Complaint — Negron v. Progressive Casualty Insurance (D.N.J.)

Summary

A qui tam Complaint for violations of the federal and state False Claims Act, filed under seal on January 28, 2014 in United States of America and the State of New Jersey ex rel. Elizabeth Negron v. Progressive Casualty Insurance Company and Progressive Garden State Insurance Company, Case 1:14-cv-00577-NLH-KMW, in the United States District Court for the District of New Jersey. Relator Elizabeth Negron alleges that the defendants exploited New Jersey auto insurance law to avoid paying medical benefits to motor vehicle accident victims by causing healthcare providers to submit claims to Medicare and Medicaid. The complaint cites the Medicare Secondary Payer statute, 42 U.S.C. § 1395y, and N.J.A.C. 11:3-14.5(a). It seeks treble damages and civil penalties of $5,500 to $11,000 per claim.

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Case 1:14-cv-00577-NLH-KMW Document1 Filed 01/28/14 Page 1 of 23 PagelD: 1

IN THE UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY
UNITED STATES OF AMERICA and the
STATE OF NEW JERSEY, ex rel. : UNDER SEAL AND IN CAMERA
ELIZABETH NEGRON :
CIVIL ACTION NO.
Plaintiffs,

PROGRESSIVE CASUALTY INSURANCE
COMPANY

and
PROGRESSIVE GARDEN STATE
INSURANCE COMPANY

Defendants.

COMPLAINT FOR VIOLATIONS OF FEDERAL AND STATE FALSE CLAIMS ACT
I. INTRODUCTION
lL. Qui Tam Relator Elizabeth Negron brings this action on behalf of the United States of
America and the State of New Jersey to recover civil damages and penalties under the False
Claims Act, 31 U.S.C. § 3729, et seq., and the New Jersey False Claims Act, N.J.S. 2A:32C-1, et
seq., against Defendants, Progressive Casualty Insurance Company and Progressive Garden State
Insurance Company.
2. Relator’s allegations against Defendants relate to an illegal scheme by which they
exploited New Jersey auto insurance.law to avoid paying medical benefits to motor vehicle
accident victims by causing healthcare providers to submit false and fraudulent claims to
Medicare and Medicaid.

IL. THE PARTIES

3. Relator Elizabeth Negron (hereinafter “Relator’) is a resident of New Jersey and a citizen

of the United States.
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4. At all times material hereto, Relator was a Medicare beneficiary.

5. Defendant, Progressive Casualty Insurance Company, is an Ohio corporation with a
principal place of business located at 6300 Wilson Mills Road, Cleveland, OH 44143.

6. Defendant, Progressive Casualty Insurance Company is one of the largest insurance
carriers in the United States, with over 10 million insurance policies in force.

7. Defendant, Progressive Garden State Insurance Company, is an Ohio corporation with a
principal place of business located at 6300 Wilson Mills Road, Cleveland, OH 44143.

8. Defendant, Progressive Garden State Insurance Company, is a subsidiary of co-
Defendant, Progressive Casualty Insurance Company.

9. Defendant, Progressive Garden State Insurance Company, is licensed by New Jersey’s
Department of Banking and Insurance to write auto insurance policies in the State of New Jersey.
10. Defendants, Progressive Casualty Insurance Company and Progressive Garden State
Insurance Company, have permanent, continuous and regular contacts with the State of New
Jersey.

IIl.. JURISDICTION AND VENUE

11. This action arises under the law of the United States to redress violations of the federal
False Claims Act (hereinafter “FCA”), 31 U.S.C. § 3729, et seq.

12. Subject-matter jurisdiction is conferred by 31 U.S.C. § 3732(a) and 28 U.S.C. § 1331.

13. | The Court has jurisdiction over Defendants’ violations of the New Jersey False Claims
Act (hereinafter “NJFCA”), N.J.S. 2A:32C-1, et seq., because their violations of New Jersey law
and their violations of federal law arise from the same transactions, occurrences and scheme. The
Court also has pendant jurisdiction over Defendants’ New Jersey law violations because these

violations and Defendants’ violations of federal law arise out of a common nucleus of operative
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facts. In addition, a civil action for violation of the New Jersey False Claims Act may be brought
in state or federal court pursuant to N.J.S. 2A:32C-5.a.

