to 752

The Justice Department secured $3. 8 billion in settlements and judgments from civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2013, Assistant Attorney General for the Civil Division Stuart F. Delery announced today.   This dollar amount, which is the second largest annual recovery of its type in history, brings total recoveries under the False Claims Act since January 2009 to $ 17 billion – nearly half the total recoveries since the Act was amended 27 years ago in 1986.

The Justice Department’s fiscal year 2013 efforts recovered more than $3 billion for the fourth year in a row and are surpassed only by last year’s nearly $5 billion in recoveries.   As in previous years, the largest recoveries related to health care fraud, which reached $2. 6  billion.   Procurement fraud (related primarily to defense contracts) accounted for another $ 890  million – a record in that area.

“It has been another banner year for civil fraud recoveries, but more importantly, it has been a great year for the taxpayer and for the millions of Americans, state agencies and organizations that benefit from government programs and contracts,” said Assistant Attorney General Delery.   “The $3. 8 billion in federal False Claims Act recoveries in fiscal year 2013, plus another $443 million in recoveries for state Medicaid programs, restores scarce taxpayer dollars to federal and state governments.   The government’s success in these cases is also a strong deterrent to others who would misuse public funds, which means government programs designed to keep us safer, healthier and economically more prosperous can do so without the corrosive effects of fraud and false claims.”

The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government contracts, including national security and defense contracts, as well as under government programs as varied as Medicare, veterans benefits, federally insured loans and mortgages, transportation and research grants, agricultural supports, school lunches and disaster assistance.   In 1986, Congress strengthened the Act by amending it to increase incentives for whistleblowers to file lawsuits on behalf of the government, which has led to more investigations and greater recoveries.

Most false claims actions are filed under the Act’s whistleblower, or qui tam, provisions, which allow private citizens to file lawsuits alleging false claims on behalf of the government.  If the government prevails in the action, the whistleblower, known as a relator, receives up to 30 perc ent of the recovery.   The number of qui tam suits filed in fiscal year 2013 soared to 752 –100 more than the record set the previous fiscal year.   Recoveries in qui tam cases during fiscal year 2013 totaled $2. 9 billion , with whistleblowers recovering $345 million.

Health Care Fraud

The $2. 6 billion in health care fraud recoveries in fiscal year 2013 marks four straight years the department has recovered more than $2 billion in cases involving health care fraud.   This steady, significant and continuing success can be attributed to the high priority the Obama Administration has placed on fighting health care fraud.   In 2009, Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius announced the creation of an interagency task force, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement.   This coordination has yielded historic results:   From January 2009 through the end of the 2013 fiscal year, the department used the False Claims Act to recover $12 .1 billion in federal health care dollars.   Most of these recoveries relate to fraud against Medicare and Medicaid.   Additional information on the government’s efforts in this area is available at StopMedicareFraud.gov, a webpage jointly established by the Departments of Justice and Health and Human Services.

Some of the largest recoveries this past fiscal year involved allegations of fraud and false claims in the pharmaceutical and medical device industries.   Of the $2. 6 billion in federal health care fraud recoveries, $1.8 billion were from alleged false claims for drugs and medical devices under federally insured health programs that, in addition to Medicare and Medicaid, include TRICARE, which provides benefits for military personnel and their families, veterans’ health care programs and the Federal Employees Health Benefits Program.   The department recovered an additional $443 million for state Medicaid programs.

Many of these settlements involved allegations that pharmaceutical manufacturers improperly promoted their drugs for uses not approved by the Food and Drug Administration (FDA) – a practice known as “off-label marketing.”   For example, drug manufacturer Abbott Laboratories Inc. paid $1.5 billion to resolve allegations that it illegally promoted the drug Depakote to treat agitation and aggression in elderly dementia patients and schizophrenia when neither of these uses was approved as safe and effective by the FDA.   This landmark $1.5 billion settlement included $575 million in federal civil recoveries, $225 million in state civil recoveries and nearly $700 million in criminal fines and forfeitures.   In another major pharmaceutical case, biotech giant Amgen Inc. paid the government $762 million, including $598.5 million in False Claims Act recoveries, to settle allegations that included its illegal promotion of Aranesp, a drug used to treat anemia, in doses not approved by the FDA and for off-label use to treat non-anemia-related conditions.  For details, see Abbott, Abbott sentencing, and Amgen.

