Insurance for Health Care Fraud?

March 4th, 2012

But you can now buy insurance specifically tailored for certain misdemeanor crimes of health-care fraud.

Corporate insurance broker Marsh and insurer Allied World Assurance Co. have joined to sell what they say are the first of these policies. They hope the insurance will appeal to top executives at pharmaceutical, biotech, medical-device, and hospital companies who worry they will be the next target of increased federal prosecution of health-care fraud.

This odd situation is born of market forces and a legal principle called the responsible corporate officer doctrine, or the Park doctrine, stemming from Supreme Court cases involving regulations designed to protect consumers of food and drugs.

This bothered me much more at first glance than after some consideration. At first glance, I thought, wow this creates a serious moral hazard to commit health care fraud.

But after some more thought, it bothers me less, especially in light of the fact that these misdemeanors may lack a mens rea requirement:

Under the act, food and health-care executives may be guilty of a misdemeanor even if they did not know bad things were happening under their watch or if they failed to correct a problem once they learned of it. . . . “If someone pleads guilty to a misdemeanor with little to no evidence that they engaged in deliberate criminal conduct, there is a strong argument that this person deserves coverage,” said Steve Shappell, a managing director with Aon Corp. and leader of the insurer’s legal and claims practice within the financial-services group. “If the evidence is more compelling that someone engaged in affirmative conduct, then the exclusions to the policy might apply.

Is this type of insurance really that much different than other types of malpractice insurance–legal or medical? Those insurances cover professionals who make a mistake (either negligent, or maybe even reckless) from high civil damages. Is it that much different than covering damages owed to the government?

I mean, government officials who make similar mistakes are covered by qualified, or even absolute immunity. Why shouldn’t private-sector schmucks get some kind of protection?

Oh, and this last part scares the crap out of me:

Health and Human Services Secretary Kathleen Sebelius, whose purview includes the FDA, was surprised to hear of the new, health-care-focused insurance policies when asked about them during a recent visit to Philadelphia.

“Really?” said Sebelius, who was the Kansas insurance commissioner before becoming that state’s governor. “I don’t practice law on a regular basis, but usually you can’t insure yourself as a bank robber for robbing banks. That is intriguing. I’d like a list of their customers because that would give us a pretty good target of people to go after.”

So not only can you not hedge your bets, but if you try, the state will go after you harder. Shrug.