14. The Court has personal jurisdiction over Defendants by and through Defendants’
permanent, continuous and regular contacts with the State of New Jersey.

15. Defendants are permitted and licensed by the State of New Jersey to sell auto insurance
policies to residents of New Jersey. Consequently, Defendants are subject to the jurisdiction of
this Court.

16. Defendants regularly and continuously solicit and sell auto insurance to New Jersey
residents. Therefore, Defendants are subject to the jurisdiction of this Court.

17. | Defendants have caused to be submitted claims for payment to federal and state health
insurance programs, including Medicare and Medicaid. Accordingly, Defendants are subject to
the jurisdiction of this Court.

18. Venue lies under 28 U.S.C. § 1391(b)-(c) and:31 U.S.C. § 3732(a) because Defendants
transact business within this district and the facts forming the basis of this Complaint occurred
within this district.

19. The facts and circumstances of Defendants’ violations of the federal FCA have not been
publicly disclosed in a criminal, civil or administrative hearing, nor in any congressional,
administrative, or General Accounting Office or Auditor General’s report, hearing, audit
investigation or in the news media.

20. The facts and circumstances of Defendants’ violations of the NJFCA have not been
publicly disclosed in a criminal, civil or administrative hearing, nor in any congressional,
administrative, or General Accounting Office or Auditor General’s report, hearing, audit

investigation or in the news media.
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21. Relator is the original source of the information upon which this Complaint is based, as
that phrase is used in the federal FCA, and she provided disclosures of the allegations of this
Complaint to the United States prior to filing.

22. Relator is the original source of the information upon which this Complaint is based, as
that phrase is used in the NJFCA. Prior to filing, she voluntarily provided the information on
which the allegations in this Complaint are based to the State of New Jersey.

23. Immediately upon the filing of this Complaint, Relator will provide the New Jersey
Attorney General with a copy of this Complaint and written disclosure of substantially all
material evidence and information Relator possesses.

IV. APPLICABLE LAW

A. Background on Federal and State-Funded Health Insurance Programs

24. In 1965, Congress enacted Title XVIII of the Social Security Act, which established the
Medicare Program.

25. Medicare provides health insurance to people age 65 or older, people under 65 with
certain disabilities and people of all ages with end-stage renal disease.

26. Payments from the Medicare Program come from a trust fund — known as the Medicare
Trust Fund — which is funded through payroll deductions taken from the work force, in addition
to government contributions.

27. The Medicare Program is administered through the United States Department of Health
and Human Services (“HHS”) and, specifically, the Centers for Medicare and Medicaid Services
(“CMS”), an agency of HHS.

28. | Much of the daily administration and operation of the Medicare Program is managed

through private insurers under contract with the federal government.
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29. Under Medicare Part A, contractors serve as “fiscal intermediaries,” administering
Medicare in accordance with rules developed by the Health Care Financing Administration, now
known as the CMS.

30. | Under Medicare Part B, the federal government contracts with insurance companies and
other organizations known as “carriers” to handle payment for physicians’ services in specific
geographic areas. These private insurance companies, or “Medicare Carriers,” are charged with
and responsible for accepting Medicare claims, determining coverage and making payments
from the Medicare Trust Fund.

31. The principal function of both intermediaries and carries is to make and audit payments
for Medicare services to assure that federal funds are spent properly.

32. To participate in Medicare, providers must assure that their services are provided
economically and are medically necessary. Medicare will reimburse costs for medical services
that are needed for the prevention, diagnosis or treatment of a specific illness or injury.

33. | Medicaid was created in 1965, at the same time as Medicare, when Title XIX was added
to the Social Security Act.

34. | Medicaid aids the states in furnishing medical assistance to eligible, needy persons,
including indigent and disabled persons.

35. Medicaid is the largest source of funding for medical and health-related services for
America’s poorest people.

36. Medicaid is a cooperative federal-state public assistance program that is administered by
the states.

37. | The New Jersey Medical Assistance and Health Services Program (New Jersey

Medicaid) is administered by the New Jersey Department of Human Services (“NJDHS”), and,
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specifically, by the Division of Medical Assistance and Health Services (“DMAHS”). DMAHS
is an agency of NJDHS.

38. Funding for Medicaid is shared between the federal government and those state
governments that choose to participate in the program.

