A U.S. District Court judge has ordered Humana Inc. to pay $32 million in attorney fees to the law firm that represented a whistleblower in a Medicare fraud lawsuit. The ruling follows a $90 million settlement the health insurance company reached in 2024 to resolve the case.
The payment was directed to Phillips & Cohen LLP, a San Francisco-based firm, for its work on a case alleging Humana overcharged the U.S. government for its Medicare Part D prescription drug plans for several years.
Key Takeaways
- A federal judge ordered Humana to pay $32 million in attorney fees to the law firm Phillips & Cohen LLP.
- The payment stems from a whistleblower lawsuit that Humana settled for $90 million in 2024.
- The lawsuit, filed in 2016, alleged Humana submitted fraudulent bids for its Medicare Part D drug plans from 2011 to 2017.
- The case was initiated by a former Humana actuary, Steven Scott, under the False Claims Act.
Details of the Court Order
U.S. District Court Judge Greg Stivers issued the ruling in September, mandating the Louisville-based health insurance giant to cover the legal costs incurred by the whistleblower's representation. According to court filings, Humana was given a deadline of September 24 to complete the $32 million payment.
This order is a separate financial obligation from the original settlement. In 2024, Humana agreed to pay $90 million to resolve the allegations brought against it without admitting wrongdoing. The subsequent ruling on attorney fees addresses the legal expenses associated with the multi-year litigation.
Understanding Whistleblower Lawsuits
The case was filed under the False Claims Act, a federal law that allows private citizens, known as relators or whistleblowers, to sue on behalf of the government if they have knowledge of fraud. If the case is successful, the whistleblower is entitled to a portion of the recovered funds, and their legal counsel can petition the court for reimbursement of attorney fees from the defendant.
Background of the Fraud Allegations
The legal action originated in 2016 when Steven Scott, a former actuary at Humana, filed a whistleblower lawsuit. The complaint, prepared by Phillips & Cohen LLP, accused Humana of knowingly overcharging the government for its Medicare Part D prescription drug contracts over a six-year period.
Medicare Part D is a federal program that helps beneficiaries cover the costs of prescription medications. Private insurance companies like Humana administer these plans by submitting annual bids to the Centers for Medicare & Medicaid Services (CMS).
These bids project the costs the insurer expects to incur. The lawsuit alleged that Humana submitted bids based on inflated and unsupported financial assumptions for its popular "Walmart Plan" between 2011 and 2017.
The Alleged Bidding Scheme
According to the complaint, Humana's official bids to CMS were significantly different from its own internal, more accurate projections. The lawsuit claimed the submitted bids were intentionally inflated, leading the government to overpay Humana by hundreds of millions of dollars.
The legal filings stated that this practice resulted in beneficiaries paying more for their coverage than necessary, while Humana profited from the discrepancy. The complaint alleged that Humana was aware of the inaccuracies but continued to submit the flawed bids for years.
Impact of Government Investigation
Court records indicate that the alleged practice of using two different sets of financial projections for bidding purposes ended shortly after Humana received a Civil Investigative Demand from the government. This action suggests the investigation prompted a change in the company's internal procedures.
Financial and Reputational Consequences
The total financial impact on Humana from this case now exceeds $122 million, combining the $90 million settlement with the $32 million in attorney fees. As one of Louisville's largest publicly traded companies, such legal and financial setbacks can attract significant investor scrutiny.
"The complaint in this case claimed Humana wasn't truthful about meeting the required coverage. The lawsuit said the healthcare giant planned to pay less and allowed beneficiaries to pay more without them knowing."
Beyond the direct financial costs, the case has been linked to other challenges for the company. The lawsuit's subject matter is reportedly related to a previous downgrade in the star rating of Humana's largest Medicare plan. These CMS star ratings are crucial for insurance providers, as higher ratings can lead to bonus payments and increased enrollment.
A lower star rating can result in the loss of billions of dollars in potential revenue, representing a significant long-term consequence for the company's Medicare Advantage and Part D business segments. At the time of the original reporting, Humana had not provided a public comment on the court's order regarding the attorney fees.
