Humana Settlement Shows Why Consumers Need More Control Over Healthcare Decisions

Affordable healthcare means less government control and more consumer control.

Photo by benjamin lehman on Unsplash

A leading health insurance company has agreed to shell out $90 million in a significant legal settlement to address allegations of fraudulent activity related to its Medicare Part D contracts.

This case underscores how corruption drives up healthcare costs for consumers already struggling to make ends meet and why it is so important that people are allowed more control over their healthcare decisions.

Former Humana actuary and whistleblower Steven Scott sued the insurance giant for submitting fraudulent bids to the federal government to obtain Part D contracts between 2011 and 2017. Part D contracts are agreements between private insurance companies and the federal government that allow insurers to offer prescription drug coverage to those receiving Medicare, according to Fierce Healthcare.

The plaintiff alleges Humana’s fraudulent activity resulted in substantial overcharges to the Centers for Medicare & Medicaid Services (CMS). The costs for these alleged actions were ultimately passed on to the government and Medicare beneficiaries.

The lawsuit, filed by the law firm Phillips & Cohen, accused Humana of manipulating the bidding process to its advantage by providing inaccurate numbers that did not reflect the true costs of offering prescription drug coverage under Medicare Part D.

The company allegedly made accurate cost predictions internally for its co-branded Part D program with Walmart but used less accurate figures in its official bids to the federal government. As a result, the company could underpay for the drug coverage it agreed to provide, leading to higher costs for the government and Medicare beneficiaries.

Insurers are required by law to cover a minimum amount for prescription drugs under Part D, with the rest covered by the government and the beneficiaries’ out-of-pocket costs. In the bidding process, payers outline what they plan to cover and ensure those benefits meet that standard.

The lawsuit alleges that Humana said it would offer the mandated level of coverage in its bids but, behind the scenes, planned to pay less, which led to both the feds and enrollees “unknowingly picking up more than their share.”

Phillips & Cohen described the case as “the first case of its kind to resolve allegations of fraud in the Part D contracting process” and explained that the company “said it would offer the mandated level of coverage in its bids, but, behind the scenes, planned to pay less, which led to both the feds and enrollees ‘unknowingly picking up more than their fair share.’”

Claire Sylvia, a whistleblower attorney and partner at Phillips & Cohen, highlighted the severity of Humana’s alleged actions.

“The Part D program depends on insurance companies paying their minimum share of drug costs. We argued that Humana shirked its responsibility by telling the government that its plan would cover drug costs that Humana did not actually plan to cover,” the lawyer said.

She further argued that “the government and beneficiaries were left with paying tens of millions of dollars more than Congress intended for years, while Humana pocketed the money as ‘savings.’”

This is one of likely many examples of how corporations subvert the system at the expense of taxpayers and consumers. There is no telling how many companies have taken advantage of government systems to pad their bottom line while consumers struggle to afford healthcare.

For starters, the additional costs covered by the government because of Humana’s alleged actions put taxpayers on the hook to make up the difference between what Humana promised and what it actually provided. But it also placed an extra burden on everyday people, who also had to pay more for their prescriptions.

Even further, with the state having to absorb higher costs because of Humana’s underpayments, premiums could have been raised for those receiving Medicare. This would make it even harder for people to pay for their insurance. For people on a fixed income, it could make their situation even more challenging.

The government could have even looked at cutting back on the benefits offered under Medicare to offset the unexpected costs of Humana’s alleged fraud. This would have further complicated things for people trying to keep themselves healthy.

Unfortunately, Humana is not the only company defrauding taxpayers and consumers, and there will likely be even more due to rampant corruption in the insurance industry and the government. Addressing fraud and corruption would undoubtedly help to alleviate the burden on consumers. However, giving people more control over their healthcare decisions would also make it easier for them to avoid the effects of corrupt entities.

Health Savings Accounts (HSAs) have often been touted as a solution that could provide relief for consumers. HSAs allow people to deposit funds into an account and save money for medical expenses. They can access these funds free of taxes.

HSAs have already benefitted many Americans. Unfortunately, there are onerous limits on how much people can contribute to these accounts every year. Removing these camps would give people even more control over their healthcare decisions.

Through HSAs, consumers would have greater financial flexibility to cover expected and unexpected medical expenses. They would not have to allow insurers to decide where and how they are treated for their ailments because they can use whichever provider strikes their fancy. This is especially important if Medicare premiums or out-of-pocket costs increase because of reduced government funding or other issues.

HSAs also allow account holders to invest their savings, which can grow over time. Lifting the cap on contributions would empower people to build a larger nest egg for future medical expenses, allowing them to bypass insurance companies and other middlemen.

The settlement between Humana and the federal government reveals serious issues in the Medicare Part D contracting process and provides just a glimpse of how deep the rot goes when it comes to medical care. In the end, these problems will only be solved when the people are the ones with the power to determine how they receive their healthcare.