Legislative Update

We’re heading into the stretch run for the 2018 state legislative season. The Coalition has tracked 113 fraud-related bills despite this being an off-year in many states. A healthy 28 bills were enacted into law, governors vetoed two measures, and 57 bills died, some fortunately so, when legislatures shut down for the year.

All this leaves 26 bills still pending. The November elections already have dampened some fraud bills, with the remaining 26 as question marks: Some statehouses adjourned early to deal with the November elections. Many legislators also are cautious about stumping for (or against) potentially contentious fraud bills. The goal is to slide quietly through the elections without upsetting influential interest groups that could boost or torpedo their election odds.

Even as state bills play out, national organizations also are debating fraud issues. Ensuring that fraud issues remain at the forefront of their attention is an important Coalition goal. We act as a primary anti-fraud liaison with the National Association of Insurance CommissionersNational Council of Insurance Legislators and National Conference of State Legislatures.

State fraud bills and model laws emerge from their talks. So the Coalition steadily provides an informed voice that these national groups rely on for advice and direction on combating fraud.

PIP challenge. Michael “Fat Mike” Danilovich lost his appeal of his federal conviction for a $279-million PIP fraud scheme in the New York City area. Danilovich was a mastermind for one of the largest no-fault fraud rings in the state’s history. There’s nothing inherently wrong with using runners and cappers, he contended in appellate court with a straight face. That fell on deaf ears and the judge shot down his appeal. So for now, Danilovich will keep serving his 25-year sentence for defrauding auto insurers with false whiplash claims.

Bad-faith challenge. An adjuster may be personally liable for bad faith and violations of the Washington state’s Consumer Protection Act, an appeals court ruled in Washington state. All insurance employees have a duty to act in good faith. The Consumer Protection Act doesn’t require that a contractual relationship exists between the parties.

Blackboarding charges. Persons who do not use their available health insurance may “blackboard” the higher “charge master” rates for medical treatment, a California appeals court ruled. But … insurers may present counter evidence of the normal and customary amounts accepted for payment. Insurers cry “foul.” They claim that allowing jurors to hear about higher fees doctors never intend to collect on is fraudulent. The counter argument? If the plaintiff loses, they’re “on the hook” potentially for the higher amounts — with no health insurance to cover the bills.

Coalition defends insurer right to deny bogus PIP claims in New York

Insurers should be empowered to deny payments to doctors who are illegal straw owners of no-fault clinics in New York, the Coalition contends in an amicus “friend of the court” brief to be filed in October. The Coalition supports auto insurers that were bilked out of $30 million in false PIP claims in a case that has reached New York’s highest court.

Dr. Andrew Carothers claimed he owned MRI clinics in the Manhattan area. Except the real owners were laymen swindlers who secretly installed him as a straw owner. This violates New York law requiring licensed physicians to own such clinics. Carothers knew nothing about how the clinics operated, and couldn’t even name his own employees. Yet he filed 20,000 lawsuits against 50-plus auto insurers when the insurers rightfully denied $30 million of false MRI claims.

The Appellate Court affirmed a lower-court civil decision against him, so Carothers appealed to the state’s highest court. The Coalition is defending insurer rights to deny bogus no-fault claims by illegally installed physician owners of clinics in New York. Insurance attorney Roy Mura is writing our amicus brief.

We’ll educate the court about the overriding benefits of preventing no-fault thievery by clinics secretly run by dishonest laymen who install doctors as straw owners — also called the fraudulent practice of corporate medicine. The court must uphold a landmark 2005 court decision that allows insurers to withhold payouts to fraudulently incorporated medical providers in New York, the Coalition is urging.

The Coalition is strengthening the fraud fight by filing amicus briefs in select court cases where decisions can create precedents with lasting legal impact.

The Administration’s efforts to open up easier consumer access to so-called Association Health Plans has prompted a firestorm of controversy. AHPs could be a magnet for fraud. That’s among the chief concerns, the Coalition and numerous other leading groups are warning.

Just as important … the Coalition went to the White House and strongly urged fully empowered state oversight as a shield against AHP scams.

The Administration loosened federal rules in June to let more small groups band together and buy group health coverage as AHPs. The signup gold rush starts Sept. 1.

