In this qui tam action, brought on behalf of the State of New York (State), defendant Aetna Health, Inc. (Aetna), a health insurance company, seeks dismissal of plaintiff-relator Jorge Whiteman’s first amended complaint (complaint) pursuant to CPLR 3211 (a) (7), 3013 and 3016 (b). For the reasons stated below, the motion is granted.Plaintiff1 alleges that Aetna violated New York State Finance Law §§189 (1) (g) and (h), commonly referred to as the New York False Claims Act (NYFCA), by failing to comply with New York’s Health Care Reform Act (HCRA) (Public Health Law §2807-j et seq.). The HCRA imposes surcharges, paid to the State of New York (Surcharge), on the payments that certain New York healthcare providers, such as hospitals (Providers), receive for patient services (see Public Health Law §2807-j [1-a] [a]).2 Aetna pays these Surcharges to the State.Plaintiff alleges that Aetna engaged in a fraudulent business practice, in which it misled Providers into accepting artificially reduced insurance reimbursement payments for patients insured by foreign insurance companies. In the first cause of action of the complaint, plaintiff contends that Aetna deceived Providers into believing that certain patients were Aetna’s insureds, when they were not, so that these Providers would, unknowingly, accept a lower, discounted payment from Aetna. Plaintiff further alleges that, based upon these improperly reduced payments, Aetna reduced the Surcharge amount that it paid to the State of New York, and submitted deceptive reports to the State. In the second cause of action, for conspiracy to violate the HCRA and the NYFCA, plaintiff contends that Aetna conspired with foreign insurance companies to carry out its scheme to reduce payments to Providers and, derivatively, the Surcharge that Aetna paid and pays to the State.Plaintiff claims that Aetna’s fraudulent scheme works through its agreements with foreign insurance companies and travel assistance companies to allow foreign insurance companies to use Aetna’s network of Providers. Plaintiff alleges that such Providers have agreed to accept discounted payments from Aetna of as much as 90 percent and that foreign insurance companies would not be able to obtain these discounts. Plaintiff contends that Aetna misleads Providers into believing that a patient is insured by Aetna, when the patient actually purchased health insurance from a foreign insurance company, prior to traveling to the United States. Thus, plaintiff claims, the money paid to Providers by Aetna is improperly reduced, as the Providers accept the discounted rates from Aetna either because they are not aware that Aetna is not the patient’s insurer, or are unable to do otherwise, due to Aetna’s power in the market.To present an example case, plaintiff describes an unnamed foreign patient, insured by a foreign insurance company, as presenting for treatment at a New York hospital. During the visit, the patient, to demonstrate insurance coverage, would give the Provider a travel assistance company’s card. To confirm that the patient has insurance coverage, the Provider would call a number on that card. The Provider would then receive a call back, from Aetna, representing that the patient is an Aetna insured, when this was not the case. The complaint alleges that Aetna paid Providers’ bills, applying its own discounts, instead of paying the greater payment that the Provider would require had it known that the patient was insured by a foreign insurer.Plaintiff states that Aetna also employed other methods in the deception, such as using incorrect billing codes that falsely indicated that the patient is an Aetna insured, instead of the code for the foreign insurance company. Plaintiff further alleges that Aetna designed misleading verification of benefits forms in order to make Providers believe that the patient is insured by Aetna and that Aetna paid Providers an aggregated payment for the foreign insureds and Aetna’s own insureds, to conceal from the Provider that some of the patients are not insured by Aetna. Plaintiff contends that Aetna also aggregates payments of the Surcharge to the State, so that the State does not know that the payments include those for patients who are not Aetna’s insureds. Plaintiff alleges that the foreign insurer pays Aetna based upon the difference between the amount of the hospital bill and the discounted amount that Aetna pays through the use of its discounted rates with Providers.Plaintiff alleges that Aetna’s conduct demonstrates a