I. INTRODUCTIONInsurance fraud - whether in the auto, workers’ compensation, or health insurance arenas - is an enormous and costly national problem. It hurts policyholders who have to pay increased premiums to offset the cost of fraud, patients who are subjected to fraudulent treatment designed to take advantage of insurance benefits rather than to treat their conditions, the general public whose trust in the country’s insurance systems is eroded, and payors who are defrauded into paying claims they do not owe. Prevention of insurance fraud is plainly in the public’s interest, and California has taken a unique step to combat it.Specifically, as part of its multi-pronged effort to fight insurance fraud, the California Legislature enacted a unique and powerful statute, the California Insurance Frauds Prevention Act (“IFPA”), Cal. Ins. Code §§ 1871.7 et seq., which allows “any interested persons, including an insurer” to act as a whistleblower and file a false claims lawsuit based on the presentation of false or fraudulent claims to insurance companies, rather than to the government. (Emphasis added.)

To Violate FCA, Labs Must Encourage Medically Unnecessary Tests Rather than Merely Induce Test Referrals By Amanda Barbour In United States v. Lab. Corp. of Am. Holdings, No. 9:14-cv-3699-RMG, 2019 WL 236799 (D.S.C. Jan. 16, 2019), relators filed a qui tam complaint alleging that LabCorp violated the FCA through several fraudulent schemes impacting government healthcare programs, such as billing for medically unnecessary tests and paying kickbacks to physicians for ordering tests from LabCorp, and that it did so as part of a conspiracy with two other laboratories. In addition to claims under the FCA, relators brought claims under the California Insurance Fraud Prevention Act (CIFPA), Cal. Ins. Code §1871.7 and the Illinois Insurance Claims Fraud Prevention Act (ICFPA), 740 Ill. Comp. Stat.

Farmers Insurance Exchange, et al v. Maurice Hale, M.D., et al, case No. BC515676 (California Superior Court, County of Los Angeles; filed July 18, 2013): In a recently unsealed qui tam lawsuit, Farmers Insurance and several other insurers allege that two imaging providers, Glendale Diagnostic Imaging Network and Central Imaging Network LLC, and their owners, Maurice Hale, M.D and Snezana Pavlovic, violated California’s Insurance Frauds Prevention Act (Cal. Ins. Code Section 1871.7), as well as California’s Unfair Business Practices Act (Cal. Bus. & Prof. Code Section 17200), by submitting false bills for “3D Rendering” of MRI and CT scans which were never prescribed or performed.

Three former employees of Bristol Myers Squibb, Inc. (BMS) brought a qui tam action alleging that BMS violated California’s Insurance Frauds Prevention Act, California Insurance Code section 1871.7 et seq. (IFPA), by giving physicians lavish gifts to induce them to prescribe its drugs or to reward high-prescribing physicians. The California Insurance Commissioner intervened in the case.

According to the complaint, BMS caused false claims to be submitted to insurance policies in violation of Cal. Penal Code Section 550. The plaintiffs also make creative use of California’s runners and cappers statute, Cal. Ins. Code § 1871.7, which prohibits the knowing employment of “runners, cappers, steerers … to procure clients or patients … to perform or obtain services or benefits under a contract of insurance or that will be the basis for a claim against an insured individual or his or her insurer.” BMS allegedly violated this law by “employing” physicians by paying them kickbacks in order to “procure clients or patients . . . to obtain services or benefits” under an insurance contract, and by employing sales representatives to give kickbacks to physicians to generate prescriptions that would be paid by private insurers.