The Coalition met with the White House this spring. AHP scams could easily crop up amid loose rules allowing groups to create AHPs, the Coalition contended. States need full authority to oversee AHPs and prevent bogus plans from spreading. The Coalition was among the few groups to meet with the White House. We also wrote the U.S. Labor Department a strongly worded letter.

States have a large array of effective anti-fraud tools such as cease-and-desist orders, fraud investigators and solvency oversight. This empowers states to stop scammers who may try to market bogus health plans around the U.S. Similar scams bilked hundreds of thousands of Americans in the early 2000s. States methodically dismantled scam plans back then.

The Coalition’s voice — aligned with many other groups — got through.

The Administration revised the AHP rule. It clarifies that states do have wide oversight authority. Yet the Coalition still urges vigilance against con artists.

Other loopholes and ambiguities still could attract scammers, inviting a potential crime wave of fake AHPs. And where are the extra federal funds needed to support stepped-up state oversight? In fact, at least 12 state AGs (including D.C.) are suing to overturn the rule. Fraud, abuse and potential mismanagement are among their concerns.

Several states also are pushing back in other ways. They cite fraud and other concerns. California clarified that it already prohibits AHPs. Pennsylvania warns that it’ll watch AHPs closely for problems. Vermont filed an emergency rule to protect consumers from abuses. A major national group representing small businesses says it’ll abandon efforts to form AHPs for members, though other groups do plan to get involved.

The Coalition also is compiling a resource guide on Association Health Plans. It’ll provide information on the rule itself … the latest federal updates … how other states are implementing or blocking AHPs … and other practical tools for navigating the tricky environment.

The Coalition encourages members to take part in our government affairs programs. Many members passionately view their roles as protecting consumers and insurers from schemes. Sound anti-fraud laws strengthen protections, and help keep premiums lower. Getting involved in our government affairs efforts provides a clear pathway to increasing your own impact.

We expect a lengthy lineup of fraud bills in 2019 once the shakeout from the November elections settles down. Make your voice heard by helping pass stronger state fraud laws. Here are three ways you can get involved:

  • Suggest legislation for 2019. We’re finalizing the states where we’ll champion legislation next year. Useful ideas also come from members. Frontline fraudfighters often see a problem, loophole or emerging trend where a new or revamped law can help stop scams. A Coalition member, for instance, suggested we expand fraud-reporting immunity to include reporting suspected bad medical providers to state medical and chiropractic boards. If you have an idea for a state, just email Matthew Smith.
  • Introduce the Coalition to your government affairs staff. Our legislative efforts save insurers and their policyholders good money by helping pass tough fraud laws that jail more scammers. We’re glad to talk with your government affairs staff about fraud issues, and how you benefit from being involved. We’re glad to tell the Coalition’s success story, and how legislative involvement matters to you.
  • Take part in letter-writing campaigns. State lawmakers pay attention when fraudfighters write cogent letters urging them to vote for or against fraud bills. We partner with IASIU for online letter-writing campaigns to support strong fraud bills — and oppose weak ones. Fraudfighters are highly credible, so lawmakers listen. Our joint letter-writing campaigns provide a direct pipeline to the lawmaker’s office. More letter campaigns will happen in 2019, so write your legislator when the Coalition and IASIU send you an action request.

The Coalition welcomes your involvement in legislation. Take the first step by sending this issue of Advocate! to your government-affairs team. Encourage them to sign up for this and other Coalition publications.

Coalition set to update landmark model insurance-fraud law

The Coalition plans to update its model insurance fraud act next year. This was the nation’s first comprehensive model state fraud law, enacted in 1995. The model imposed stiff penalties. It also gained wide credibility around the U.S. by defining scams by insurers, agents and bogus insurers as insurance fraud. It expanded protections for consumers while giving states strong tools to convict and penalize insurance schemers of all stripes.

More than half of the states have adopted the Coalition’s model fully or in part since it was released in 1995.

After nearly 25 years of service, the respected model will be revised to reflect changes in how fraud is committed, new kinds of fraud, advances in technology and other societal shifts.

Key will be ongoing member input during drafting — the diverse voices of insurers, consumer leaders and government agencies. The Coalition’s board will vote on the new measure, making it the true voice of our united membership.

You can contribute to the update. Read through the current Act. Submit your thoughts, suggestions and changes to matthew@insurancefraud.org. And of course … stay tuned for much more updates in the year ahead.