It's my personal belief that people are not seeing the Forrest for it's trees when it comes to health care reform (or "PPACA" as us law school elites are calling it to confuse everyone)---even its supporters. Many on this site who support the health care reform bill do so almost reluctantly. Well here's one particular provision of the health care reform bill that NOBODY, and I mean NOBODY is talking about--and that is the extension of the False Claims Act to practically all claims made in the exchanges. Not only is this a way of preventing fraud and abuse and saving the U.S. taxpayer billions of dollars, but it's also a way to enforce the rules of the exchange and make sure that Insurers have a strong incentive to not skirt any insurance reforms.
First, a little background on the False Claims Act.
In order to save time (I'm writing this in between classes) I'll let wiki do some leg work here:
The False Claims Act (31 U.S.C. § 3729–3733, also called the "Lincoln Law") is an American federal law that allows people who are not affiliated with the government to file actions against federal contractors claiming fraud against the government. The act of filing such actions is informally called "whistleblowing." Persons filing under the Act stand to receive a portion (usually about 15–25 percent) of any recovered damages.
Your typical case works as follows:
- A whistlblower finds a false claim being made, or that has been made, against the gov't.
- Said whistleblower files a claim.
- The DOJ reviews the whistleblowers claim and decides whether it wants to take over the investigation. If the DOJ does take over the investigation, they have the power to haul in the CEO or CFO of the company, without the company attorney present, to answer questions.
- If the DOJ ends up recovering any money, the whistleblower gets 30 percent of the haul and the Treasury recoups the other 70 percent.
Without boring you with the caselaw or any details, the False Claims Act has never applied to false claims made by or against private insurance companies, even if the private insurance was being subsidized by federal or state funds.
Well all that is about to change.
Courtesy of Gibson Dunn (a mega law firm who knows their stuff) a nice summary:
The PPACA creates state-run "exchanges" intended to increase competition among health insurance providers by supplying a mechanism for individuals to shop different policies. Section 1313 specifies that any payments made "by, through, or in connection with" an exchange are subject to the FCA if they include any federal funds. As FCA violations are subject to treble damages, this creates significant incentives for participants to closely monitor any exchange-related activities.
So for the first time, Private insurance claims will be subject to the False Claims Act if:
- The claim is made by or under a plan in a state or federally administered exchange. AND
- The plan recieves fedral funds.
But here's the real kicker--under current caselaw, if you do not follow the conditions that come with federal funds, and then go ahead and accept he federal funds anyhow---that's considered a false claim for the purposes of the False Claims Act. The theory being, you represented that you were in compliance to get the money so if in fact you are not in compliance--well then that's a false claim and a waste of taxpayer funds. So hopefully you can see where I'm going here---
Insurance companies will have to follow every last regulation of participation in the exchanges or else every single claim they make or process while they are out of compliance will be subject to the False Claims Act.
No more will we have to depend on woefully understaffed, and often times underqualified state regulators to make sure that private insurance companies are in copmliance. No, now we have a way of forcing compliance on the back end. I don't care who you are--you can't afford to pay back every single claim you've made for an extended period of time back to the government because you weren't in compliance. The cost of noncompliance for insurance companies for the rules of the exchange is to risk going out of business.
And remember, this False Claims Act business is only one level of regulatory control over the private insurance industry---there are several others that have been discussed at length here and elsewhere. I just thought I'd bring your attention to perhaps the enforcement mechanism with the most teeth out there.