39. Title XIX of the Social Security Act allows considerable flexibility within each State’s
Medicaid plan and, therefore, specific Medicaid coverage and eligibility guidelines vary from
state to state.

40. | However, in order to receive federal matching funds, a state Medicaid program must
meet certain minimum coverage and eligibility standards.

B. New Jersey Auto Insurance Law

Al. In 1972, the New Jersey Legislature enacted the New Jersey Automobile Reparation
Reform Act, commonly referred to as the “No Fault” law or act. N.J.S. 39:6A-1, et seq

42. Under the 1972 statute, all insurance policies written for private passenger vehicles were
required to provide enumerated personal injury protection (“PIP”) benefits to certain classes of
persons without regard to who was at fault for causing the motor vehicle accident. Id.

43. PIP benefits, which include medical benefits, are used to pay medical and other related
expenses incurred by the insured as the result of a motor vehicle accident.

44. In1990, the New J ersey Legislature enacted the Fair Insurance Reform Act. 1990 N.J.
ALS 8.

45. The Fair Insurance Reform Act of 1990 requires insurers to provide an option for
insureds to have their health insurance, including insurance from a federal or state program, be
primarily responsible for payment of PIP-like benefits. N.J.S. 39:6A-4.2 and 39:6A-4.3. This

option is often referred to as the “health first option.” In order to avoid coverage disputes,
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N.J.A.C. 11:3-14.5(b) requires written information identifying the health insurer providing
primary PIP medical expense benefits.

46. | When the insured chooses this option, an insurance company like Progressive is only
secondarily liable for medical expenses under the terms of the insurance contract.

47. Pursuant to the statutory language and guidelines provided by New Jersey’s Department
of Banking and Insurance, an insured can choose to have virtually any health insurance carrier be
primary payer of PIP benefits, including federal or state programs, but not Medicare or
Medicaid. N.J.A.C. 11:3-14.5(a).

C. Medicare Secondary Payer Law

48. Incertain cases, an individual who is eligible for Medicare coverage also has coverage
through an auto insurance policy providing no-fault medical benefits.

49. Congress endeavored to coordinate payment in situations in which an individual has
overlapping Medicare benefits and private insurance coverage by enacting the Medicare
Secondary Payer (“MSP”) statute in 1980. 42 U.S.C. § 1395y, et seq.

50. The MSP statute and related regulations dictate when Medicare will pay a medical claim
as the “primary payer” and when Medicare will pay as a “secondary payer.” Generally, under the
MSP statute and related regulations, the private insurance carrier is always the primary payer.
See, e.g., 42 U.S.C..§ 1395y(b)(1)(A),(B); 42 C.F.R. §§ 411.172, 411.101, 411.203.

51. The cos has provided guidelines on when Medicare will pay medical benefits when no-
fault auto insurance coverage is also available.

52. The CMS has promulgated the following guideline: “ Under § 1862(b)(2) of the Act, 42
U.S.C. 1395y(b)(1), Medicare does not make payment for covered items or services to the extent

that payment has been made, or can be reasonably be expected to be made under no-fault
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insurance. Medicare is secondary to no-fault insurance even if State law or a private contract of
insurance stipulates that its benefits are secondary to Medicare benefits or otherwise limits its
payments to Medicare beneficiaries...” Medicare Secondary Payer (MSP) Manual, Chapter 2 —
MSP Provisions, Section 60 — No-Fault Insurance (Rev. 49, Issued: April 07, 2006;
Effective/Implementation: May 08, 2006).

53. Medicare is liable for claims stemming from a motor vehicle accident only when the no-
fault insurance coverage, such as PIP, has exhausted.

D. Medicaid Secondary Payer Law

54. Just like Medicare, Medicaid is generally considered the payer of last resort. 42 C.F.R. §
433.135, et seq. |

55. Section 433 of Title 42 regulates State fiscal activities with respect to state-ran Medicaid
programs. 42 C.F.R. § 433.1.

56. Subpart D (“Third Party Liability”) concerns the liability of third parties, such as
commercial insurance companies, with respect to claims submitted to a Medicaid program for
payment. 42 C.F.R. § 433.135, et seq.

57. Similar to the MSP statute, federal regulation ensures that Medicaid is secondary to other
available sources of insurance benefits, including no-fault auto insurance benefits like PIP. 42
C.F.R. § 433.139.