The department also settled allegations relating to the manufacture and distribution of adulterated drugs.   For example, generic drug manufacturer Ranbaxy USA Inc. paid $505 million to settle allegations of false claims to federal and state health care programs for adulterated drugs distributed from its facilities in India.  The settlement included $237 million in federal civil claims, $118 million in state civil claims and $150 million in criminal fines and forfeitures.   For details, see Ranbaxy.

Adding to its successes under the False Claims Act, the Civil Division’s Consumer Protection Branch, together with U.S. Attorneys across the country, obtained 16 criminal convictions and more than $1. 3 billion in criminal fines, forfeitures and disgorgement under the Federal Food, Drug and Cosmetic Act (FDCA).  The FDCA protects the health and safety of the public by ensuring, among other things, that drugs intended for use in humans are safe and effective for their intended uses and that the labeling of such drugs bears true, complete and accurate information.

In other areas of health care fraud, the department obtained a $237 million judgment against South Carolina-based Tuomey Healthcare System Inc., after a four-week trial, for violating the Stark Law and the False Claims Act.  The Stark Law prohibits hospitals from submitting claims to Medicare for patients referred to the hospital by physicians who have a prohibited financial relationship with the hospital.   Tuomey’s appeal of the $237 million judgment is pending.  If the judgment is affirmed on appeal, this will be the largest judgment in the history of the Stark Law.   For the court’s opinion, see Tuomey.

The department also recovered $26.3 million in a settlement with Steven J. Wasserman M.D., a dermatologist practicing in Florida, to resolve allegations that he entered into an illegal kickback arrangement with Tampa Pathology Laboratory that resulted in increased claims to Medicare.   Tampa Pathology Laboratory previously paid the government $950,000 for its role in the alleged scheme.   The $26.3 million settlement is one of the largest with an individual in the history of the False Claims Act.   For details, see Wasserman.

Procurement Fraud

Fiscal year 2013 was a record year for procurement fraud matters.   The department secured more than $887 million in settlements and judgments based on allegations of false claims and corruption involving government contracts.  Prominent among these successes was the department’s $664 million judgment against Connecticut-based defense contractor United Technologies Corp. (UTC).   A federal court found UTC liable for making false statements to the Air Force in negotiating the price of a contract for fighter jet engines.   In 2004, the department had won a smaller judgment after a three-month trial.  Both sides appealed, but the government’s arguments prevailed, resulting in the case being returned to the trial court to reassess damages.  The $664 million judgment, which UTC has appealed, is the largest judgment in the history of the False Claims Act and, if the appellate court affirms, will be the largest procurement recovery in history.   For details, see UTC.

The department also settled allegations of false claims with two companies in connection with their contracts with the General Services Administration (GSA) to market their products through the Multiple Award Schedule (MAS) program.   To be awarded a MAS contract, and thereby gain access to the broad government marketplace, contractors must provide GSA with complete, accurate and current information about their commercial sales practices, including discounts afforded to their commercial customers.   The government alleged that W.W. Grainger Inc., a national hardware distributor headquartered in Illinois, and Ohio-based RPM International Inc. and its subsidiary, Tremco Inc., a roofing supplies and services firm, failed to disclose discounts given to their commercial customers, which resulted in government customers paying higher prices.  The department recovered $70 million from W.W. Grainger in a settlement that also included allegations relating to a U.S. Postal Services contract and $61 million from RPM International Inc. and Tremco.  For details, see Grainger, RPM/Tremco.

Other Fraud Recoveries

A $45 million settlement with Japan-based Toyo Ink S.C. Holdings Co. Ltd. and its Japanese and United States affiliates (collectively Toyo) demonstrates the breadth of cases the department pursues.  This settlement resolved allegations that Toyo misrepresented the country of origin on documents presented to the Department of Homeland Security’s U.S. Customs and Border Protection to evade antidumping and countervailing duties on imports of the colorant carbazole violet pigment into the United States.   These duties protect U.S. businesses by offsetting unfair foreign pricing and foreign government subsidies.   For details, see Toyo.

The False Claims Act also is used to redress grant fraud.   In a significant case involving a grant from the Department of Education, Education Holdings Inc. (formerly The Princeton Review Inc.) paid $10 million to resolve allegations that the company fabricated attendance records for thousands of hours of afterschool tutoring of students that was funded by the federal grant.  For details, see Education Holdings.

Recoveries in Whistleblower Suits

Of the $3. 8 billion the department recovered in fiscal year 2013, $2. 9 billion related to lawsuits filed under the qui tam provisions of the False Claims Act.   During the same period, the department paid out more than $345 million to the courageous individuals who exposed fraud and false claims by filing a qui tam complaint.   (The average share paid to whistleblowers in fiscal year 2013 cannot be determined from these numbers because the awards paid to whistleblowers in one fiscal year do not always coincide with the fiscal year in which the case was resolved, and the fiscal year’s recoveries may include amounts to settle allegations outside the whistleblower’s complaint.)

