Humana Agrees to Settle Part D Whistleblower Lawsuit for $90 Million
Humana has agreed to settle a lawsuit filed by a whistleblower who accused the health insurer of submitting fraudulent bids to the HHS Centers for Medicare and Medicaid Services (CMS) for Part D contracts between 2011 and 2017. The Medicare Part D program provides prescription drug coverage for more than 54 million Medicare recipients to help them cover the cost of medications, lowering costs and protecting against higher costs. The U.S. government accepts bids from private health insurers to administer Part D benefits and those insurers must cover a minimum required amount of the drug costs. Annual bids are submitted to the CMS by insurers wishing to participate in the Part D program and they are required to report their proposed benefits and confirm that they meet the government’s minimum standards.
In 2016, a whistleblower, Steven Scott, filed a lawsuit against Humana that alleged violations of the False Claims Act. Scott, a former actuary for Humana, alleged the health insurer was inflating costs to obtain a higher-paying contract and failed to provide the required level of coverage. Humana was alleged to have consistently overcharged the government over a 7-year period resulting in Humana benefitting from cost savings of hundreds of millions of dollars, with Medicare beneficiaries losing out as they were forced to pay more for medications than Congress intended. Scott alleged that Humana was maintaining two sets of books as part of the scheme and ended that practice in 2017, shortly after the government launched an investigation. The Department of Justice dropped the investigation and did not intervene in Scott’s case.
Shortly before the jury trial was due to begin, Humana and Scott agreed to settle the lawsuit. The settlement included no admission of wrongdoing with Humana maintaining that its drug prescription plan was fully compliant with all laws and regulatory requirements and the actuarial assumptions in the plan were reasonable. The decision to settle the lawsuit was taken to avoid the uncertainty and cost of a lengthy jury trial.
Phillips & Cohen, a law firm that specializes in whistleblower lawsuits, represented Scott and said this was the first case of its kind to resolve allegations of fraud in the Part D contracting process. “We alleged that Humana kept two sets of books – one set that its actuaries prepared for bids Humana submitted to the government and a separate internal set that Humana’s actuaries prepared with Humana’s actual anticipated costs, which Humana used for all its business dealings including its internal budgeting,” said Edward Arens, a Phillips & Cohen partner who was involved in the case. “This practice would never have come to light if our brave client, Steven Scott, had not stepped forward to report it.”
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