E. New Jersey Secondary Payer Law

58. | New Jersey’s “health first option” was enacted ten years after the MSP statute and 42
C.F.R. § 433. Not surprisingly, the statute considers the secondary status of Medicare and
Medicaid. The statute expressly provides, “this option shall not apply to any coverage or benefits

provided pursuant to Medicare or Medicaid.” N.J.A.C. 11:3-14.5(a).
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59. Pursuant to the statute’s language, it is illegal under New Jersey law to bill Medicare and

Medicaid as primary under the terms of an auto insurance policy. N.J.A.C. 11:3-14.5(a).

60. New Jersey’s Department of Insurance has advised that an insured “cannot select

Medicare or Medicaid as your primary health insurer for auto accidents.”

F. The Federal False Claims Act

61. The FCA provides for liability for treble damages and a penalty from $5,500 to $11,000

per claim for anyone who knowingly submits or causes the submission of a false or fraudulent

claim to the United States.

62. The FCA extends civil liability to any person who: (1) knowingly presents, or causes to

be presented, to an officer or employee of the United States government or a member of the

Armed Forces of the United States a false or fraudulent claim for payment or approval; (2)

knowingly makes, uses or causes to be made or used, a false record or statement to get a false
claim or fraudulent claim paid or approved by the government; (3) conspires to defraud the

government by getting a false or fraudulent claim allowed or paid. 31 U.S.C.S. § 3729(a).

63. To establish a prima facie case under 31 U.S.C.S. § 3729(a)(1) of the FCA, the United

States must prove: (1) the defendant presented or caused to be presented to an agent of the

United States a claim for payment; (2) the claim was false or fraudulent; and (3) the defendant

knew the claim was false or fraudulent. Under the FCA, 31 U.S.C.S. § 3729 et seq., a claim

includes any request or demand for money from the United States government. 31 U.S.C.S. §

3729(c).

64. In the context of the FCA, the term "knowingly" is defined as follows: "knowing" and

"knowingly" mean that a person, with respect to information: (1) has actual knowledge of the

information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts
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in reckless disregard of the truth or falsity of the information, and no proof of specific intent to
defraud is required. 31 U.S.C.S. § 3729(b).

65. | The Supreme Court has held that the FCA is intended to reach all types of fraud, without
qualification, that might result in financial loss to the government and reaches beyond "claims"
that might be legally enforced, to all fraudulent attempts to cause the government to pay out
sums of money and, therefore, the term "false or fraudulent claim" should be construed broadly.

United States v. Neifert-White Co., 390 U.S. 228, 232-33 (1968).

66. Although the archetypal qui tam action is filed by an insider at a private company who
discovers his employer has overcharged under a government contract, courts have been willing

to entertain FCA actions under numerous alternative theories. United States ex rel. Hopper v.

Anton, 91 F.3d 1261, 1266 (9th Cir. 1996).
67. The Third Circuit has also recognized FCA liability in cases in which a "defendant
causes, or will cause, [an] intermediary to make a false claim against the government resulting in

a financial loss to the treasury." Hutchins, 253 F.3d at 185; see, e.g., United States v. Bornstein,

423 U.S. 303, 309, 96 S. Ct. 523, 46 L. Ed. 2d 514 (1976).

68. | The United States District Court for the Eastern District of Pennsylvania has already
addressed FCA liability under the MSP in United States ex rel. Drescher v. Highmark, Inc., 305
F, Supp. 2d 451 (E.D. Pa. 2004). In denying the defendant’s 12(b)(6) motion to dismiss, the
District Court held that FCA liability may be triggered when a private insurance company causes
a medical provider to a submit a claim to Medicare as the purported primary payer. Id. at 461.

G. New Jersey’s False Claims Act

69. The NJFCA was enacted in 2008 and became effective on March 13, 2008.

70. The NJFCA is modeled after the federal FCA.

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71. |The NJFCA provides, in pertinent part: (a) a person who (1) knowingly presents or
causes to be presented to an employee, officer or agent of the State, or to any contractor, grantee,
or other recipient of State funds, a false or fraudulent claim for payment or approval; (2)
knowingly makes, uses, or causes to be made or used a false record or statement to get a false or
fraudulent claim paid or approved by the State; or (3) conspires to defraud the State by getting a
false or fraudulent claim allowed or paid by the State; is jointly and severally liable to the State
for a civil penalty of not less than and not more than the civil penalty allowed under the federal
FCA. NJFCA § 2A:32C-3.a, et seq.

