The way auto insurance is supposed to work is that you pay your premiums, and the insurance company pays certain costs if you get into an accident. These typically include medical bills. However, the courts recently unsealed a whistleblower complaint that argues auto insurers have long cheated their responsibilities.
According to a lawsuit filed by MSP Recovery and Akeel & Valentine, hundreds of insurance companies knowingly failed to pay. This isn’t just the standard insurance tactic of paying as little as possible. Instead, the complaint argues the insurance companies refused to report billions of dollars they owed to Medicare and Medicaid. As a result, they stuck taxpayers with the bills.
Insurers’ responsibility to report under Section 111
Possibly the largest qui tam action in U.S. history, the lawsuit claims that over 315 auto insurance companies willfully failed to let Medicare and Medicaid know when they were responsible for the payments. In these cases, Medicare and Medicaid paid the victims’ medical bills, but the insurance companies were the primary payers. They had a legal duty to repay the government.
This duty to repay the government begins with proper reporting. Naturally, insurance companies don’t want to claim responsibility. This is why Section 111 of the Medicare, Medicaid, and SCHIP Extension Act says they must. As the Centers for Medicare & Medicaid Services (CMS) website notes, Section 111:
- Exists to help the CMS pay the appropriate amounts for services
- Mandates reporting by groups that provide liability, no-fault or workers’ compensation insurance
- Identifies specific reporting requirements for these groups
The CMS then uses this reporting to determine what amounts the insurance companies must repay.
According to the lawsuit, hundreds of auto insurance companies knew their reports were flawed. They neither collected nor provided the CMS with key information such as Social Security numbers. Indeed, the lawsuit alleges that the insurance companies’ reporting systems were designed to fail. As a result, the insurance companies were able to hold onto unnamed billions of dollars. They owed this money to the medical providers but chose to let taxpayers foot the bills instead.
What is the purpose of the lawsuit?
As a qui tam action, the lawsuit can help the government recover much of the money the insurance companies refused to pay. It might also force the auto insurance industry to revise and improve its reporting processes. As Shareef Akeel of Akeel & Valentine notes, the CMS pays more than $1.4 trillion each year.
There are multiple billions at stake in past bills. There are also multiple billions at stake each year going forward. The lawsuit aims to hold insurance companies responsible for the billions they owe, rather than letting them surf on taxpayers’ backs.