National insurer Aetna Inc., has agreed to pay $117,700,000 to resolve Federal allegations that it violated the False Claims Act by submitting or failing to withdraw inaccurate and untruthful diagnosis codes for its Medicare Advantage Plan enrollees in order to increase its payments from Medicare.
The settlement adds to the growing list of Justice Department enforcement actions and settlements involving leading Medicare Advantage insurers accused of defrauding or engaging in other prohibited conduct dealing with the Medicare program.
These and other payer-focused investigations, prosecutions and settlements alert employer and union sponsored health plans, their sponsors and fiduciaries of the advisability of using prudent processes to verify the compliance of their health insurance vendors or the accuracy of their charges or other data to comply with the Employee Retirement Income Security Act (“ERISA”) and protect themselves and their plans from other avoidable costs and liabilities.
MA Plan Violations
The Medicare Advantage (“MA”) Program, established under Medicare Part C allows Medicare beneficiaries to opt out of traditional Medicare and enroll in private health plans offered by insurance companies known as Medicare Advantage Organizations, or “MAOs.” The Centers for Medicare & Medicaid Services (“CMS”) pays MAOs a fixed monthly amount adjusted for various risk factors that affect expected health expenditures for the beneficiary. In general, CMS pays MAOs more for sicker beneficiaries expected to incur higher healthcare costs. To qualify for these “risk adjustments,” CMS requires MAOs to submit medical diagnosis codes to show their plans cover sicker patients.
The United States alleges that Aetna submitted inaccurate and untruthful patient diagnosis data to CMS in order to inflate the risk adjustment payments it received from CMS, failed to withdraw the inaccurate and untruthful diagnosis data, failed to repay CMS, and falsely certified in writing to CMS that the data was accurate and truthful. The settlement announced on March 12, 2026, resolves these allegations.
“The government pays private insurers over $530 billion each year to care for Americans enrolled in Medicare Advantage,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. “We will continue to hold accountable insurers that knowingly submit inaccurate or unsupported diagnoses to improperly inflate reimbursement.”
The United States contends that, for payment year 2015, Aetna operated a “chart review” program in which it paid diagnosis coders to review medical records (also known as “charts”) and identify all medical conditions that the charts supported. Aetna relied on the results of those chart reviews to submit additional diagnosis codes to CMS to obtain additional payments. However, CMS and the Justice Department claim Aetna’s chart reviews did not substantiate some diagnosis codes previously reported by Aetna to CMS. Aetna did not delete or withdraw those diagnosis codes, which would have required Aetna to reimburse CMS. The Justice Department alleges that Aetna used the results of its chart reviews to identify instances where Aetna could seek additional payments from CMS while ignoring those same results when they indicated Aetna was overpaid.
The settlement also resolves further allegations that, for payment years 2018 to 2023, Aetna knowingly submitted or failed to delete or withdraw inaccurate and untruthful diagnosis codes for morbid obesity to increase the payments it received from CMS for beneficiaries enrolled in its MA plans. The medical records for individuals diagnosed as morbidly obese typically include one or more Body Mass Index (BMI) recordings. Aetna submitted or failed to delete inaccurate and untruthful diagnosis codes for morbid obesity for individuals whose recorded BMI was inconsistent with a diagnosis of morbid obesity, and these codes increased the payments made by CMS.
The civil settlement related to morbid obesity resolves a lawsuit filed under the whistleblower provisions of the False Claims Act, which permit private parties to sue on behalf of the government when they believe that a defendant has submitted false claims for government funds and receive a share of any recovery. The qui tam case is captioned United States ex rel. Mary Melette Thomas v. Aetna Inc., et. al., number 24-cv-339 in U.S. District Court for the Eastern District of Pennsylvania. The settlement in this case provides for the whistleblower, a former Aetna risk-adjustment coding auditor, to receive a $2,012,500 share of the settlement amount.
The investigation and resolution of this matter illustrate the government’s emphasis on using the False Claims Act and other federal health care fraud laws to combat healthcare fraud. While traditionally these efforts have emphasized the investigation and prosecution of civil or criminal claims against health care providers, often at the urging or based on data provided by large health insurance payer entities contracted with Medicare, over the past year the Justice Department and Department of Health and Human Services Office of Inspector General (“OIG”) and state regulators have announced a growing series of False Claims Act and other health care fraud charges and settlements against Medicare Advantage, health insurance exchange and other major health insurers participating in Medicare programs.
For example, in January, 2026, the Justice Department announced Kaiser Foundation Health Plan Inc.; Kaiser Foundation Health Plan of Colorado; The Permanente Medical Group Inc.; Southern California Permanente Medical Group; and Colorado Permanente Medical Group P.C. (collectively “Kaiser”) agreed to pay $556 million to resolve allegations that they violated the False Claims Act by submitting invalid diagnosis codes for their Medicare Advantage Plan enrollees in order to receive higher payments from the government.