Whistleblower lawsuits were in the range of three to four hundred per year from 2000 to 2009, when they began their climb from 433 lawsuits in fiscal year 2009 to 752  lawsuits in fiscal year 2013.   Due to the complexity of fraud investigations generally, the outcomes of many of the qui tam cases filed this past fiscal year are not yet known, but the growing number of lawsuits filed since 2009 have led to increased recoveries.   Qui tam recoveries exceeded $2 billion for the first time in fiscal year 2010 and have continued to exceed that amount every year since.   Qui tam recoveries this past fiscal year bring the department’s totals since January 2009 to $13.4 billion.   During the same period, the department paid out $1.98 billion in whistleblower awards.

“These recoveries would not have been possible without the brave contributions made by ordinary men and women who made extraordinary sacrifices to expose fraud and corruption in government programs,” said Assistant Attorney General Delery.   “We are also grateful to Congress and its continued support of strengthening the False Claims Act, including its qui tam provisions, giving the department the tools necessary to pursue false claims.”

In 1986, Senator Charles Grassley and Representative Howard Berman led successful efforts in Congress to amend the False Claims Act to, among other things, encourage whistleblowers to come forward with allegations of fraud.  In 2009, Senator Patrick J. Leahy, along with Senator Grassley and Representative Berman, championed the Fraud Enforcement and Recovery Act of 2009, which made additional improvements to the False Claims Act and other fraud statutes.   And in 2010, the passage of the Affordable Care Act provided additional inducements and protections for whistleblowers and strengthened the provisions of the federal health care Anti-Kickback Statute.

Assistant Attorney General Delery also expressed his deep appreciation for the dedicated public servants who investigated and pursued these cases.   These individuals include attorneys, investigators, auditors and other agency personnel throughout the Justice Department’s Civil Division, the U.S. Attorneys’ Offices, the Departments of Defense and Health and Human Services, the various Offices of Inspector General and the many other federal and state agencies that contributed to the department’s recoveries this past fiscal year.

“The department’s continued success in recovering fraudulent claims for taxpayer money this past fiscal year is a product of the tremendous skill and dedication of the people who worked on these cases and investigations and continue to work hard to protect against the misuse of taxpayer dollars,” said Delery.

Civil Division


Health Care Clinic Owners Sentenced for Role in $8 Million Health Care Fraud Scheme

Department of Justice
Office of Public Affairs
Monday, December 2, 2013
Health Care Clinic Owners Sentenced for Role in $8 Million Health Care Fraud Scheme
Two health care clinic owners were sentenced today in connection with an $8 million health care fraud scheme involving the now-defunct home health care company Flores Home Health Care Inc.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Special Agent in Charge Michael B. Steinbach of the FBI’s Miami Field Office, and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Office of Investigations Miami Office made the announcement.

Miguel Jimenez, 43, and Marina Sanchez Pajon, 29, both of Miami, were sentenced by U.S. District Judge Ursula Ungaro in the Southern District of Florida.   Jimenez was sentenced to serve 87 months in prison and Pajon was sentenced to serve 57 months in prison.   Jimenez and Pajon pleaded guilty in August to conspiracy to commit health care fraud.

Jimenez and Pajon, who are married, were owners and operators of Flores Home Health, a Miami home health care agency that purported to provide home health and physical therapy services to Medicare beneficiaries.

According to court documents, Jimenez and Pajon operated Flores Home Health for the purpose of billing Medicare for, among other things, expensive physical therapy and home health care services that were not medically necessary and/or not provided.   Jimenez’s primary role at Flores Home Health involved controlling the company and running and overseeing the schemes conducted through Flores Home Health.   Both Jimenez and Pajon were responsible for negotiating and paying kickbacks and bribes, interacting with patient recruiters, and coordinating and overseeing the submission of fraudulent claims to the Medicare program.

Jimenez, Pajon, and their co-conspirators paid kickbacks and bribes to patient recruiters in return for the recruiters providing patients to Flores Home Health for home health and therapy services that were medically unnecessary and/or not provided.   They also paid kickbacks and bribes to co-conspirators in doctors’ offices and clinics in exchange for home health and therapy prescriptions, medical certifications, and other documentation.   Jimenez, Pajon, and their co-conspirators used the prescriptions, medical certifications, and other documentation to fraudulently bill Medicare for home health care services, which Jimenez and Pajon knew was in violation of federal criminal laws.