knowing, intentional scheme to deprive the State of the proper HCRA Surcharge, which is based upon the amount that Aetna pays to a Provider and a Surcharge percentage rate that would have been substantially higher for a foreign insurance company that has not elected to pay the Surcharge directly to New York State. Plaintiff contends that, due to the improper application of Aetna’s discount to Provider bills for foreign insureds, and Aetna’s submission of payments to the State using its lower Surcharge rate, the State loses Surcharge monies. Plaintiff alleges that he has personal knowledge of Aetna’s practices from his former position at a travel insurance company.In support of its motion to dismiss, Aetna argues that the complaint does not state a claim because Aetna’s obligation to the State is to pay the Surcharge, which is based only upon the amount that Aetna actually paid to a Provider for services “to an Aetna insured” (defendant’s memorandum of law at 11). Aetna asserts that the underlying contractual relationships, between Aetna and foreign insurers and Aetna and domestic health care providers, are not obligations owed to the State (id.). Aetna cites to HCRA §2807-j (1) to support its contention that the Surcharge can reflect negotiated payments to Providers for patient services, for what Aetna labels as an Aetna “member,” whether the member is domestic or foreign. As Aetna points out, plaintiff has not alleged that Aetna has ever failed to correctly pay a Surcharge amount based upon the amount that Aetna actually paid a Provider for services, or that Aetna’s reports and records misrepresent that amount.Aetna states that HCRA §2807-j (1) contemplates that the amount that Aetna reimburses to Providers will be determined by the terms of Aetna’s contracts with its foreign insureds and network providers, and that the Surcharge amounts for an Aetna “member” are governed by private contracts, which are not before the court, are not obligations owed to the State, and only incidentally reduce the Surcharge. Aetna asserts that plaintiff has not alleged that Aetna breached a contract with a Provider, or under-reimbursed a Provider under a contract, but only that Aetna provides to foreign travelers the same discounted network rates that it provides to its domestic insureds. Aetna argues that plaintiff does not demonstrate that Aetna’s contracts are illegal, or cite to authority to show that it is impermissible for a domestic insurance company to contract with foreign insurers to provide health insurance to foreigners traveling in the U.S. or access to Aetna’s domestic provider network, or to provide insurance coverage to foreign travelers on the same terms as domestic insureds.Aetna also asserts that because plaintiff does not discuss the content of any Aetna contract, his allegations are conclusory. Aetna further points out that while plaintiff insists the court should simply presume there was secret, deceptive, and/or illegal conduct, plaintiff also states, in a footnote, that hospitals and Providers were likely aware of the true circumstances concerning the foreign insurers. Aetna contends, therefore, that plaintiff’s allegations are based upon speculative assertions about its lawful, private contracts, and hypothetical assumptions about the rights of third parties under those contracts, when those parties are not complaining and neither they, nor the contracts, are before the court.In opposition, plaintiff argues that Aetna had an obligation to make payments and submit reports to the State, and is trying to distract the court by arguing that the Surcharge was correctly calculated, when Aetna wrongfully reduced the amounts paid to Providers, and the resulting Surcharge. Plaintiff states the inference that must be drawn from his pleading is that the foreign patients had no dealings with Aetna to obtain insurance, but dealt with foreign insurers, and that Aetna’s efforts to disguise the status of the foreign patients shows that its concealment of information from Providers was knowing. Plaintiff further contends that the reduced Surcharge payments, and the related reports submitted to the State, are not the result of negligence or honest mistakes. Plaintiff states that unlike Seiden v. Utica First Ins. Co. (96 AD3d 67), cited by Aetna, the reduced Surcharge in the present case is part of a fraudulent scheme in which Aetna misrepresented to Providers that foreign patients were Aetna’s own insureds, when they were not. Plaintiff contends, therefore, that Aetna, through