72. Under the NJFCA, the term "knowingly" is defined as follows: "knowing" and
"knowingly" mean that a person, with respect to information: (1) has actual knowledge of the
information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts
in reckless disregard of the truth or falsity of the information, and no proof of specific intent to
defraud is required, NJFCA § 2A:32C-2.

73. Equal to the FCA, the NJFCA provides for liability for treble damages and a penalty from
$5,500 to $11,000 per claim for anyone who knowingly submits or causes the submission of a
false or fraudulent claim to the United States.

Vv. FACTS

A. Progressive’s Online Application

74. Defendants’ have an online application for auto insurance on their website,
www.progressive.com.

75. Defendants’ online application requires the applicant to enter personal information then

recommends a policy based on the information entered.

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76. During the application process, the applicant is asked whether all members of his or her
household are covered by health insurance and whether that health insurance covers injuries in
the event of an accident.

77. If the applicant selects “Yes” for each of these inquiries, Progressive automatically
recommends a policy in which the health insurance carrier is deemed primary payer of PIP
benefits, including medical benefits.

78. On the page that outlines the aforesaid recommended policy, there is a section for “PIP
(Personal Injury Protection) Policy Coverages.”

79. Within the aforementioned section, it reads “No” next to “PIP Primary Insurer,” thereby
attempting to indicate that Progressive will be secondarily liable for PIP benefits, including
medical benefits.

80. Next to “PIP Primary Insurer” is a “?” within a box.

81. Only when the applicant clicks on the “?” does Progressive offer an explanation for this
coverage selection. |

82. Moreover, if, and only if, the applicant clicks on the “?,” is the applicant instructed to
select “Yes” if... “one or more of the drivers on the policy are on MEDICARE or
MEDICAID...”

83. Even though Defendants’ online application automatically enrolls applicants into the
“health first option,” the application never inquires into the applicant’s Medicare or Medicaid
status.

84. Accordingly, Medicare and Medicaid beneficiaries are automatically recommended auto

_ insurance policies with the “health first option” and are subsequently enrolled into such policies. |

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85. Defendants could prevent Medicare and Medicaid beneficiaries from being enrolled into
the “health first option” by simply asking the applicant whether he or she is a Medicare or
Medicaid beneficiary. Likewise, Defendants could ensure that state and federal law is not
violated by automatically enrolling applicants into an auto insurance plan where PIP is primary.
86. Rather, Defendants’ online application leaves it up to the prospective policy member to
manually opt out of the “health first option” if he or she is a Medicare or Medicaid beneficiary.
87. Upon information and belief, the online application process provides Defendants no
information as to an applicant’s health insurance carrier.

B. Relator’s Motor Vehicle Accident and Resulting False and Fraudulent Claims

88. At all times material hereto, Relator was the owner of a 1994 Chevrolet G20 Van that
was registered in New Jersey.

89. Relator purchased an auto insurance policy from Defendants through the aforementioned
online application process.

90. Atall times material hereto, Relator was a Medicare beneficiary due to a disability.

91. For reasons previously described, Relator was automatically recommended an auto
insurance policy with the “health first option” and subsequently enrolled into such a policy
despite being a Medicare beneficiary.

92. Defendants never inquired into Relator’s Medicare status during the application process.
93. Relying on the information and recommendations provided by Defendants, Relator never
clicked on the “?” to get more information about the “PIP Primary Insurer” coverage option.

94, Since Relator did not manually opt out of the “health first option,” she was told she

would receive a discount on her premiums.

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95. Thereafter, Relator was insured by Defendants who assigned her a policy with number
50797095-0.

96. On May 14, 2010, Relator was involved in a motor vehicle accident in Philadelphia,
Pennsylvania.

97. After the accident, Relator received medical treatment from the following healthcare
providers: Diagnostic Imaging, Inc., Oxford Health Care, P.C., Aria Health System and the City
of Philadelphia EMS Division.

98. Asis customary with motor vehicle accident victims, these healthcare providers
submitted their bills to Relator’s auto insurer (Defendants) for payment.

99. Defendants received the aforementioned bills and assigned them claim number
103118594.

100. The aforementioned medical bills were processed by a Progressive adjuster.

101. Pursuant to Progressive’s claims processing procedures, the adjuster denied the bills
recognizing that Relator was enrolled in the “health first option.”