The Kaiser settlement resolved allegations that, from 2009 to 2018, Kaiser engaged in a scheme to increase its Medicare reimbursements by pressuring physicians to add diagnoses after patient visits through “addenda” to patients’ medical records. The United States alleged that Kaiser developed various mechanisms to mine a patient’s past medical history to identify potential diagnoses that had not been submitted to CMS for risk adjustment. Kaiser then sent “queries” to its providers urging them to add these diagnoses to medical records via addenda, often months and sometimes over a year after visits. In many instances, the United States alleged, the diagnoses added by the providers had nothing to do with the patient visit in question, in violation of CMS requirements.
The United States further alleged that Kaiser set aggressive physician- and facility-specific goals for adding risk adjustment diagnoses. It alleged that Kaiser singled out underperforming physicians and facilities and emphasized that the failure to add diagnoses cost money for Kaiser, the facilities, and the physicians themselves. It also alleged that Kaiser linked physician and facility financial bonuses and incentives to meeting risk adjustment diagnosis goals.
The United States alleged that Kaiser knew that its addenda practices were widespread and unlawful. Kaiser ignored numerous red flags and internal warnings that it was violating CMS rules, including concerns raised by its own physicians that these were false claims and audits by its own compliance office identifying the issue of inappropriate addenda.
The Kaiser civil settlement includes the resolution of certain claims brought in lawsuits under the qui tam or whistleblower provisions of the False Claims Act by Ronda Osinek and James M. Taylor, M.D., former employees of Kaiser. Under those provisions, private parties are permitted to sue on behalf of the United States and receive a portion of any recovery. The qui tam cases are captioned United States ex rel. Osinek v. Kaiser Permanente, et al., No. 3:13-cv-03891 (N.D. Cal.) and United States ex rel. Taylor v. Kaiser Permanente, et al., No. 3:21-cv-03894 (N.D. Cal.). The relator share of the recovery totaled $95 million.
While the number of settlements and prosecutions against health insurance entities remain relatively small, Medicare Advantage and other health insurance organizations or their affiliates contracted with Medicare’s also have faced a myriad of other False Claims Act or other charges of misconduct. See e.g., Troy Health, Inc. Enters Non-Prosecution Agreement and Admits to Fraudulently Enrolling Medicare Beneficiaries and Identity Theft; Executive Vice President Of Insurance Brokerage Pleads Guilty In $133M Affordable Care Act Fraud Scheme; Health Plus Was Excluded for 10 Years for Failing to Supply Payment Information Required in an OIG Subpoena.
Health Plan Sponsor & Fiduciary Implications
Coupled with the OIG’s recent addition of health care payer-focused projects to its latest compliance plan, however, these prosecutions and settlements should warn health care payers to tighten their controls and other compliance while signaling the advisability of tighter scrutiny of payer vendors by employer and other private health program sponsors and fiduciaries.
Employer and other plan sponsors face obvious financial risks from inappropriate vendor charges and actions. Because ERISA’s duty of prudence obligates plan fiduciaries to act prudently to protect plan assets and provide for proper administration of the plan, health plan fiduciaries also risk personal liability for failing prudent due diligence, contractual, audit, oversight, enforcement and requires plan fiduciaries to prevent plan losses and administrative errors arising from these and other vendor misconduct and performance deficiencies.
If you have questions about this or other health care concerns, contact the author.
For More Information
We hope this update is helpful. For more information about the or other health or other employee benefits, human resources, or health care developments, please contact the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452 -8297.
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About the Author
Peer recognized as “Top Rated Lawyer” and “LEGAL LEADER™ “Top Rated Lawyer” and “Best Lawyer” for her work in Health Care Law, Labor and Employment Law; ERISA & Employee Benefits,” and “Business and Commercial Law,” Cynthia Marcotte Stamer is an A Martindale-Hubble “AV-Preeminent” (Top 1%) attorneys board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for her more than 35 years of health industry and other management work, public policy leadership and advocacy, coaching, teachings, and publications including leading edge work on PBM, pharmacy and pharmaceutical and other health care, managed care, insurance, and insured and self-insured contracting, design, administration and regulation..
Author of numerous highly regarded works on health law and policy, Immediate Past Chair of the ABA International Section Life Sciences Committee and the current Tort Trial and Insurance Practice Section Medicine and Law Committee, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and past Group Chair and current Welfare Benefit Committee Co-Chair of the ABA RPTE Employee Benefits & Other Compensation Group, Ms. Stamer is most widely recognized for her decades of pragmatic, leading edge work, scholarship and thought leadership on health and other privacy and data security and other health industry legal, public policy and operational concerns.
