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Author: Bo Frith

Insurance Fraud

June 19, 2020

We have written before on the various attempts at fraud perpetrated by insurance salesmen. We have also handled numerous cases of egregious insurance fraud. Fraud in the insurance industry is not going away.

Banner Life Insurance was recently hit with a $40.5 million settlement for fraudulently increasing the cost of insurance premiums. The case, filed in Maryland, detailed a scheme affecting roughly 10,000 policyholders where the insurance company significantly increase premiums on policies bought years, even decades, prior.

There are strict rules governing premium increases on insurance policies. After reports of skyrocketing premiums, Congress attempted to rein in rate increases.[1] The Affordable Care Act requires the federal government to work with the states to develop a process for reviewing unreasonable increases in premiums for certain categories of health insurance. As of 2012, insurers may not increase rates above a Virginia-specific percentage.[2]

Most interestingly in the Banner Life case, a whistleblower was the person who brought the fraudulent activities to light. It appears an employee with the defendant insurance company informed the plaintiff’s attorneys of the fraudulent scheme. It is highly likely the whistleblower received significant financial compensation in bringing the injustice to the public.

In addition to the protections afforded whistleblowers under the Virginia Fraud Against Taxpayers Act and the federal False Claims Act, the soon-to-be-enacted HB798 will provide additional protections for whistleblowers from retaliation as well as significant financial incentives to come forward.

[1] Abelson, Reed. Health Insurers Making Record Profits As Many Postpone Care. New York Times. May 13, 2011. Available at https://www.nytimes.com/2011/05/14/business/14health.html.

[2] Fighting Unreasonable Health Insurance Premium Increases. Centers for Medicare & Medicaid Services. Nov. 16, 2011. Available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/ratereview05192011a#_ftn1.

Virginia’s New Whistleblower Law: Timing Is Critical

June 1, 2020

Virginia’s new whistleblower protection law, HB 798, becomes effective July 1, 2020. It provides a host of broad protections for employees who suffer retaliatory conduct by their employer. A key aspect of this law is the issue of timing. Understanding this issue is critical to the success or failure of whistleblower claims.

Predictably, the business lobby expresses concern over the new law. Business groups claim the law allows almost any employee to conjure up, facing the prospect of performance related discipline or discharge, some purported misdeed about which the employee contends they have complained in order to avoid termination or to file suit.

The issue of timing is vitally important to whistleblower claims. While studies consistently show that the concerns of baseless lawsuits to be unfounded[1], courts throughout the country are suspect are whistleblower claims that occur at the same time or subsequent to termination.[2]

A few areas employees should be aware of before making a claim of retaliation under the new whistleblower law:

  • Was the employee’s whistleblowing conduct prior to the date of termination?
    • Courts are highly suspicious of the authenticity of an employee’s whistleblowing when it occurs at the same time as that of termination.
  • Did the employer have a clearly delineated whistleblower policy of which the employee was aware prior to the alleged retaliation?
    • If the employee was unclear as to which supervisor to inform of unethical conduct, it is harder for the employer to claim the employee failed to follow proper protocol in whistleblowing.
  • Did the employer investigate the employee’s whistleblowing allegation prior to termination?
    • If the employer failed to investigate the employee’s whistleblowing prior to termination, it is harder for the employer to argue they took the employee’s allegations seriously.
  • If the employer alleges performance issues for the employee, were those issues documented prior to the employee’s whistleblowing?
    • If the employer does not have documentation of the employee’s alleged performance issues prior to the employee’s whistleblowing conduct, it is more difficult for the employer to argue termination is related to job performance rather than retaliation for statutorily protected whistleblowing.

Any of the above issues can have a significant effect on a case, either positively or negatively. Potential whistleblowers should think carefully about these issues and secure documentation whenever possible.

[1] Dyck, Alexander, et al. Who Blows the Whistle on Corporate Fraud? The Journal of Finance, vol. 65, no. 6, 2010, pp. 2213–2253. JSTOR. Available at www.jstor.org/stable/23324409.

