Whistleblower Lawsuit Against Humana: Settles Medicare Part D Fraud Allegations For $90M

Last week, Humana Inc HUM agreed to pay $90 million to the federal government to settle a whistleblower lawsuit alleging fraudulent Medicare Part D bids.

The lawsuit, filed by Phillips & Cohen under the False Claims Act, accused the healthcare insurance giant of overcharging the government by submitting misleading bids for Medicare Part D prescription drug contracts between 2011 and 2017.

The case is the first of its kind to address alleged fraud in the Part D contracting process.

Also Read: Insurance Giant Humana Stock Tumbles After Q2 Earnings Beat, Issues Sub Par Profit Outlook.

Medicare Part D, the federal government’s voluntary prescription drug program, contracts with private insurers to cover prescription drug benefits for Medicare beneficiaries.

Insurers must submit annual bids detailing the benefits they plan to offer, which must meet minimum coverage levels as mandated by the Centers for Medicare & Medicaid Services (CMS).

The complaint alleged that while Humana pledged to provide these required benefits, it knowingly planned to deliver less coverage, resulting in the government and beneficiaries bearing more of the costs.

The lawsuit was initiated by whistleblower Steven Scott, a former actuary at Humana, who claimed to have discovered that the company used two assumptions when submitting its bids.

Internally, Humana reportedly made accurate cost predictions for its “Walmart Plan” while basing its official bids to CMS on unsupported assumptions that were consistently inaccurate in Humana’s favor.

The discrepancy allegedly allowed the insurer to profit by hundreds of millions of dollars.

According to the complaint, Humana abruptly ceased using separate assumptions after receiving a Civil Investigative Demand from the government in 2017, potentially mitigating further harm.

Although the Department of Justice (DOJ) chose not to intervene, the case advanced under Scott’s legal team, led by Andrew Shen and James Webster of Kellogg, Hansen, Todd, Figel & Frederick, PLLC.

After extensive legal proceedings, including the denial of both parties’ motions for summary judgment, the court concluded that there was sufficient evidence for a jury to determine whether Humana knowingly made false statements.

The case was set to trial but settled just before proceedings began.

Price Action: HUM stock traded lower by 0.15% at $352.84 on the last check Tuesday.

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