fraud, improperly obtained a substantial discount from Providers, which were unavailable to the foreign patients’ insurance companies, and then computed the Surcharge, and submitted the related reports to the State, based upon the fraudulently reduced amounts.Citing to United Food and Commercial Workers Unions and Food Empls. Benefit Fund v. DeBuono (101 F Supp 2d 74, 75 [ND NY 2000]), plaintiff states that, when an insurer makes an election pursuant to HCRA §2807 (5) (a) and 7(b)(i), to make Surcharge payments to the State on an aggregated basis (Elector), it is legally responsible to make the payments and provide reports to the State documenting the payments. Plaintiff contends that Aetna, as an Elector, had the obligation to make full, complete and accurate Surcharge payments to the State, and to honestly report the payments, and that Aetna’s reports, regarding its payments of Surcharges, constitute an express or implied false representation that the payments were for an Aetna insured. Even absent the alleged false reports, plaintiff argues, Aetna made or caused to be made a false record or statement by intentionally paying wrongfully reduced Surcharges, which constitutes a false certification under the NYFCA.DiscussionPlaintiff asserts claims under Finance Law Sections 189(1)(g) and (h), which are also known as the reverse false claim provisions.3 “A ‘reverse false claim’ occurs when someone uses a false record to avoid an obligation to pay the government” (Seiden, 96 AD3d at 71 [citation omitted][addressing NYFCA §189 (1) (g)]). “To allege a reverse false claim, a plaintiff must state facts tending to show: (1) that the defendant made, used, or caused to be used a record or statement to conceal, avoid, or decrease an obligation to [the government]; (2) that the statement or record was false; (3) that the defendant knew that the statement or record was false; and (4) that [the state] suffered damages as a result” (id. at 71-72[internal quotation marks and citations omitted]). NYFCA §189 (1) (g) does not require that a false statement or record be made or presented to the government (see id.). NYFCA §189 (1) (h) provides liability for:“any person who…knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the state or a local government, or conspires to do the same…”(see United States ex rel. Customs Fraud Investigations, LLC v. Victaulic Co., 839 F3d 242, 254-55 [3d Cir 2016][where company failed to mark its product, making product subject to a government tariff, and then failed to pay the tariff, a reverse false claim was stated]).In this proceeding, plaintiff contends that the false statements serving as the predicate for §189 (1) (g) liability are Aetna informing Providers that foreign nationals were Aetna members, and, as a result, Providers bill Aetna at negotiated Aetna rates; and the allegation that Aetna submits false statements to the State in its aggregate payments, first without making any distinction as to the amounts paid to Providers for services given to foreign nationals versus services given to its domestic Aetna members; and, second, by using the Aetna Elector Surcharge rate as opposed to a different, less favorable rate.The most glaring deficiency of the aforementioned contentions by plaintiff is any allegation, even “upon information and belief,” that treating foreign insureds the same as Aetna domestic members violates something — a statute, regulation, or other law, or even a contract.4 As Aetna aptly argues, “Plaintiff cites no provision of U.S. or New York law that prohibits a domestic insurer, such as Aetna, from contracting to provide health insurance to foreigners traveling in the U.S. or that prohibits Aetna from covering such foreign insureds on the same terms as its domestic insureds” (defendant’s mem at 11).The Court cannot see how the arrangement presents an NYFCA violation. Plaintiff’s complaint and opposition papers are replete with words such as “illegal,” “fraudulent,” and/or “unlawful” — however, merely parroting such language does not make it so. The same applies to the repeated phrase of “secret” agreements or contracts, which, apparently, are not so much of a secret (see complaint at 23, n 2). Instead, the repetition of the words appear to be designed to mask plaintiff’s failure to adequately state any unlawful conduct, leaving the complaint premised upon mere speculation and conjecture as to any fraudulent conduct. Indeed, the Court cannot see how agreeing to insure foreigners with health insurance while traveling in the