Educators Mutual Slapped with $2.86 Settlement

SALT LAKE CITY (AP) -- An insurance company that provides group coverage for Utah school districts, colleges and universities must pay $2.86 million to the federal government and a whistleblower to settle allegations of Medicare fraud, the U.S. Attorney's Office announced Wednesday.

The settlement award includes $457,600 for Mary Covington, a health insurance adjustor who in 2002 sued Educators Mutual Insurance Association of Utah alleging the insurance group was shifting the cost of kidney transplants from its own coffers to federal taxpayers.

The government, which assumed the case, alleged the insurance group violated the Medicare Secondary Payer law by making Medicare the primary payer for kidney transplants and dialysis services. The government also alleged Educators Mutual told other people carrying the insurance that their benefits for end-stage renal disease would be based on what Medicare would pay while offering coverage for other organ transplants in excess of what Medicare would pay.

Educators Mutual denies the allegations, but agreed to settle the case and accept a three-year monitoring program to assure its compliance with Medicare provisions.

"We chose to settle," said Educators Mutual spokeswoman Christie Hawkes. "We believe the plan was in compliance with the law."

Covington, a 35-year insurance industry professional who owns and operates the Salt Lake firm Claims Management Inc., helps hospitals, doctors and individuals make sure insurance claims are paid properly. She said Wednesday that she filed the lawsuit two years ago after seeing three or four cases where Educators Mutual had taken a secondary position on kidney transplant claims.

The tipoff, she said, was when Educators Mutual would pay a small portion of the claims that amounted to about $60,000 each. The portion was almost identical to the Medicare hospital co-payment of roughly $800. In a reversal of lawful procedure, the remainder of the hospital bills went to Medicare, which paid the remainder of the claims.

"It doesn't seem fair the insurer would cost-shift that to the government," Covington said.

Covington said she contacted Educators Mutual after reviewing policy plans dated back to 1999, when the cost-shifting for end-stage renal disease seemed to begin. "They didn't seem willing to do anything," she said.

"I looked at my people and said, 'Well, that's wrong,' " Covington said. "We're all paying for Medicare. ... I said, 'They've taken money from the government, so let's go see an attorney."'

Brian King, one of Covington's attorneys, said they told the feds they were filing the lawsuit on behalf of the government with Covington as the plaintiff. The federal government stepped in and took over. The case was sealed until Wednesday, when the settlement was announced.

Covington and her attorneys will share the $457,600 under a provision of the False Claims law, which allows whistleblowers to receive a portion of any cash settlement if the federal government assumes the case.

"This wasn't a slam dunk," King said. "Educators doesn't admit liability, but this is a good settlement. It puts a lot of money back into taxpayer coffers."

Under the settlement, Educators Mutual agreed to a 3-year compliance plan that includes close monitoring of policies, procedures, training and education. Regular reports on the plan have to be submitted to the federal Office of Inspector General and Medicare.

"We are pleased to have put this matter behind us," said Educators Mutual CEO Andy Galano in a statement. "We can now focus entirely on our principal mission: offering affordable health care coverage to Utah's educators and their families."

Educators Mutual Insurance Association is a nonprofit insurance company established in 1935 for public school districts, colleges and universities. The company employs 130 people at its Murray headquarters and has a risk pool of about 56,000, Hawkes said.

(Copyright 2004 by The Associated Press. All Rights Reserved.)

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