Feds Deny Delaware Insurance Commissioner’s Application for Medical Loss Ratio Adjustment

In a September 9th letter the Centers for Medicare & Medicaid Services denied Delaware Insurance Commissioner Stewart’s application for an adjustment to the 80 percent medical loss ratio (“MLR”) standard applicable to the individual health insurance market in Delaware beginning in 2011 as a result of the federal health care reform legislation, the Patient Protection and Affordable Care Act (the “Act”). Section 1001 of the Act required issuers in the individual market to spend at least 80 percent of premium dollars on reimbursement for clinical services and activities that improve health care quality for enrollees. Beginning in 2011, if an issuer does not meet the 80 percent standard, it is required to provide rebates to enrollees.

The Act permits states to apply for adjustments to the 80 percent standard if applying that standard may destabilize the market for individual health insurance coverage in the state. Commissioner Stewart applied for an adjustment of the standard to 65 percent, 70 percent and 75 percent for the reporting years 2011, 2012 and 2013, respectively. Of the three largest issuers of individual health insurance coverage in the state, Blue Cross Blue Shield, Golden Rule, and Aetna, Blue Cross Blue Shield already meets the 80 percent standard but Golden Rule and Aetna do not and, according to media reports, threatened to pull out of the individual insurance market in Delaware if an adjustment was not obtained. Golden Rule and Aetna had not, however, provided the required 180-day notice of withdrawal from the Delaware individual market of the time of CMS’s decision. Some individual consumers and small business owners voiced objections to Commissioner Stewart’s application arguing it was a concession to the insurance companies and not in the best interest of Delaware consumers.

CMS, which has previously granted adjustment requests from five states and denied such a request from one state, North Dakota, denied Delaware’s request because the evidence presented did not establish that application of the 80 percent MLR standard would destabilize the Delaware individual market. Among other things, CMS found that Golden Rule and Aetna would remain “substantially profitable” even if they had to pay rebates as a result of not meeting the 80 percent MLR standard.

Reverse False Claims-The Latest in False Claims Act Exposure

Earlier this week, the Department of Justice announced that it had its second largest annual recovery of civil fraud claims in history, securing $2.4 billion in settlements and judgments in cases involving fraud against the government in the fiscal year ending Sept. 30, 2009. In making this announcement, Tony West, the Assistant Attorney General for the Civil Division, reiterated that “rooting out fraud” remains one of the Justice Department’s highest priorities.” The government thanked its partners in these recovery efforts, mentioning the cooperation it receives from whistleblowers, State Departments of Justice, Medicaid Fraud Control Units, and Congress.

The reference to Congress’ role in assisting with fraud recovery efforts cannot be minimized. With the enactment of the Fraud Enforcement Recovery Act of 2009 (“FERA”) and the Patient Protection and Affordable Care Act (“PPACA,” sometimes referred to as the Healthcare Reform Act) in March of this year, Congress has significantly expanded the scope of liability for individuals and entities that receive government funds.

As a result of these reforms, one area where we are seeing considerable exposure for healthcare providers is with “reverse false claims.” There is no longer any doubt that the knowing retention of Medicare and Medicaid overpayments can serve as the basis for False Claims Act liability.

Under PPACA, health care providers are required to “report and refund” any overpayment by within 60 days after the date on which the overpayment was identified (or the date any corresponding cost report is due, whichever is later). The definition of overpayment under PPACA includes any funds received or retained under Medicare or Medicaid to which the provider is not entitled. And PPACA expressly makes the retention of any overpayment an obligation under the False Claims Act.

The Justice Department’s announcement last week that “A top priority for this administration is fighting health care fraud.” should come as no surprise to healthcare practitioners. In fiscal year 2009, health care fraud recoveries reached $1.6 billion, two-thirds of the year’s total. With the recent expansion to the Justice Department’s arsenal of recovery weapons, we will continue to see an increase in recovery efforts. Now more than ever it is essential to be vigilant in avoiding risk related to billing and collections.