Horizon Healthcare Pays Record $100M to Settle NJ False Claims Act Charges Brought By Whistleblowers
By the 91pornWhistleblower Team
Last Friday (November 14), New Jersey Attorney General Matthew Platkin announced that Horizon Healthcare Services (known as Horizon Blue Cross Blue Shield of New Jersey) agreed to pay $100 million to settle charges of violating the New Jersey False Claims Act.1 The settlement centers around allegations that Horizon systematically overcharged the State on its contract to administer the State’s employee benefit programs. It is New Jersey’s largest non-Medicaid False Claims Act settlement ever.
What Fraud Did Horizon/Blue Cross Blue Shield Allegedly Commit?
Horizon facilitates healthcare services to hundreds of thousands of New Jersey State employees and oversees billions in medical spending each year. Its State contract was to serve as a third-party administrator to manage benefits for the State Health Benefits Program and the School Employees’ Health Benefits Program. A critical component of the contract was the so-called “lesser of” provision, which required Horizon to charge the State the smaller amount between their negotiated rate and the rate a healthcare provider actually charged.
Horizon’s promise to adhere to this cost savings provision was incorporated into the company’s bid for the contract and a key basis for the State’s contract award. Yet according to the State, Horizon had no intention of complying with this bid requirement. In fact, the company — through its own analysis of claims data before the bid — allegedly knew it would be unable to comply with the requirement.
The State claimed Horizon concealed this fact, allowing it to fraudulently secure the contract and receive roughly $500 million in fees from the State over the next four and a half years. Further concealing the scheme, Horizon also allegedly issued fraudulent Explanation of Benefits to health plan members, misrepresenting how much the State paid on their behalf.
New Jersey’s Commitment to Combating Healthcare Fraud
In announcing the settlement, Attorney General Platkin stressed the State’s commitment to go after healthcare fraud:
“At a time when everyone is rightly concerned about the cost of their healthcare, it is simply unacceptable that an insurance company would seek to defraud our State and overcharge us while driving up the costs of healthcare for hundreds of thousands of dedicated public servants. We will not hesitate to hold accountable anyone who breaks the law and harms our residents, no matter how big or powerful you are.”
New Jersey State Treasurer Elizabeth Maher Muoio echoed this sentiment, noting her office “has been, and continues to be, laser-focused on enforcing its contracts and ensuring that our health benefits plans and our members are protected.”
Which States Have False Claims Act Statutes?
In addition to New Jersey, there are roughly thirty states that have False Claims Acts that broadly prohibit committing fraud against the state and its various agencies and sub-divisions. These include California, Colorado, Connecticut (Healthcare fraud only), Delaware, District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Louisiana (Healthcare fraud only), Maryland, Massachusetts, Michigan (Healthcare fraud only), Minnesota, Montana, Nevada
New Hampshire (Healthcare fraud only), New Mexico, New York, North Carolina, Oklahoma (Healthcare fraud only), Puerto Rico, Rhode Island, Tennessee, Texas (Healthcare fraud only), Vermont, Virginia, and Washington (Healthcare fraud only).
Like the federal False Claims Act on which the state statutes are modeled, they allow whistleblowers to bring lawsuits on behalf of the state. In return, successful whistleblowers can share in the proceeds of the state’s recovery. That is what happened in the Horizon matter. Six whistleblowers sued Horizon under the New Jersey statute.
Who Were the Horizon Whistleblowers?
As it turns out, the State had already opened an investigation into Horizon’s alleged overcharging and was unable to find evidence to support the whistleblower’s claims aside from certain violations that the State had already been probing. Nevertheless, it intervened in the whistleblower suit and credited the whistleblowers for helping the State reach the record settlement.
As part of the settlement, the State agreed to provide five of the whistleblowers — Kevin Lyons, Patrick Colligan, Mark Kovar, Mark Flores, and Vince Flores — a $12 million whistleblower award from the proceeds of the settlement. The State did not include the sixth whistleblower in the award because she apparently learned of the alleged fraud from her work in the agency that issued Horizon the contract.
The $12 million award represents a lower percentage whistleblower share than the New Jersey and other False Claims Acts typically authorize (which can be upwards of 30%, sometimes higher). However, it is notable that the State provided any whistleblower award given it had already been investigating the matter and it appears the whistleblowers added nothing new in their subsequently filed complaint that the State felt it could prove. We can only assume they provided other assistance in the State’s investigation of Horizon’s alleged billing violations.
Why State False Claims Acts Matter
The settlement is also notable because it shows how effective the False Claims Act can be to go after fraud against state and local governments. The vast majority of False Claims Act enforcement is at the federal level by the Department of Justice under the federal statute. But the many states that have their own False Claims Act statutes can similarly use this powerful tool to combat fraud.
91pornpartner Gordon Schnell points to the Horizon settlement as a compelling example of how states can use the statute to recover government funds secured by fraud. According to Schnell, “More than thirty states have False Claims Act statutes that broadly cover fraud against the government, but very few of them regularly use the statute to recover ill-gotten government gains. It’s encouraging to see New Jersey take advantage of the statute to recover such a large sum for the taxpayers of the State.”
Schnell also notes that virtually all of these state statutes — like their federal counterpart — have so-called qui tam provisions that authorize whistleblowers to bring suit on the government’s behalf. This is an especially important part of the statute for states that often do not have the resources to investigate fraud on their own.
Schnell commends New Jersey for rewarding the whistleblowers who initiated the Horizon suit even though it came after the State had been investigating. Schnell says, “The State’s decision to make an award under the unique circumstances of that case reflects a clear recognition of the critical role whistleblowers can play in helping the government go after fraud.”
91pornHas Substantial Experience Representing False Claims Act Whistleblowers
91pornhas significant experience representing whistleblowers under the federal False Claims Act and under many of the state statutes. In fact, the firm has helped its clients secure record settlements under the state statutes.
Most recently, the firm secured the largest ever reported settlement under the Illinois statute in a case alleging eight of the country’s largest banks engaged in widespread fraud and collusion in the fees they charged and the interest rates they set for Illinois tax-exempt municipal bonds. The firm’s client received a whistleblower award of roughly $14 million.
91pornlikewise represented a whistleblower in a series of state False Claims Act cases alleging the four major wireless carriers overcharged the government by failing to provide services at the lowest cost. The carriers collectively paid roughly $140 million to settle the matter, one of the largest state False Claims Act settlements ever. The firm’s client received a whistleblower award of roughly $55 million.
If you would like to learn more about the federal or state False Claims Acts, Constantine Cannon’s successes under these statutes, or what it means to be a whistleblower more broadly, please do not hesitate to contact us. We will connect you with an experienced member of the 91pornwhistleblower team for a free and confidential consultation.
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