Insurers Beware! MAP Assignees File Class Actions Against No-Fault Insurers Throughout the Country Claiming Millions and Double Damages

Posted by Rafael Gonzalez on May 12, 2017 9:00:00 AM

Examining your claimsAs I previously blogged about on September 9, 2016, on August 30, 2016, the United States Court of Appeals for the 11th Circuit published its opinion in MSP Recovery, LLC v. Allstate Insurance Company, concluding that a contractual obligation, without a judgment, settlement, award, or other payment, can satisfy the “demonstrated responsibility” requirement of the private cause of action provided for by the Medicare Secondary Payer Act (MSP Act) at 42 U.S.C. §§ 1395y(b)(2)(B)(ii), (b)(3)(A). The court therefore allowed Medicare Advantage Plan assignee entities to seek double damages against no-fault, med-pay, PIP primary payers because of their refusal to reimburse Medicare advantage plan payments made related to the underlying covered claims.

17 Class Action Lawsuits and Counting

Since then, MSPA Claims 1, an assignee of a Medicare Advantage Plan (MAP) which paid for medical care and treatment on behalf of its Medicare beneficiary enrollees related to auto accidents, has filed 17 class action lawsuits around the country seeking double damages from no-fault and med-pay primary payers. Six of them in federal court, and eleven of them in state court. Thus far, defendants include Scottsdale Insurance Company, Geico Casualty Company, Century Surety Company, National Fire Insurance Company, Kingsway Amigo Insurance Company, Allstate Insurance Company, St. Mary’s, State Farm Mutual Automobile Insurance Company, IDS Property Casualty Insurance Company, Ocean Harbor Casualty Insurance Company, Windhaven Insurance Company, and Government Employees Insurance Company.

Recent Wins

One by one, the courts hearing these matters are agreeing with such class action certification requests. Most recent, MSP Recovery, the parent company to MSPA Claims 1, was able to obtain class certification for Medicare Advantage Organizations (MAO), pursuant to the Medicare Secondary Payer (MSP) law, against IDS Insurance Company. On April 20, 2017, the 11th Circuit Court in Miami-Dade County, Florida, entered a 56-page Order Granting the Motion to Certify Class. In doing so, the Court agreed with MSP Recovery and acknowledged that in processing its no-fault claims, IDS: (1) lacked specific guidelines to determine whether their insureds were Medicare eligible; and (2) failed to notify CMS about every instance in which it receives a no-fault claim from a Medicare beneficiary. This practice by IDS, and by many other no-fault insurers, argued MSP Recovery, causes MAOs to pay for health benefits for which the no-fault carrier is primarily responsible.

This victory comes just a few months after another Court also granted MSP Recovery’s Motion for Class Certification against Ocean Harbor Casualty Insurance in a factually similar context.

Class Action Complaint Against State Farm

So, with two wins under their belt, I thought it was time to examine their claims, their basis for their claims, and their arguments for double damages. In one of their recent cases filed on February 23, 2017, MAO-MSO Recovery II, LLC, a Delaware entity; MSP Recovery, LLC, a Florida entity; and MSPA Claims 1, LLC, a Florida entity (Plaintiffs), on behalf of themselves and all others similarly situated, filed a class action complaint against State Farm Mutual Automobile Insurance Company, an Illinois Company (Defendant) in the United States District Court, for the Southern District of Illinois.

Plaintiffs argue that “the issues are properly brought and should be maintained as a class action for fair and efficient adjudication of this controversy because such treatment will allow a large number of similarly-situated MAOs to litigate their common claims simultaneously, efficiently, and without the undue duplications of effort, evidence, and expense that several individual actions would induce.” Plaintiffs further argue that “individual joinder of the individual members is wholly impracticable; the economic damages suffered by the individual class members may be relatively modest compared to the expense and burden of individual litigation; and the court system would benefit from a class action because individual litigation would overload court dockets and magnify the delay and expense to all parties.” Therefore, Plaintiffs contend that “class action device presents far fewer management difficulties and provides the benefit of comprehensive supervision by a single court with economies of scale.”

Defendant Failed to Reimburse MAPs

Plaintiffs allege “Defendant offers automobile insurance policies that contain no-fault coverage (No-Fault) as well as medical payments (Med-Pay) coverage for any automobile accident-related medical expenses. The policies are required to provide primary coverage for medical bills incurred pursuant to the relevant policies of insurance and statutory provisions that mandate no-fault coverage as applied by the specific states within the United States.”