From approximately October 2009 through approximately June 2012, Flores Home Health was paid approximately $8 million by Medicare for fraudulent claims for home health services that were not medically necessary and/or not provided.

The case was investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.  This case was prosecuted by Trial Attorney A. Brendan Stewart of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,700 defendants who have collectively billed the Medicare program for more than $5.5 billion.   In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov .


Stores selling Obamacare policies popping up across California

With enrollment deadlines approaching, California officials, insurers and agents are opening stores in outlets across the state to sign up individuals for Obamacare policies.

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 Covered CaliforniaCertified counselor Helen Lee, right, signs up a woman for health coverage at a Covered California exchange office in the Baldwin Hills Crenshaw mall. (Anne Cusack, Los Angeles Times / November 27, 2013)
By Chad TerhuneNovember 27, 2013, 5:17 p.m.

As shoppers hunt for holiday bargains this season, they may find something unusual for sale at the mall: Obamacare.

With enrollment deadlines looming, California officials, insurance companies and agents are staking out retail space to sign up thousands of people as part of the Affordable Care Act. These sales tactics reflect how dramatically the healthcare law is changing the insurance industry.

Until recently, most health insurance companies and agents didn’t put much time into selling policies to individuals and focused more on catering to employers and large groups in the workplace. But the health insurance mandate and billions of dollars in federal premium subsidies have made individual policies a far more attractive market.

California’s health insurance exchange and other government-run marketplaces are rushing to sign up people by Dec. 23, the deadline to have coverage in effect Jan. 1. Open enrollment lasts until March 31.

A state lawmaker and union organizers last week opened a mall store in a predominantly African American area of Los Angeles. In Orange County, insurance agents are signing up dozens of people each week at Laguna Hills Mall, and healthcare giant Kaiser Permanente has rented five retail locations in Northern California to sell exchange policies.

The Covered California exchange has posted solid enrollment since opening Oct. 1, primarily through its website and call centers. It has signed up nearly 80,000 people in private health plans through Nov. 19 and an additional 135,000 people have applied for Medi-Cal, the state’s Medicaid program for the poor.

But the exchange estimates that about 80% of people will want in-person help to figure out their insurance options. Rather than set up storefronts itself, Covered California has focused more on training people who then go out to farmers markets and health fairs to promote the exchange and do enrollment.

Some consumer advocates welcome the increased retail exposure, but they worry that stores run by insurers or agents might push certain health plans and leave out other choices on the exchange.

“Having a lot of venues where people are running errands is a good thing,” said Betsy Imholz, special projects director at Consumers Union. “But we want to avoid inappropriate steering. There are upsides and downsides to this.”

State Sen. Holly Mitchell (D-Los Angeles) said she pushed for a Covered California store at the Baldwin Hills Crenshaw mall because many lower-income people who stand to benefit most from the healthcare law aren’t likely to click on a website.

“There are still people who don’t have access online,” Mitchell said. “We want to bring health insurance to where people are naturally, and the clock is ticking on the enrollment window.”

Billboards for Covered California surround the Baldwin Hills mall, beckoning people to “health insurance made affordable.” The small store is on the mall’s second floor, across from a nail salon and a short stroll from Macy’s and Foot Locker.

It has a counter stacked full of insurance brochures and a small table where state certified enrollment counselors use a laptop to answer people’s questions and help them get coverage.

Capri Capital Partners, the mall’s Chicago owner, said it donated the space until open enrollment ends March 31. The location is open seven days a week with afternoon and evening hours.

Brenda Hardson, 51, was handed a brochure about the mall store recently and came back with her uninsured daughter, Rickesha Morris. The 31-year-old was recently laid off from her job and she sat down with an enrollment worker to review her options.

“It’s always better to speak with someone face to face,” Hardson said. “The website only answers general questions.”

In Northern California, Kaiser has hired 40 people to run its five stores in San Jose, Sacramento, Modesto and Fresno. A sixth location is planned for Stockton in December.

The Oakland nonprofit said it got 10,000 visitors to two mall kiosks it opened last year, and it drew lessons from that experience.

“We know people have a lot of questions about healthcare reform, how to get coverage and what kind of financial assistance might be available to them,” said Wade Overgaard, a senior vice president at Kaiser Permanente.

Kaiser says its store workers are certified by the state and will enroll people in Kaiser policies as well as competitors’ health plans.

