Self-funded insurance plans create an avenue for employers to explore a lower overall health care cost to its employees. These plans give an employer the flexibility to customize a health care plan that align with its goals and needs of its employee population. Employers also prefer a self-funded health plan because of its cost effectiveness- not subject to all taxes and fees, not subject to certain government regulations, avoids the mark-up insurance companies build into their premiums, and the opportunity to get money back at the end of the year. The overall margins generated with a self-funded health plan could lead to a vast profit for an employer.
However, self-funded health plans involve a number of obstacles. There is a risk of financial loss due to operational inadequacies. Self-funded plans are vulnerable to regulatory penalties and lawsuits due to potential errors that are triggered by a lack of knowledge. There is also an increased potential of fraud or abuse if the organization’s oversight and compliance efforts are deficient. The fraud concerns in a self-funded health plan are not immune from federal criminal laws related to theft and misuse of funds. In recent years, the federal government has been enforcing compliance of self-funded programs by targeting high profile violations of criminal statutes- specifically 18 USC 1347 (Healthcare Fraud) and 18 USC 1343 (Wire Fraud).
Former professional athletes have recently been under indictment for being involved in fraud schemes related to their respective self-funded health plan. The fraud consisted of submitting claims for services that were never rendered and for medical equipment that was never received. These former players face potential penalties for knowingly submitting false claims to their respective league’s plan.
- The National Basketball Association Players’ Health and Welfare Benefit Plan (the “NBA Plan”)
The NBA Plan offers benefits to eligible active and former players who played in the NBA for at least three years but are not eligible for Medicare. The NBA Plan provides a health reimbursement account that refunds certain medical expenses not covered by a player’s primary insurance provider.
On October 7, 2021, 18 former NBA players were charged with defrauding the NBA Plan by allegedly submitting nearly $4 million in fraudulent claims for medical services that were never rendered. The scheme was orchestrated by former player Terrence Williams who reportedly received kickbacks for supplying fake invoices and letters to support the false claims.
According to the indictment, Williams recruited participants to be involved in a scheme to defraud the NBA Plan by supplying false invoices that supported fraudulent claims to the NBA Plan in exchange for financial kickbacks. Claims were submitted to the NBA Plan for medical services that were never performed. These claims included expensive medical and dental services that occurred between 2017 and 2020.
The fraud surfaced after the documents Williams’ provided raised suspicions because they contained grammatical errors, incorrect letterhead, and consistent typographical errors. The claims also involved a player who was playing in a different country while simultaneously receiving services in a California dental office.
The former players were each charged with one count of conspiracy to commit healthcare and wire fraud which can result in a sentence of up to 20 years in prison.
- The Gene Upshaw NFL Player Health Reimbursement Account Plan (the “NFL Plan”)
The NFL Plan helps eligible participants with out-of-pocket covered medical care expenses after their NFL-paid medical coverage under the NFL Player Insurance Plan ends. The NFL Plan was established in order to pay for legitimate medical expenses and provide valuable resources to assist a player’s medical needs.
On December 12, 2019, 10 former NFL players were charged with defrauding the NFL Plan by allegedly submitting claims for expensive medical equipment that was never received. The type of medical equipment included hyperbaric oxygen chambers, ultrasound machines and cryotherapy machines. The scheme was orchestrated by former player Robert McCune who received kickbacks for forging documents, altering prescriptions, and impersonating other players on the phone.
According to the indictment, the scheme included claims that were typically between $40,000 and $50,000 each for expensive medical equipment that was never purchased or received. Assistant Attorney General Benczkowski stated, “If you loot health care programs to line your own pockets, you will be held accountable by the Department of Justice.”
On February 9, 2022, Robert McCune was sentenced to 5 years in federal prison for his role in orchestrating the scheme to defraud the NFL Plan. To date, there have been 15 total former NFL players who have pled guilty to charges in connection with the scheme to defraud the NFL Plan.
The federal government has a program in place to identify fraud, waste, and abuse of federal funds, but how can a self-funded plan investigate potential fraud? An employer’s money and commitment in a self-funded plan need to be protected from misuse. The best way for an employer to protect its investment is to create an internal process that reviews claims submitted by its employees. A company needs to conduct routine internal investigations within its plan, and an efficient way to implement this strategy is the formation of a compliance program. A compliance program can assist in preventing fraud from happening while also ensuring that the employer’s investment is consistently monitored and functioning at an efficient level. If you are an employer and are exploring the most effective ways to structure a self-funded health plan, please contact Michael Elliott at (469) 758-4152 or michael@elliottsauter.com.