Plaintiffs and the putative class members (Class Members) allege they “provided Medicare benefits to Medicare-eligible beneficiaries enrolled under the Medicare Advantage program. These Medicare beneficiaries were simultaneously covered by insurance policies issued by Defendant, which made Defendant the primary payer for the medical bills, services, and items paid by Plaintiffs and the Class Members. MAOs paid for the medical items or treatment even though the Defendant was responsible for paying those expenses under their no-fault insurance policies and the Medicare Secondary Payer provisions of Medicare.”

Plaintiffs allege “Defendant failed to fulfill its statutorily-mandated duty to reimburse MAOs for medical expenses arising out of automobile accidents.” Plaintiffs assert “the rights of MAOs via assignment of all rights, title, and interest allowing them to bring these claims.”

Plaintiffs contend “under Medicare Secondary Payer provisions of the Medicare Act, MAOs are, by law, secondary payers for any medical expenses that are covered by a policy of insurance under its terms and provisions. This means that when there is any other source that is responsible for payment for a medical claim(s), i.e., an insurance policy, that has a contractual obligation to pay for the medical services pursuant to the terms and conditions of the policy, there is a “demonstrated responsibility” requiring the primary payer to pay pursuant to its terms and conditions before a Medicare payer like Plaintiffs and the class should pay for the same medical expenses.”

Seeking Double Damages Pursuant to MSP Private Cause of Action

Plaintiffs filed this lawsuit seeking reimbursement for those accident-related medical expenses paid for by the Plaintiffs’ assignors and all other MAOs that should have been paid, in the first instance, by Defendant under the Medicare Secondary Payer provisions. As such, Plaintiffs filed this action on behalf of themselves and all other similarly situated Class Members for: (1) double damages, pursuant to the Medicare Secondary Payer private cause of action, 42 U.S.C. § 1395y(b)(3)(A); and (2) breach of contract under Plaintiffs’ direct right of recovery.

Plaintiffs argue that “the United States District Court for the Southern District of Illinois has subject-matter jurisdiction pursuant to 28 U.S.C. § 1332(d) because at least one member of the class is a citizen of a different state than the Defendant and the aggregate amount in controversy exceeds $5,000,000.00, exclusive of interest and costs.”

Plaintiffs’ position is that “if a primary payer, such as a no-fault insurer, has not made or cannot reasonably be expected to make payment, Medicare makes a conditional payment. However, since Medicare is the secondary payer, the primary payer (such as a no-fault or med-pay insurer) must reimburse Medicare for all conditional payments.” 42 U.S.C. § 1395y(b)(2)(B)(ii).

To enforce this scheme, the Plaintiffs contend MSP provisions created “a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement).” 42 U.S.C. § 1395y(b)(3)(A).

Defendant Has Wrongly Placed Burden on MAPs

Plaintiffs allege “Defendant’s failure to reimburse Plaintiffs and the Class Members for making payments has enabled Defendant to circumvent its responsibilities under the MSP provisions.” As a result, Plaintiffs contend “Defendant has derived substantial profits by placing the burden of financing medical treatments for its policy holders upon the shoulders of MAOs.” In other words, Plaintiffs argue that “Defendant not only avoided having to pay for medical expenses they were otherwise obligated to pay, but the Defendant took advantage of the less expensive costs passed on to Medicare patients.”

Consequently, pursuant to 42 U.S.C. § 1395y(b)(3)(A), Plaintiffs and the Class Members indicate they are “entitled to double damages from Defendant due to its failure to provide primary payment for those claims which the Defendant was the primary payer and for which the Defendant has not provided appropriate reimbursement to the Plaintiffs or Class Members.”

Ascertaining and Administering Damages

Plaintiffs argue that “ascertaining and administering damages will be relatively simple since Defendant maintains a listing of every policy they have issued containing PIP, BRB, or Med Pay coverage and knows which of its policy holders has been involved in an automobile accident.” Plaintiffs contend that “once that data is compiled and organized, Plaintiffs can determine which of the policy holders were Medicare beneficiaries at the time of the accident. Then, using the database, Plaintiffs and the Class Members can identify those payments made for medical treatment where the Defendant was (1) the primary payer and (2) for which reimbursement was not made.”

