Insurance fraud is a nationwide problem. It is estimated that insurance fraud steals $308.6 billion every year from American taxpayers. Fraud is estimated to occur in at least 10 percent of all property-casualty insurance claims, while Medicare is estimated to cost the taxpayer at least $60 billion per year.
Scam artists and unethical medical providers can quickly drain down the pool of publicly available funds when submitting false claims to taxpayer-supported healthcare programs like Medicare and Medicaid. But what about private insurance fraud?
Only two states in the US have targeted private insurance fraud possible through their state laws. California is one of them. The California Insurance Frauds Prevention Act is a powerful anti-fraud law that anyone residing or doing business in California should know about.
History of the California Insurance Frauds Prevention Act
First codified by the state legislature in 1993, the California Insurance Frauds Prevention Act (IFPA) was initially created to address workers’ compensation fraud, or specifically, employers who underestimate the number of workers they employ in order to underpay workers’ compensation insurance coverage. This creates an unfair burden for honest employers and significantly raises rates for everyone while risking the health and safety of injured workers who need comprehensive coverage.
However, the law was expanded afterwards with the understanding that insurance fraud, even private commercial insurance fraud, broadly harms Californians. For instance, the amended law states that 15 to 20 percent of all auto insurance payments include fraudulent activity. Additionally, the law emphasizes that “health insurance fraud is a particular problem for health insurance policyholders… [believed to] account for billions of dollars annually in added healthcare costs nationally.”
Only one other state currently has a similarly expansive anti-fraud law on the books. The Illinois Insurance Claims Fraud Prevention Act also allows qui tam relators, or whistleblowers, to bring claims alleging private insurance fraud on behalf of the State.
What Types of Fraud Does the California Insurance Frauds Prevention Act Fight?
Since dishonest insurance claims harm Californians by raising rates for everyone, the California government does not need to suffer direct harm in order for a qui tam claim to be filed under the IFPA. This is contrary to the existing stance taken by the federal False Claims Act, as well as many other state qui tam laws. Because of this, the IFPA closes a significant loophole allowing for whistleblower claims in commercial or private insurance cases.
Today, the IFPA can be used to initiate a number of insurance fraud claims. Reportable instances of fraud under the state law include:
- Fraudulent billing such as over billing, administering medically unnecessary testing, unbundling, and more by health care providers and hospitals
- Making fraudulent claims to receive health insurance benefits, workers’ compensation benefits, or qualify for a life insurance policy
- Auto repair shops that over bill auto insurance providers for parts repaired or reinstalled, or for work that was supposed to take place but did not
- Underreporting by employers in an attempt to avoid paying proper insurance premiums
- Kickbacks in the form of employing “runners, steerers, or cappers” to promote pharmaceuticals, recruit clients or patients
Damages under the California Insurance Frauds Prevention Act
Another difference between the False Claims Act and the California Insurance Frauds Prevention Act is that the IFPA is not only a civil statute but also carries the possibility of criminal enforcement. Under the IFPA, damages are designed to be remedial, not punitive, hence the additional risk of imprisonment.
Civil fines are currently set at $5,000 to $10,000 per individual violation, in addition to treble damages sustained by the victims of the fraud. Because of this, instances involving several false claims or sustained fraud can quickly pile up with monetary damages.
Whistleblower Provisions in the California Insurance Frauds Prevention Act
Whistleblowers may be able to receive significantly higher percentages of the overall recovery by filing their claim under the IFPA than under almost any other anti-fraud law in the United States. The exception is in cases where the whistleblower is found to have planned or initiated the fraud.
If the State of California chooses to intervene in a whistleblower claim under the IFPA, the whistleblower may receive anywhere from 30 to 40 percent of the proceeds. Considering that the False Claims Act and other similar whistleblower statutes cap the reward percentage at 30 percent, the IFPA offers a much higher possible percentage for whistleblowers as an incentive to report. In cases where the State declines to intervene, whistleblowers may receive anywhere from 40 to 50 percent of the overall proceeds, in recognition of their personal drive to recover stolen funds.
Even publicly available information may be eligible for a reward under the California IFPA. In cases where the whistleblower’s disclosure came largely from information that is already publicly available (such as published news, legislative reports, administrative hearings), they may still be able to win up to 10 percent of the overall recovery for their help in the case.
Finally, it is possible to file a claim under both the federal False Claims Act, the California IFPA, and any other applicable state laws, thereby maximizing the possible reward percentage for a whistleblower with qualifying information. In cases where fraud spans both public and commercial insurances, such as when a hospital bills both Medicare and private insurers for their patients, a whistleblower may be able to collect rewards under multiple California whistleblower laws.
Protections for Whistleblowers under the California Insurances Frauds Prevention Act
It is illegal for employers to retaliate against a worker for making a protected disclosure as a whistleblower. The IFPA provides legal relief for whistleblowers in CA facing workplace retaliation, or even those who support an action filed under the California IFPA. The law states that employers must take all the necessary steps to “make the employee whole” when offering relief after discrimination, harassment, or termination. This may look like reinstatement at the same level of seniority, double back pay with interest paid to a terminated employee, or even legal and attorneys’ fees paid to the employee who was forced to bring the lawsuit due to their employer’s actions.
If you have been discriminated against after becoming an IFPA whistleblower in California, you have up to eight years after the retaliatory action to file a claim against your employer, or within 3 years of discovering “the facts constituting the grounds” for the retaliation. Talk to Tycko & Zavareei LLP’s qui tam attorneys to ensure you file before the statute of limitations expires in California fraud cases involving harassment, possible harassment, or the threat of retaliation.
How Can Californians Identify and Report Violations of the California Insurance Frauds Prevention Act?
California’s Insurance Frauds Prevention Act is unique in that it can be pursued by two separate state government departments. The local district attorney’s office can pursue IFPA claims, as well as the California Commissioner of Insurance. Because of this, investigation and enforcement is more likely with IFPA claims than other whistleblower lawsuits, leading to higher possible recovery amounts. Two sets of state agencies, with double the resources and diversified priorities, may be able to take on a case at any point in time.
Because of this dual reporting system, a whistleblower will need to provide a copy of their claim to both the district attorney’s office as well as the Commissioner of Insurance when filing a qui tam claim under the IFPA in California. The whistleblower may be asked to comply with an investigation led by either of these departments.
How Can a California IFPA Lawyer Help Me?
A whistleblower lawyer can help guide your case in the following ways:
- Provide guidance on what kinds of evidence are legal and acceptable to take, and what kinds are best left out of your claim
- File your claim with the dual reporting agencies in California, and liaise with both departments as necessary
- Protect your anonymity by filing your sealed complaint under the name of our law firm instead of your own identity
- Ensure that your claim is filed under the correct state and federal laws to qualify for the maximum reward possible
- Follow up on delayed claims or cases involving significant investigation so you can return to your own priorities
- Protect you in case of possible retaliation by your employer by filing a lawsuit on your behalf for the potential to receive double back pay with interest, reinstatement, reasonable legal fees, and more
- Provide expert guidance to ensure that your testimony and claim are as strong as possible, especially when taking on a larger entity or well-known institution
If you have information about insurance fraud, whether it involves private or public funds, commercial insurance or Medicare/Medicaid in the State of California, you may have a valid whistleblower claim. If so, you may be eligible to receive a significant financial award, as well as protections against retaliation by your employer.
A consultation with our qui tam experts is confidential and complimentary. Learn more about the California Insurances Frauds Prevention Act by speaking with us online or by phone today.