While there is a growing awareness of risk adjustment fraud within the Medicare Advantage space, a False Claims Act (“FCA”) case recently cast light on a seemingly new frontier in federal risk adjustment fraud investigations and prosecutions – the Affordable Care Act (“ACA”) insurance “Exchanges.” This article examines this potentially new trend.
The ACA created “Health Insurance Marketplaces” – also known as “Exchanges” – designed to breed competition among private insurance carriers offering affordable insurance plans to small businesses and (often lower income) individuals in each state. The ACA generally prohibits plans participating in the Exchanges from setting premiums based on the health status of prospective insureds. For that reason, lawmakers were concerned that private insurers would flee due to fears that unhealthy and, consequently, expensive individuals would sign up for their plans. The danger, in other words, was creating a pool of insureds too risky to feasibly insure.
To address this fear, the ACA created the “HHS risk adjustment model” – a hierarchical condition category-based (“HCC”) risk adjustment paradigm similar to the one employed by the Medicare Advantage program. The intention behind the model was to “provide increased [risk adjusted] payments to health insurance issuers that attract higher-risk populations (such as those with chronic conditions) and reduce the incentives for issuers to avoid higher-risk enrollees. Under th[e] program, funds are transferred from issuers with lower-risk enrollees to issuers with higher-risk enrollees.” 77 Fed. Reg. 17220, 17221 (Mar. 23, 2012). Under this model, the ACA “takes patient data provided by insurers, evaluates each insurer’s risk in a given market, and shifts money from insurers who ended up with healthier populations to insurers who ended up with sicker populations. After completion of the risk adjustment process for a given benefit year, the Government shifts funds by issuing invoices to those insurers who owe risk adjustment payments (and those insurers then submit the due funds directly to the Government), and issues payments from the Treasury to those insurers who are due risk adjustment payments.” U.S. ex rel Osinek, et al. v. Kaiser Permanente, et al.; 2023 WL 4054914, at *6 (emphasis supplied); see also 42 U.S.C. § 18063(a)(1). Given the model’s structure, it’s not hard to see how it may incentivize participating carriers to create the appearance that their insureds are sicker than they actually are through the manipulation of diagnosis codes.
In Osinek, the Northern District of California, ruling on Defendants’ Motion to Dismiss, found that, under such a model, a plausible case could be made that risk adjustment fraud in the form of diagnosis code upcoding constituted a violation of the False Claims Act, insofar as such fraud, under the ACA, could cause the Treasury to issue funds to insurers whose insureds’ risk profiles have been inflated. Id. 2023 WL 4054914, at *6-7. Further to this point, the Court noted that the ACA contains a provision that expressly states that any “[p]ayments made by, through or in connection with an Exchange are subject to the False Claims Act if those payments include any Federal funds.” 42 U.S.C. 18033(a)(6)(A); Osinek at *7.
How Frier Levitt Can Help
Frier Levitt handles healthcare False Claims Act whistleblower cases. If you work for an Exchange and are aware of any risk adjustment upcoding, you may be entitled to compensation as a whistleblower under that law. Contact Frier Levitt for a consultation.