102. The adjuster then sent denial letters to Relator and the healthcare providers.

103. The letter explained that Relator was ineligible for PIP benefits under her policy because
she “elected to have [your] health insurance as the primary source of coverage for medical
costs.”

104. The letter further instructed, “[A]II medical bills related to the above captioned loss
should be submitted to [your] health insurance carrier for payment.”

105. Accordingly, Diagnostic Imaging, Inc. was caused to submit their bills to Medicare.

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106. Upon information and belief, the CMS contractor for Medicare recognized that there was
possible no-fault insurance available and, therefore, denied Diagnostic Imaging, Inc.’s first
submission on or about January 18, 2011.

107. Diagnostic Imaging, Inc. resubmitted its bills to Medicare, despite their being no-fault
insurance available from Defendants, and Medicare paid the false and fraudulent claims on or
about February 08, 2011.

108. After receiving Defendants’ letter, Oxford Healthcare contacted Progressive and advised
the adjuster that it was not an approved Medicare provider. The adjuster requested a letter from
Oxford indicating that it did not participate in Medicare before Defendants finally paid some of
the bills.

109. After receiving Defendants’ letter, Aria Health System attempted to reach out to Relator
in order to obtain her health insurance information. By the time Aria’s billing department figured
out that Relator was a Medicare beneficiary, it had missed the Medicare submission deadline.
Accordingly, Aria simply wrote off the bills as a loss.

110. After receiving Defendants’ letter, the City of Philadelphia billed Medicare for its
ambulatory services. However, the City missed the Medicare submission deadline and the CMS
contractor denied the claims as untimely.

111. When all of the aforementioned claims were submitted to Medicare, there were still
medical benefits available under Relator’s auto insurance policy with Defendants.

112. Defendants had actual knowledge of Relator’s Medicare status after its adjuster’s

conversation with Oxford Healthcare, if not sooner.

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113. Prior to obtaining actual knowledge of Relator’s Medicare status, Defendants deliberately
ignored Relator’s Medicare status and acted with reckless disregard as to the identity of Relator’s
health insurance carrier.

114. After discussing Relator’s Medicare status with Oxford Healthcare and Relator,
Defendants knew their denial letter and actions were causing Relator’s healthcare providers to
submit bills to Medicare even though the PIP benefits had not exhausted.

115. Prior to obtaining knowledge of Relator’s Medicare status, Defendants deliberate
ignorance of Relator’s Medicare status and their reckless disregard as to the identity of Relator’s
health insurance carrier caused Relator’s healthcare providers to submit false and fraudulent
claims to Medicare.

VI. COUNTS

COUNT I (ALL DEFENDANTS) — VIOLATIONS OF THE FEDERAL FALSE
CLAIMS ACT, 31 U.S.C. § 3729, et seq.

116. Relator re-alleges paragraphs 1-112 as if set forth in full herein.

117. Defendants automatically recommend and subsequently enroll applicants into auto
insurance policies that treat the health insurance carrier as primary payer of medical
expenses, irrespective of whether that applicant is a Medicare beneficiary.

118. When the Medicare beneficiary is involved in a motor vehicle accident, his or her
respective healthcare providers submit claims to Defendants for payment under the auto
insurance policy.

117. Defendants instruct their adjusters to check whether the insured is enrolled in a policy

with the “health first option.”

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118.

118.

119.

120.

121.

122.

123.

If the policy provides that the health insurance carrier is primary payer of PIP under the
policy, the adjuster then sends denial letters to the insured and the insured’s healthcare
providers.

Within that letter, the adj uster instructs the aforementioned parties to submit the medical
bills to the insured’s health insurance carrier because the auto insurance is secondary
under the terms of the policy.

Defendants: (1) know that the health insurance carrier is Medicare and disregard this fact:
(2) deliberately avoid checking to see if the insurance carrier is Medicare; or (3) act with
reckless disregard as to the identity of the health insurance carrier.

Defendants’ actions and claims processing procedures cause the healthcare providers to
submit false and fraudulent claims to Medicare.

By submitting claims to Medicare, the healthcare providers are certifying their
compliance with all applicable Medicare law including the Medicare Secondary Payer
Statute.