[2] See e.g., Berber v. Wells, 1:16-cv-24918-JEM. Unpublished. (Jan. 8, 2020, 11th Cir).

Non-Competes No Longer Enforceable for Lower Income Workers

June 1, 2020

A landmark new law passed by the Virginia legislature will render many non-competition provisions unenforceable. House Bill 330 states that non-competition provisions can no longer be enforced against “low wage” employees.

The statute defines “low wage” as less than the average weekly wage of the Commonwealth. This is a significant change and an amount much greater than other similar states. The average weekly wage of the Commonwealth changes from year to year. The Virginia Workers’ Compensation Commission sets the dollar amount. The amount of yearly income to qualify as a “low wage” employee is surprisingly high. For example, any employee who earned less than $59,000 in 2020 would qualify as “low wage.”

If an employer tries to enforce a non-compete provision against a low wage employee, the employee can then countersue. The law provides the possibility for an award of lost compensation, liquidated damages, expert witness fees, and even attorney’s fees.

The law also provides protection against non-solicitation provisions. While the new law is ostensibly titled as a non-competition statute, it nonetheless contains protections against non-solicitation provisions as well. A non-competition provision is a prohibition on an employee from competing in the same or similar line of work with his former employer after his employment ends. A non-solicitation provision is a prohibition on an employee soliciting the clients of his former employer after termination. Specifically, the new law states low wage employees cannot be found to be in violation of a non-solicitation provision if the employee does not initiate contact with his employer’s former client. In other words, there is no violation of a non-solicitation provision for a low wage employee if the client initiates first contact with the former employee.

A few caveats limit the applicability of the new law. First, the law applies only to employment agreements executed after July 1, 2020. Employment agreements in existence prior to that date are not affected. In other words, non-competition and non-solicitation provisions signed prior to July 1, 2020 are still in effect. Second, the law applies only to salaried employees. If the employee is solely or primarily compensated via commission or bonus, the law does not apply.

Despite these caveats, the new law banning non-competes for lower income employees is a significant step in the right direction. For too long, Virginia served as a haven for pro-business groups and employers. As we argued before on this website, being the #1 state for business suggests Virginia is near the bottom 50 states for employees. This new law is a small step in addressing this inequity.

Medicaid Fraud

May 19, 2020

Medicaid is a state and federally funded health care program that uses taxpayer dollars to cover the medical needs of low income individuals. When health care employees take advantage of this program by submitting false claims for financial profit, all taxpayers suffer. If you believe your employer is submitting false claims to Medicaid, you may be entitled to significant compensation.

There are a number of laws covering Medicaid whistleblowers. The Virginia Fraud Against Taxpayers Act (VAFTA) allows whistleblowers to file a lawsuit on behalf of the government and share in a percentage of the recovery. Any person who commits the following may be in violation of the VFATA:

  • presents a false claim for payment;
  • makes a false statement material to payment;
  • conspires with others to defraud;
  • fails to return money or property of the state;
  • delivers a receipt for a state program without knowledge of its accuracy;
  • conceals or decreases an obligation to a state program.

Employees are often concerned their employer will fire them or decrease their pay if they come forward with an allegations of fraud. Fortunately, there are a number of laws that protect employees. The VAFTA protects an employee from the retaliatory conduct of an employer. The employee is protected from being fired as well as any negative conduct, whether actual or threatened, due to the employee’s whistleblowing. Should prohibited retaliation occur, the employee may be entitled to reinstatement, back pay, special damages, and attorney’s fees. The new Virginia whistleblower statute offers further protection for these whistleblowers as well as the federal False Claims Act.

We already know a wide variety of Medicaid fraud is happening. Fraudulent referral systems for hospitals and surgeons. “Pill mill” doctors who fraudulently bill for prescription opioids. Marked-up billing for ambulance services.  Nursing home administrators seeking reimbursement for services they did not provide.

