[JURIST] The US Court of Appeals for the Sixth Circuit [official website] on Friday affirmed [opinion, PDF] a $5.1 million fraud judgment against Blue Cross Blue Shield of Michigan [corporate website] (BCBSM). Hi-Lex [corporate website], a car parts manufacturer, sued BCBSM for carrying on in bad faith regarding its Administrative Services Contract (ASC) by which BCBSM provides health insurance to Hi-Lex employees. Specifically, BCBSM paid every hospital bill under the ASC, but added hidden surcharges. It then charged Hi-Lex an additional administrative fee for the “additional” services provided. The US District Court for the Eastern District of Michigan [government website] issued a summary judgment [opinion, PDF] finding that BCBSM was a fiduciary under the controlling statute, the Employee Retirement Security Act (ERISA) [Department of Labor website, LII backgrounder], and in the course of violating such fiduciary duty, was also involved in self-dealing. The court awarded pre- and post-judgment damages to Hi-Lex with interest. BCBSM appealed on the findings of summary judgment, and Hi-Lex cross-appealed, claiming the calculation of damages was insufficient to cover the 20 years of mark-ups discovered. The Court of Appeals reviewed the contested points de novo and upheld all of the district court’s findings.
Insurance fraud and abuse under ERISA has surged [JURIST archive] since promulgation of the Patient Protection and Affordable Care Act (PPACA) [statute, PDF, JURIST archive], commonly referred to as Obamacare. According to the Employee Benefits Security Administration (EBSA) [government website], which enforces ERISA, healthcare fraud by providers and patients grows [EBSA Fact Sheet] as the insurance market expands [EBSA news release]. In the 2013 fiscal year EBSA closed over 3,000 civil investigations regarding health insurance fraud, with over 72% of those cases resulting in monetary damages. Furthermore, EBSA also closed 320 criminal investigations resulting in the indictment of 88 individuals for fraud, chief among them plan administrators in the same position as those responsible for the fraud at BCBSM. Furthermore, the EBSA investigations may only be the tip of the iceberg, as these and other related problems [JURIST report] are also investigated by the Internal Revenue Service and the Federal Bureau of Investigation [agency websites].