Conclusion

If the last five years of case law pertaining to Medicare Advantage Plans seeking double damages pursuant to the Medicare Secondary Payer Act private cause of action provision wasn’t enough to catch your attention, these latest class action lawsuits should. The future is here. As I have been speaking and writing about for several years, we now have a new cottage industry of private entities and law firms seeking reimbursement and double damages. Folks, this is not going away. If anything, it will continue to evolve, affecting worker’s compensation insurers next, and liability insurers down the line.

As I have also been warning about for years, if you haven’t already, it is time for your organization to create a process in which your claims system can identify a Medicare beneficiary, can learn about conditional payments made by Medicare, a Medicare Advantage Plan, or a Prescription Drug Plan, analyze such payments, make a determination as to which payments are reimbursable, and reimburse them as quickly as possible, so as to negate Medicare, MAPs, PDPs, and their assignees’ any opportunity to file a private cause of action for double damages.

The last 5 years of case law and these lawsuits also provide clarity that a MAP or its assignee suing a primary plan under the private cause of action in the MSP Act may satisfy the demonstrated responsibility prerequisite by alleging the existence of a contractual obligation to pay. As a result, work comp, no-fault, med-pay, and PIP insurers that have accepted a claim or have made payments on same are now presumptive targets for such private cause of actions.

In addition, a settlement, judgment, award, or payment, whether coverage, liability, responsibility, or compensability has been previously denied, will also satisfy the prerequisite demonstrated responsibility component. As a result, auto, homeowners, commercial liability, medical malpractice, products liability, and general liability insurers that have settled a claim with a Medicare beneficiary and have not made certain that any conditional payments made by Medicare, a MAP, or PDP, have been reimbursed are now on their radar for such private cause of actions.

Now more than ever, your internal conditional payment resolution process will be tested. And if you are outsourcing these functions, now is the time to investigate what they are doing about your MAP and PDP reimbursement requirements. As these lawsuits prove, doing nothing will only get you into trouble. Are you ready? Is your TPA prepared? Is your current vendor adequately protecting you?

About Medicare Conditional Payments

42 CFR Section 411.21 indicates that Medicare conditional payments are payments made by Medicare for medical treatment where a primary payer (insurer or self-insurer) has or may have an obligation to make such payment.  Primary payers must reimburse Medicare for conditional payments it has made. 42 USC Section 1395y indicates that primary payers include group health providers, workers’ compensation, liability and no-fault insurers and self-insured entities, as well as physicians, attorneys, hospitals, or clinics that receive payment from a primary payer must make reimbursement.

42 USC Section 1395y also indicates responsibility as a primary payer arises even if liability for the medical expense is contested. Such a responsibility can be demonstrated by entry of a judgment or by payment conditioned on a release or waiver of payment, even if liability is denied. 42 CFR Section 411.24 indicates Medicare has a direct right of action against all primary payers responsible for making payment. And, Medicare has a direct right of action against any person or entity that received a primary payment, including the Medicare beneficiary, medical provider, physician, attorney, state agency or private insurer.

About Flagship Services Group

Flagship Services Group is the premier Medicare compliance services provider to the property & casualty insurance industry. Our focus and expertise has been the Medicare compliance needs of P&C self-insureds, insurance companies, and third party administrators. We specialize in P&C mandatory reporting, conditional payment resolution, and set aside allocations. Whether auto, liability, no-fault, or work comp claims, we have assembled the expertise, experience and resources to deliver unparalleled MSP compliance and cost savings results to the P&C industry. To find out more about Flagship, our folks, and our customized solutions, please visit us at www.flagshipservicesgroup.com. To speak with us about any of our P&C MSP compliance products and services, you may also contact us at 888.444.4125 or info@flagshipsgi.com.

About Rafael Gonzalez

Rafael Gonzalez, Esq. is President of Flagship Services Group, the only national Medicare Secondary Payer services provider focusing on and offering comprehensive mandatory reporting, conditional payments, and set aside allocation compliance services to the property and casualty insurance industry. He speaks and writes on mandatory insurer reporting, conditional payment resolution, set aside allocations, CMS approval, and MSA and SNT professional administration, as well as the interplay and effect of these processes and systems and the Affordable Care Act throughout the country. Rafael blogs on these topics at Medicare Compliance for P&C Insurers at www.flagshipservicesgroup.com/blog. He is very active on LinkedIn, Twitter, Instagram, and Facebook. He can be reached at rgonzalez@flagshipsgi.com or 813.967.7598

Topics: Liability