Health care professionals are in the unique position to gain inside knowledge of Medicaid fraud. The government provides cash incentives and powerful protections for whistleblowers who are willing to come forward. If you suspect your employer is participating in a scheme to profit from Medicaid, we encourage you to contact our office.

Medicare “Education”

May 15, 2020

“Hi, Mr. /Mrs. ___________ my name is Fred Smith and I’m excited to talk to you today to educate you about Medicare!” Many Virginia residents have heard this refrain over the phone or in person at some point over the past few years. Insurance companies have instructed their salesmen to use such statements as part of a script to sell insurance products. As discussed below, Virginia residents would be well advised to be cautious anytime insurance salesmen offer to “educate” them about Medicare.  

Insurance companies often target potential customers based on information gleaned from public/private databases. The insurance companies pay the database for individuals’ contact information including names, addresses, and phone numbers on soon-to-be Medicare eligible individuals who are about to turn 65 years of age.[1]

As you may imagine, soon-to-be Medicare recipients are the perfect target for insurance companies. These individuals are older, more likely to need insurance, and can be solicited in the comfy confines of their home. You may wonder why the government allows insurance companies to buy seniors’ personal information. The insurance industry claims the information is used only to “educate” potential customers about Medicare.[2] The reality is unfortunately quite different.

Many, if not most, insurance salesmen have no intention of educating seniors on Medicare. Once they get in the door on Medicare education, the salesmen aggressively push seniors to buy unnecessary products. The primary means of doing this is through high pressure sales tactics that prey on seniors’ fears. Insurance salesmen use lines such as “put the resident in the nursing home.” The often speak of themselves as “wild animals stalking their prey” and other lines that sound like they came from Alec Baldwin’s character in Glengarry Glen Ross. A textbook example of these egregious sales tactics is this story from Inside Edition.

In summary, Virginia residents should be wary whenever insurance salesmen claim to want to “educate” them on Medicare. If it sounds too good to be true, it usually is.

[1] Lazarus, David. Why Health Insurance Companies Will Solicit You Even After You Die. Los Angeles Times (Oct. 18, 2016) available at https://www.latimes.com/business/lazarus/la-fi-lazarus-medicare-mailings-20161018-snap-story.html.

[2] 42 C.F.R. 422.2268; 42 C.F.R.423.2268.

Whistleblowers Perform a Social Good

May 14, 2020

In recent years, whistleblower litigation has increased significantly. A wide range of new legislation includes whistleblowing provisions such as the Dodd-Frank Wall Street reform bill, False Claims Act for federal financial fraud, and Virginia’s new whistleblower law (HB 798) on employer retaliation. Contrary to the assertion of many in the business lobby, whistleblowers perform an essential social good that creates better outcomes for employees, consumers, and business.

Perhaps most obviously, whistleblowers are good for employees. An employee who is able to “blow the whistle” on a culture of sexual harassment or racism creates a better place to work and not just for the employee but for everyone working at the business.

Whistleblowers are good for consumers. Whistleblowers detect more corporate fraud than any other source, including management review, internal audit, or law enforcement.[1] Every year fraud costs taxpayers billions of dollars.[2] Whistleblowers have brought to light some of the biggest frauds in American history. For example, whistleblowers revealed the almost impossibly corrupt business practices of Theranos and (insert deep voice here) “Elizabeth Holmes.”[3]

Whistleblowers are good for business. A recent study in the Harvard Business Review demonstrates whistleblowers create fewer lawsuits and lead to settlements for smaller dollar amounts than instances where whistleblowers are not encouraged to come forward.[4] The research demonstrates whistleblowers provide an avenue for companies to address problems before they mushroom out of control.

Whistleblowers are a win-win. Rather than demean whistleblowers, we should all applaud the beneficial service they provide.

[1] 2020 Global Study on Occupational Fraud and Abuse. Association of Certified Fraud Examiners. Available at https://www.acfe.com/report-to-the-nations/2020/.