The healthcare providers, acting under instruction of Defendants, are violating the
Medicare Secondary Payer Statute because they are submitting claims to Medicare when
there are no-fault insurance benefits available. Therefore, these claims are false and
fraudulent.

By submitting the claims to Medicare, despite there being no-fault insurance benefits
available, the healthcare providers: (1) know they are submitting false and fraudulent
claims under the Medicare Secondary Payer Statute; (2) are deliberately ignoring the

falsity of the claims under the Medicare Secondary Payer Statute; and (3) are acting with

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124.

125.

126.

127.

128.

129.

130.

131.

132.

133.

reckless disregard as to the falsity of the claims under the Medicare Secondary Payer
Statute.

Defendants’ egregious and fraudulent actions are causing the healthcare providers to
submit such false and fraudulent claims to Medicare.

The New Jersey Legislature created the “health first option” in 1990.

Since 1990, Defendants have been illegally enrolling Medicare beneficiaries into auto
insurance policies where the health insurance carrier is deemed primary payer of medical
expenses.

Numerous healthcare providers have submitted millions of claims to Defendants for
payment under such auto insurance policies.

Defendants systematically deny these claims as the purported secondary payer.
Defendants recklessly instruct their policyholders and their healthcare providers to submit
their claims to the policyholders’ health insurance carrier- Medicare.

Through Defendants’ fraudulent and reckless practice, Medicare has received millions of
false and fraudulent claims since 1990.

The mere submission of a claim to Medicare constitutes fraud under the federal False
Claims Act.

CMS contractors are paying many of these false and fraudulent claims.

Defendants could stop healthcare providers from submitting false and fraudulent claims
under these circumstances by simply inquiring into an insured’s Medicare status during
the application process or before instructing the healthcare providers to submit their

claims to the health insurance carrier.

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134.

135.

136.

137.

138.

139.

140.

141.

142.

Given the scale of Defendants’ fraud, and the ease at which it could be prevented,
Defendants are purposefully deriving great economic benefit at the cost of taxpayers.
Defendants have saved billions of dollars by leading healthcare providers to think that
they are secondarily liable for medical expenses.

Defendants have caused the Medicare Trust Fund to lose billions of dollars by misleading
healthcare providers into thinking Defendants are secondarily liable for medical

expenses.

COUNT I (ALL DEFENDANTS) — VIOLATIONS OF NEW JERSEY’S FALSE
CLAIMS ACT, 31 U.S.C. § 3729, N.J.S. 2A:32C-1, et seq.

Relator re-alleges paragraphs 1-36 as if set forth in full herein.

Defendants automatically recommend and enroll applicants into auto insurance policies
that treat the health insurance carrier as primary payer of medical expenses, irrespective
of whether that applicant is a Medicaid beneficiary.

When the Medicaid beneficiary is involved in a motor vehicle accident, his or her
respective healthcare providers submit claims to Defendants for payment under the auto
insurance policy. |

Defendants instruct their adjusters to check whether the insured is enrolled in the “health
first option.”

If the policy provides that the health insurance carrier is primary under the policy, the
adjuster then sends denial letters to the insured and healthcare providers.

Within that letter, the adjuster instructs the aforementioned parties to submit the medical
bills to the insured’s health insurance carrier because the auto insurance is secondary

under the terms of the policy.

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Case 1:14-cv-00577-NLH-KMW Document1 Filed 01/28/14 Page 20 of 23 PagelD: 20

143.

144.

145.

146.

147.

148.

149.

150.

Defendants: (1) know that the health insurance carrier is Medicaid and disregard this fact;
(2) deliberately avoid checking to see if the insurance carrier is Medicaid; or (3) act with
reckless disregard as to the identity of the health insurance carrier.

Defendants’ actions and claims processing procedures cause the healthcare providers to
submit false and fraudulent claims to Medicaid.

By submitting claims to Medicaid, the healthcare providers are certifying their
compliance with all applicable Medicaid law including all federal and state regulation
regarding Medicaid’s secondary payer status.

The healthcare providers, acting under instruction of Defendants, are violating the
aforementioned state and federal law because they are submitting claims to Medicaid
when there are no-fault insurance benefits available. Therefore, these claims are false and
fraudulent.