Inside Laguna Hills Mall, the Insurance Resource Center is signing up more than 100 people per week as part of the healthcare law rollout. Gary Mann, a senior partner with Nationwide Senior Plans, said he and a partner opened the 3,000-square-foot store in mid-October.

Eight agents, all trained and authorized to enroll people by the state exchange, cover the store seven days a week. It features signs for Covered California and major insurers, such as Anthem Blue Cross.

The agents don’t charge people to answer their questions or enroll them in a health plan or Medi-Cal. Rather, the agents get paid commissions by the insurance companies.

Mann said the store is seeing an increase in traffic from policyholders who are having their existing coverage canceled Dec. 31 because it doesn’t meet all the requirements of the Affordable Care Act.

Covered California rejected President Obama‘s recent call to extend those canceled plans for another year, and an estimated 1 million Californians are losing their current policies.

That has angered many consumers, and Mann said others who oppose the healthcare law vent at his store.

“We get some hostile people and they shout at us,” he said.

His biggest concern, however, is people putting off their insurance shopping until the last minute. “People procrastinate,” Mann said, “and if everyone jumps on at the end, it will really test the system.”



Supreme Court to take up Obamacare contraception case

Washington (CNN) — The high-stakes fight over implementing parts of the troubled health care reform law will move to the U.S. Supreme Court in coming months, in a dispute involving coverage for contraceptives and religious liberty.

The justices agreed on Tuesday to review provisions in the Affordable Care Act requiring employers of a certain size to offer insurance coverage for birth control and other reproductive health services without a co-pay.

At issue is whether private companies can refuse to do so on the claim it violates their religious beliefs.

Oral arguments will likely be held in March with a ruling by late June.

Nearly 50 pending lawsuits have been filed in federal court from various corporations challenging the birth control coverage benefits in the “Obamacare” law championed by President Barack Obama, which has come in for fierce political criticism over its rocky public introduction.

The high court last year narrowly upheld the key funding provision of the health care law, a blockbuster ruling affirming that most Americans would be required to purchase insurance or pay a financial penalty — the so-called “individual mandate.”

The constitutional debate now shifts to the separate employer mandates and whether corporations themselves enjoy the same First Amendment rights as individuals.

Three federal appeals courts around the country have struck down the contraception coverage rule, while two other appeals courts have upheld it. That “circuit split” made a Supreme Court review more likely.

The Supreme Court agreed to hear two cases involving for-profit corporations. Among the plaintiffs is Hobby Lobby, Inc. a nationwide chain of about 500 arts and crafts stores.

Hobby Lobby finds way around $1.3-million-a-day Obamacare hit – for now

David Green and his family are the owners and say their Christian beliefs clash with parts of the law’s mandates for comprehensive coverage.

They say some of the drugs that would be provided prevent human embryos from being implanted in a woman’s womb, which the Greens equate to abortion.

The privately held company does not object to funding other forms of contraception — such as condoms and diaphragms — for their roughly 13,000 employees, which Hobby Lobby says represent a variety of faiths.

Companies that refuse to provide the coverage could be fined up to $1.3 million daily.

Kyle Duncan, general counsel of the Becket Fund for Religious Liberty and lead lawyer for Hobby Lobby, called the Supreme Court decision to hear the case a “major step” for the Greens and their business, and “an important fight for Americans’ religious liberty.”

Opinion: Religious liberty is for people, not corporations

The White House said on Tuesday that it believes a requirement on contraceptives is “lawful and essential to women’s health.”

The White House added that it is “confident the Supreme Court will agree.”

The Obama administration has defended the law and federal officials say they have already created rules exempting certain nonprofits and religiously affiliated organizations from the contraceptives requirements. In those cases, women would receive coverage from another company at no cost.

The Supreme Court was asked to take up the issue by a private Christian university in Virginia but the court, without explanation, decided not to hear that appeal.

The law’s supporters say it does not require individual company owners to personally provide coverage they might object, but instead places that responsibility on the corporate entity.

A key issue for the justices will be interpreting the 1993 federal law known as the Religious Freedom Restoration Act. Can companies, churches, and universities be included, or do the protections apply only to “persons?”

The botched rollout of HealthCare.gov, the federal Obamacare website, has become a political flashpoint along with other issues that Republicans say proves the law is unworkable.

WH: Obamacare website ‘on track’ to meet Nov. 30 goal

The cases accepted were Sebelius v. Hobby Lobby Stores, Inc. (13-354); and Conestoga Wood Specialties Corp. v. Sebelius (13-356).

Church and state, executive power on Supreme Court docket