[2] See e.g., McFadden, Cynthia and Karamehmedovic, Almin. Medicare Fraud Costs Taxpayers More Than $60 Billion Each Year. ABC News (Mar. 17, 2010). Available at https://abcnews.go.com/Nightline/medicare-fraud-costs-taxpayers-60-billion-year/story?id=10126555.

[3] Jarvis, Rebecca. The Drop Out. Podcast available at https://abcaudio.com/podcasts/the-dropout/; The Inventor: Out for Blood in Silicon Valley. HBO Documentary Films 2019; Carreyou, John. Hot Startup Has Struggled With Its Blood-Test Technology. The Wall Street Journal (Oct. 16, 2015). Available at https://www.wsj.com/articles/theranos-has-struggled-with-blood-tests-1444881901?mod=article_inline.

[4] Stubben, Stephen and Welch, Kyle. Research: Whistleblowers Are A Sign of Healthy Companies. Harvard Business Review (Nov. 14, 2018). Available at https://hbr.org/2018/11/research-whistleblowers-are-a-sign-of-healthy-companies.

New Law for Virginia Whistleblowers

May 13, 2020

Whistle, Referee, Umpire, Plastic, Red, Sports, Toy

We write frequently on this website about how Virginia is “good for business.” While that may be true, Virginia is often bad for employees. For years, the at-will employment doctrine shielded Virginia employers from litigation brought by their employees. A new statute may upend the longstanding protections enjoyed by employers and provide appropriate recourse for whistleblowing employees.

Historically, Virginia followed the at-will employment doctrine. The doctrine provided that subject to a few exceptions, an employer may fire an employee for any reason, at any time, without cause. The doctrine provided little protection for employees who were fired or reprimanded for “blowing the whistle” on their employer’s unethical business practices.

On April 11, 2020, Virginia Governor Ralph Northam signed into law HB798. The new statute dramatically broadens the extent of whistleblower protections for employees in Virginia. HB798 protects employees from retaliatory action by their employer when the employee:

  • Reports violations of state or federal law to a supervisor or governmental body;
  • Participates in a government investigation
  • Refuses to commit a criminal act

Likewise, “retaliatory action” is defined quite broadly. Retaliatory action is not merely limited to firing but includes “any retaliatory action that goes to the employee’s compensation, terms, conditions, privileges, or work condition.”

The remedies a successful employee may receive is likewise expansive. An aggrieved employee may receive:

  • An injunction
  • Reinstatement
  • Recovery of lost wages

Under HB798 employees do not have to go through an administrative process such as filing a complaint with a government agency. They can go directly to court and sue the employer. Further, the employee is not limited to filing in federal court, but may file in Virginia state court that tends to be more pro-plaintiff.

HB798 become effective July 1, 2020. No less an authority than Forbes magazine calls this new legislation a “monumental shift in favor of employees and provides substantive protections for employees who step forward and blow the whistle on their employers.”[1]

[1] Spiggle, Tom. What The New HB798 Whistleblowing Law Means for Virginia Workers. Forbes (May 5, 2020). Available at https://www.forbes.com/sites/tomspiggle/2020/05/05/new-virginia-whistleblower-law/#5aa61a3c167e.

What Happens to a Doctor or
Nursing Home When Sued?

April 30, 2020

Oftentimes a client will ask, “What happens to the doctor/ nursing home if they are sued?” Some clients are concerned that while the treatment they received was poor, they do not want to put a doctor or nursing home out of business. There are a variety of considerations that may arise in the event of a successful lawsuit against a Virginia doctor or nursing home. From a legal perspective, however, virtually nothing will happen to the defendant doctor.

How Many
Medical Malpractice Cases
Do We Handle at a Time?

April 17, 2020

Virginia medical malpractice attorney Bo Frith explains how many cases Frith Ellerman & Davis Law Firm investigates at a time and why his firm is selective with the cases they take on.

What is the Difference Between a
Medical Mistake vs. Medical
Malpractice in Virginia?

April 17, 2020

Virginia medical malpractice attorney Bo Frith explains how many cases Frith Ellerman & Davis Law Firm investigates at a time and why his firm is selective with the cases they take on.