State Insurance Fraud Prevention Acts

California and Illinois have unique insurance fraud prevention acts modeled after the Federal False Claims Act, with one major distinction: the government does not have to suffer harm.

Insurance Fraud versus Government Fraud

Insurance FraudInstead, both the California Insurance Frauds Prevention Act, Ins. Code §§ 1871 et seq., and the Illinois Claims Fraud Prevention Act, 740 ILCS 92/1 et seq., allow whistleblowers to fight insurance fraud by bringing qui tam cases against any person or company that defrauds private insurance companies. Rather than bringing the case on behalf of the government and fellow taxpayers, the whistleblower brings the case on behalf of the government and fellow policyholders.

Both statutes operate much like the Federal False Claims Act. The cases are initially filed under seal so that the government has an opportunity to investigate the claims. Like its Federal and State counterparts, the insurance fraud prevention acts make it illegal to knowingly present false or fraudulent claims to insurers for payment of a loss or injury. In addition, the Acts forbid people and companies from paying incentives or kickbacks in exchange for obtaining insurance benefits.

If found to have violated one of the Acts, a person or company can be fined from $5,000 to $10,000 per violation in addition to damages of three times the amount of money the fraud cost its victims.

Whistleblower Rewards

The California and Illinois Acts actually provide larger whistleblower rewards for successful cases. The whistleblowers that bring the action are rewarded with at least 30% of the recovery in cases that the government gets intervenes or gets involved in and at least 40% of the recovery in cases that the government declines to pursue.

Even if the court ultimately determines that the whistleblower’s case is based primarily on information that was already publicly available from legislative or administrative reports, news articles, or public hearings, the whistleblower can still receive up to 10% of the government’s recovery.

In all three scenarios, the whistleblower can recover reasonable costs and attorney’s fees incurred during the litigation.

Also, both Acts provide strong whistleblower retaliation provisions that allow a whistleblower to be made whole, including reinstatement and backpay, should he or she be demoted, harassed, or otherwise retaliated against for bringing a whistleblower case under the Act.

If you believe you have a case, you should act fast regardless of whether you are governed by the California or Illinois law.  Both require that the case be brought within three years of discovering the fraud, but no more than eight years after the fraud itself took place.  Also, you have to consider that only the whistleblower who files first may receive an award.

Types of Insurance Fraud

Examples of insurance fraud covered by the insurance fraud prevention acts include:

  • Billing health insurance companies for services not performed;
  • Billing health insurance companies for a treatment performed by a person that is not licensed;
  • Submitting multiple insurance claims to health insurance companies for the same service rendered;
  • Employing “runners, steerers or cappers” to recruit patients or clients; and
  • Paying cash inducements or other kickbacks in order to obtain health insurance benefits.

You can read the entire California Insurance Frauds Prevention Act, Ins. Code §§ 1871 et seq., by clicking here or the Illinois Claims Fraud Prevention Act, 740 ILCS 92/1 et seq., by clicking here.

If you believe someone or a company is defrauding health insurance companies, click here to contact us for a confidential case evaluation.