In 2013, two former WellCare Health Plans Inc. executives (WellCare) were found guilty of health care fraud for their parts in devising and carrying out a fraudulent scheme that deceived the Florida Agency for Health Care Administration (AHCA), the Florida Healthy Kids Corporation (Healthy Kids), and WellCare’s investors by retaining over $40 million in health care premiums that WellCare was statutorily required to reimburse to the state agencies. This week, former CEO Todd Farha and former CFO Paul L. Behrens each entered into settlement agreements with the Securities and Exchange Commission (SEC) to pay a combined $26 million in restitution and civil payments to finally draw the matter to a close. By the deadline of May 1, 2017, Farha must pay $12.5 million to the SEC and $7.5 million to WellCare. Behrens will have to pay $4.5 million to the SEC and $1.5 million to WellCare. The monetary penalties are in addition to the jail sentences handed down to the pair in 2014 (Farha for a 3-year term and Behrens for 2 years).
Farha and Behrens were accused in 2012 of concocting a complex scheme to retain excess premiums paid to WellCare by AHCA and Healthy Kids, two Florida programs charged with supporting health care services for low-income adults and children. WellCare, through its health maintenance organizations Staywell Health Plan of Florida (Staywell) and HealthEase of Florida (HealthEase), agreed to provide medical and health benefits to qualified AHCA and Healthy Kids participants in exchange for premium payments. However, to ensure a proper balance between costs savings and quality health care, the State of Florida required Staywell and HealthEase to spend certain percentages of the premium on eligible medical expenses. If the entities spent less than the statutorily required percentage of the premiums on eligible expenses, they were required to refund the difference to AHCA and Healthy Kids.
The defendants instead fraudulently retained premiums through a number of mechanisms: they included ineligible expenses and disallowed administrative expenses in the refund calculations; formed a WellCare subsidiary called “Harmony Behavioral Health” to help conceal the scheme; calculated a range of arbitrary amounts to refund to AHCA and Healthy Kids and then “reverse-engineered” a methodology to arrive at a particular refund target; and padded medical expenses by agreeing to pay certain hospitals higher reimbursement rates in exchange for lower rates under Medicare and Medicaid contracts in a “rate-swapping” agreement. In all, over $40 million in excess premiums were retained through the scheme.
Should you have questions regarding this alert, please do not hesitate to contact any of the FisherBroyles Health and Pharmacy Law attorneys listed below.
Brian E. Dickerson
Nicole Hughes Waid