$23.2 Million Whistleblower Settlement Under the California Insurance Fraud Prevention Act

The impact of medical fraud on our economy is enormous. Almost one-quarter of our federal budgets pays for healthcare, with 2/3 of that--or over $500 billion--going to fund Medicare. The Medicare fraud rate is as high as 10%, and a 2012 Forbes article found that approximately 40% of New York Medicaid claims were at least "questionable."

Thus, unsurprisingly, a great percentage of False Claims Act cases brought by our firm allege fraudulent medical billing, including false claims submitted to Medicare, Medicaid, Tricare, and GEHA. Noticeably missing from that list: private insurance. If a provider is defrauding Medicare, it almost certainly is engaging in the same fraud against the private insurance companies. And under the Affordable Care Act, fraud on private insurance providers also has a massive effect on our economy. The costs of fraud are passed on to the consumer through higher premiums, which means not only increased costs to the individual taxpayer, but also to the government subsidies for those plans.

This is frustrating to the whistleblower who wants the fraud to stop across the board. Hopefully the start of a new trend, California has taken note and passed the California Insurance Fraud Prevention Act. The IFPA mirrors the state and federal False Claims Act, but applies it to private insurance providers; harm to the government is not required. As the state understands that fraud on the insurance companies actually harms its residents, whistleblowers are not suing on behalf of the private companies, but rather are acting on behalf of themselves, every one of their fellow policyholders, and for the State of California. Moreover, whereas the FCA awards relator shares of 15%-25% of intervened cases and 25%-30% of non-intervened cases, the IFPA awards relator shares of 30%-40% and 40%-50% respectively.

The state of California recently announced a $23.2 million settlement between the Department of Insurance and whistleblowers and pharmaceutical company Warner Chilcott to resolve a lawsuit alleging drug marketing and kickbacks in violation of federal and state law. The whistleblowers in that case received a whopping 49% relator's share! This is in addition to a $125 million False Claims Act settlement!

The IFPA is a scarcely utilized and often unknown statute of which a skilled False Claims Act attorney should be aware. Hopefully other states will take note of this recent settlement and enact similar legislation.

Bracker & Marcus was not a part of the Warner Chilcott case, but it does represent individual plaintiffs in both qui tam and retaliation actions under state and federal False Claims Acts and California IFPA.