United States is nefarious. Foreign insurers partnering and contracting with Aetna to reduce their insureds’ rates is also not nefarious, or illegal or unlawful (see generally 159 MP Corp. v. Redbridge Bedford, LLC, — NY3d —, 2019 NY Slip Op 03526, *3 [May 7, 2019][discussing this State's "deeply rooted" public policy of freedom of contract]). The fact that profits may be made, or money will be saved, as a result, is also not nefarious (see Frank Lyon Co. v. United States, 435 US 561, 580-81 [1978]["The fact that favorable tax consequences were taken into account by Lyon on entering into the transaction is no reason for disallowing those consequences. We cannot ignore the reality that the tax laws affect the shape of nearly every business transaction"]). To be sure, the money Aetna receives is not unlike insurance premiums it would receive anyway from domestic persons or entities. In exchange, Aetna permits those persons to access its network of providers and obtain health services at discounted rates. Such arrangement appears to be “perfectly legal” and is therefore insufficient to state a reverse false claim (see Seiden, 96 AD3d at 72; cf. U.S. ex rel. Koch v. Koch Indus., Inc., 57 F Supp 2d 1122, 1124 [ND Okla 1999][relator had plausible indirect reverse false claim where defendant misrepresented the amount of oil purchased and its price to the lessees, which in turn caused the lessees to submit false statements concerning the royalties owed to the government for such oil]).Regarding the “false” records or statements made in the surcharge payments to the State, the parties concede that Aetna’s obligation under the HCRA is to pay a surcharge based upon the amounts actually reimbursed to the provider. Further, as Aetna notes, the statute expressly contemplates that the amounts reimbursed will be determined by the terms of Aetna’s contracts with its insureds and providers (HCRA §2807-j [1]). In other words, the statute permits the negotiated rates and contemplates that surcharges may be lower as a result of the negotiated rates than the State would otherwise receive.Plaintiff does not dispute that Aetna complied with the statutory obligation to submit surcharges to the State based upon the amounts actually reimbursed. Specifically, plaintiff does not allege that Aetna made any misrepresentations in the calculation of the surcharge — hence there is no “falsity” in the statement or record, since the surcharge payments to the State are based upon the amounts actually paid.As for the contention that the surcharge to the State does not distinguish between foreign patients and domestic patients, the claim fails for the same reason as above — there is no reason why Aetna cannot treat foreign insureds as its own members and plaintiff’s complaint cites no reason why it is illegal or unlawful. In his opposition papers, plaintiff states that the Surcharges on foreign patient claims constituted fraudulent misrepresentations, “such as express or implied false representations that the HCRA surcharge payments were for Aetna insureds” (plaintiff’s mem in opp at 7). While the representation may imply they are Aetna members, there is no demonstrated falsity by foreign insurers contracting with Aetna so that Aetna treats the foreign nationals as Aetna members and covers their claims.Plaintiff’s allegations that paying the surcharge at a lower rate for Electors than one would otherwise have to pay also fails to state a claim for §189 (1)(g) liability. As stated above, Aetna is free to contract to cover foreigners’ claims and may, consequently, properly pay surcharges to the State at the Elector rate.Further, the Court finds that the same allegations fail to state an NYFCA §189 (1) (h) claim for the same reasons as the (1)(g) claim, as the complaint fails to allege anything “improper” about the arrangement and Aetna has satisfied its statutory obligations to pay surcharges based upon the amounts the provider has received.Finally, plaintiff fails to adequately plead an NYFCA conspiracy claim. “[U]nder the facts of this case, the relators cannot show a conspiracy to commit fraud given that they have not sufficiently pleaded fraud under the FCA” (Bishop v. Wells Fargo & Co., 823 F3d 35, 50 [2d Cir 2016], cert granted, judgment vacated, 137 S Ct 1067, 197 L Ed 2d 169[2017]).ConclusionAccordingly, the motion to dismiss is granted and the Clerk is directed to enter judgment dismissing the complaint with prejudice. This constitutes the decision and order of this Court.Dated: June 26, 2019