By submitting the claims to Medicaid, despite there being no-fault insurance benefits
available, the healthcare providers: (1) know they are submitting false and fraudulent
claims under the Medicare Secondary Payer Statute; (2) are deliberately ignoring the
falsity of the claims under the Medicare Secondary Payer Statute; and (3) are acting with
reckless disregard as to the falsity of the cla ims under the Medicare Secondary Payer
Statute.

Defendants’ egregious and fraudulent actions are causing the healthcare providers to
submit such false and fraudulent claims.

The New Jersey Legislature created the “health first option” in 1990.

Since 1990, Defendants have been enrolling Medicaid beneficiaries into auto insurance

policies where the health insurance carrier is deemed primary payer of medical expenses.

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Case 1:14-cv-00577-NLH-KMW Document1 Filed 01/28/14 Page 21 of 23 PagelD: 21

151.

152.

153.
154.
155.

156.

157.

158.

159.

160.

Various healthcare providers have submitted millions of claims to Defendants for
payment under such auto insurance policies.

Defendants systematically deny these claims as the purported secondary payer.
Defendants recklessly instruct their policyholders and their healthcare providers to submit
their claims to the policyholders’ health insurance carrier- Medicaid.

Through Defendants’ fraudulent and reckless practice, Medicaid has received millions of
false and fraudulent claims since 1990.

The mere submission of a claim to Medicaid constitutes fraud under the NJFCA.

The State of New Jersey is paying many of these false and fraudulent claims.

Defendants could stop healthcare providers from submitting false and fraudulent claims
under these circumstances by simply inquiring into an insured’s Medicaid status during
the application process or before instructing the healthcare providers to submit their _
claims to the health insurance carrier.

Given the scale of fraud, and the ease at which it could be prevented, Defendants are
purposefully deriving great economic benefit at the cost of taxpayers.

Defendants have saved billions of dollars by misleading healthcare providers into
thinking they are secondarily liable for medical expenses.

Defendants have caused the State of New Jersey to lose billions of dollars by misleading
healthcare providers into thinking Defendants are secondarily liable for medical
expenses.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs, the United States of America and the State of New Jersey,

through Relator, requests the Court enter the following relief:

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Case 1:14-cv-00577-NLH-KMW Document1 Filed 01/28/14 Page 22 of 23 PagelD: 22

A. That Defendants be ordered to cease and desist from violating 31 U.S.C. § 3729, et seq.
and N.J.S. 2A:32C-1, et seq.

B. That this Court enter judgment against Defendants in an amount equal to three times the
amount of damages the United States has sustained because of Defendants’ actions, plus a
civil penalty of not less than $5,500 and not more than $11,000 for each violation of 31
USS.C. § 3729, et seq.

C. That this Court enter judgment against Defendants in an amount equal to three times the
amount of damages the State of New Jersey has sustained because of Defendants’ actions,
plus a civil penalty of not less than $5,500 and not more than $11,000 for each violation

of N.J.S. 2A:32C-1, et seq.

D. That Relator be awarded the maximum amount allowed under the federal FCA and
NJFCA.
E. That Relator be awarded all costs of this action, including attorneys' fees and expenses.
F. That Relator recover such other relief as the Court deems just and proper.
Respectfully submitted,

JERRMY E/\ABAY, ES

Sa Weston, Petrelli, ond & Millstein, LLC
1818 Market Street, Suite1 700

Philadelphia, Pennsylvania 19103

(215) 523-6900

Attorney for Relator

Date: January 28, 2014

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Case 1:14-cv-00577-NLH-KMW Document1 Filed 01/28/14 Page 23 of 23 PagelD: 23

CERTIFICATE OF SERVICE

[hereby certify that a true and correct copy of the foregoing Complaint, along with a

copy of Relator’s Disclosure Statement, was served upon the following on the date below via

Federal Express.

Eric Holder
Attorney General of the United States
950 Pennsylvania Avenue, NW
Washington, DC 20530

Paul Fishman
Assistant United States Attorney General
District of New Jersey
970 Broad Street, 7th Floor
Newark, NJ 07102

Ellie Honig
Medicaid Fraud Control Unit
Office of the New Jersey Attorney General

P.O. Box 094
- Trenton, NJ 08625-0094

SACKS, WESTON, PETRELLI, DIAMOND & MILLSTEIN, LLC

Marke treet, Suite 1
Phil elphia, Pennsylvania 103

(215) 523-6900

Date: January 28, 2014

23


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