Lawsuit alleges auto insurance firms stuck taxpayers with billions in medical bills

A multibillion-dollar whistleblower lawsuit against 315 auto insurance companies who are accused of sticking taxpayers with billions in health care costs was unsealed Friday in Detroit. 

At issue are medical costs that are picked up by Medicare and Medicaid after a motorist gets in an accident. By law, the suit alleges, insurance companies are supposed to reimburse the government for those medical bills.

But too often, the suit alleges, insurance companies don't pay anything, forcing taxpayers to cover the bills that they're supposed to pay.

"It's huge, massive — and all the insurance companies do it," said Troy attorney Shereef Akeel, one of many lawyers working on the lawsuit, which was filed under seal two years ago on behalf of the U.S. government and multiple states, including Michigan.

"We’re hoping to change the behavior of the insurance companies to automatically pay back the government when the government pays first," Akeel said, "and to recoup the billions of dollars that has been kept in the private insurance industry and bring it back to the public sector where it belongs."

The lawsuit does not put an exact dollar figure on the alleged losses to the government, stating only that billions have been lost.

The suit was unsealed in U.S. District Court in Detroit on Friday afternoon on behalf of the U.S. government and Michigan, California, Connecticut, Florida, Illinois, Massachusetts, New York, Ohio, Rhode Island, Texas, and the government of Puerto Rico.

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This case is known as a qui tam lawsuit,  which is brought by a whistleblower against entities accused of defrauding the government. In this case, the whistleblower is MSP Recovery, a Medicare and Medicaid recovery firm in Coral Gables, Florida, that specializes in helping governments recover claims they should never have paid.

In this case, MSP is hoping to help governments recover medical bills they have paid for insured drivers. 

"This is costing the government billions and billions of dollars,"  said Florida attorney John Ruiz, founder of the MSP Recovery law firm. "What we have uncovered is that these primary payers (insurance companies) are aware of the situation. ... The system is totally flawed. They know it’s flawed, and they purposely hide information in order to avoid making payments."

The suit also accuses insurance companies of "intentionally and systematically" failing to "accurately and completely report accident information involving their" customers.

"If we pay, you gotta pay us back," said Akeel, who is working with multiple law firms in Florida on behalf of the government plaintiffs. 

In bringing the lawsuit, lawyers and data specialists collected millions of accident reports, terabytes of Medicare and Medicaid claims data, hospital records, and reimbursement data. 

The 215-page lawsuit opens with a brief explanation about how government health care plans should pay "last — if ever" where there is primary or private health coverage. And if the government pays first, the suit says, the "primary plan must reimburse within 60 days."

But, too often, the suit states, Medicare is "in the dark" about how much it is owed by private health insurers. 

According to the lawsuit, Congress enacted a reporting requirement that, if complied with, would "take Medicare out of the dark and expose unreimbursed payments."

This reporting requirement, referred to as Section 111 reporting, requires insurance companies to notify Medicare when it has accepted responsibility to pay for a Medicare beneficiary’s medical expenses. This requirement, in theory, would allow Medicare to identify and recover the payments it makes each year for accident victims.

But it doesn't work that way, the suit alleges.

"Contrary to congressional intent, (insurance companies) have built into their business model a scheme to ensure that Medicare remains in the dark as to the majority of unreimbursed secondary payments," the suit states.  

None of the defendants has yet been served with the lawsuit.

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