Ms. Stamer’s work throughout her career has focused heavily on working with health care and managed care, health and other employee benefit plan, insurance and financial services and other public and private organizations and their technology, data, and other service providers and advisors domestically and internationally with legal and operational compliance and risk management, performance and workforce management, regulatory and public policy and other legal and operational concerns. As a part of this work, she has continuously and extensively worked with domestic and international health plans, their sponsors, fiduciaries, administrators, and insurers; managed care and insurance organizations; third party administrators and other health benefit service providers; hospitals, health care systems and other health care providers, accreditation, peer review and quality committees and organizations; billing, utilization management, management services organizations, group purchasing organizations; pharmaceutical, pharmacy, and prescription benefit management and organizations; consultants; investors; EMR, claims, payroll and other technology, billing and reimbursement and other services and product vendors; products and solutions consultants and developers; investors; managed care organizations, self-insured health and other employee benefit plans, their sponsors, fiduciaries, administrators and service providers, insurers and other payers, health industry advocacy and other service providers and groups and other health and managed care industry clients as well as federal and state legislative, regulatory, investigatory and enforcement bodies and agencies.
She also has extensive experience helping health care systems and organizations, group and individual health care providers, health plans and insurers, health IT, life sciences and other health industry clients prevent, investigate, manage and resolve sexual assault, abuse, harassment and other organizational, provider and employee misconduct and other performance and behavior; manage Section 1557, Section 504, Civil Rights Act and other discrimination and accommodation, and other regulatory, contractual and other compliance; vendors and suppliers; contracting and other terms of participation, medical billing, reimbursement, claims administration and coordination, Medicare, Medicaid, CHIP, Medicare/Medicaid Advantage, ERISA and other payers and other provider-payer relations, contracting, compliance and enforcement; Form 990 and other nonprofit and tax-exemption; fundraising, investors, joint venture, and other business partners; quality and other performance measurement, management, discipline and reporting; physician and other workforce recruiting, performance management, peer review and other investigations and discipline, wage and hour, payroll, gain-sharing and other pay-for performance and other compensation, training, outsourcing and other human resources and workforce matters; board, medical staff and other governance; strategic planning, process and quality improvement; meaningful use, EMR, HIPAA and other technology, data security and breach and other health IT and data; STARK, ant kickback, insurance, and other fraud prevention, investigation, defense and enforcement; audits, investigations, and enforcement actions; trade secrets and other intellectual property; crisis preparedness and response; internal, government and third-party licensure, credentialing, accreditation, HCQIA and other peer review and quality reporting, audits, investigations, enforcement and defense; patient relations and care; internal controls and regulatory compliance; payer-provider, provider-provider, vendor, patient, governmental and community relations; facilities, practice, products and other sales, mergers, acquisitions and other business and commercial transactions; government procurement and contracting; grants; tax-exemption and not-for-profit; privacy and data security; training; risk and change management; regulatory affairs and public policy; process, product and service improvement, development and innovation, and other legal and operational compliance and risk management, government and regulatory affairs and operations concerns. to establish, administer and defend workforce and staffing, quality, and other compliance, risk management and operational practices, policies and actions; comply with requirements; investigate and respond to Board of Medicine, Health, Nursing, Pharmacy, Chiropractic, and other licensing agencies, Department of Aging & Disability, FDA, Drug Enforcement Agency, OCR Privacy and Civil Rights, Department of Labor, IRS, HHS, DOD, FTC, SEC, CDC and other public health, Department of Justice and state attorneys’ general and other federal and state agencies; JCHO and other accreditation and quality organizations; private litigation and other federal and state health care industry actions: regulatory and public policy advocacy; training and discipline; enforcement; and other strategic and operational concerns.
Author of publications on “Transparent PBM Contracting,” “ACOs, Direct Contracting: Legal & Practical Challenges For Employers, Providers & TPAs,” “The Medicare Advantage Contracting Manual,” “Third Party Administrator (TPA) Contracting Principles and Strategies and a multitude of other highly regarded publications and presentations, Stamer is widely recognized for her thought leadership on PBM and other managed care and health plan contracting and design, and a multitude of other health care, health plan and other health industry matters. In addition, Ms. Stamer contributes her time and leadership to numerous policy, professional, civil and other organizations including service as the, the American Bar Association (ABA) International Section Life Sciences Committee Vice Chair, a Scribe for the ABA Joint Committee on Employee Benefits (JCEB) Annual OCR Agency Meeting and a former Council Representative, Past Chair of the ABA Managed Care & Insurance Interest Group, former Vice President and Executive Director of the North Texas Health Care Compliance Professionals Association, past Board President of Richardson Development Center (now Warren Center) for Children Early Childhood Intervention Agency, past North Texas United Way Long Range Planning Committee Member, and past Board Member and Compliance Chair of the National Kidney Foundation of North Texas, and a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her extensive publications and thought leadership as well as leadership involvement in a broad range of other professional and civic organizations. For more information about Ms. Stamer or her health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.
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