New Jersey Adopts Tough New Insurance Fraud Law

On June 9, 2003, New Jersey Governor James McGreevey signed into law a comprehensive reform package relating, among other things, to insurance fraud. The new law is L. 2003, Chapter 89. It is accessible on the Web at http://www.njleg.state.nj.us/2002/Bills/PL03/89_.HTM.

The new law creates a new crime of "insurance fraud." In brief, any person (including an insured or a licensed practitioner) who knowingly makes or causes to make a false or misleading statement of material fact to an insurance company (including medical and dental insurers, automobile insurers and professional liability insurers as well as self-funded plans and the State Health Plan) is guilty of "the crime of insurance fraud" if such statement is made in connection with any of the following: a claim for payment or reimbursement; an application for coverage; and any payment made or to be made in accordance with the terms of an insurance policy. L.2003, c.87, § 73 (codified at N.J.S.A. 17:33A-33).

The new law recites that it is intended to aggressively confront the problem of insurance fraud by facilitating the detection, investigation and prosecution of such fraud. L. 2003, c.87, § 71(b). Among the features of the bill are provisions that make it a second degree crime: "if the person knowingly commits five or more acts of insurance fraud, including acts of healthcare claims
fraud, ... and if the aggregate value of [the benefit] obtained or sought to be obtained is at least $1,000." L.2003, c.89, § 73(b) (codified at N.J.S.A. 17:33A-33(b).)

In determining whether the $1,000 threshold has been met, the amounts involved in separate claims may be aggregated and the fraud need not have succeeded; the amounts involved in attempted (unsuccessful) frauds are also includible. This means that a covered person and/or practitioner who submits five claims with knowingly misleading or false information material to the claim ("material" means it's relevant -- an incorrect address which is irrelevant to the insurer's action would not be material) of $200 each could be convicted of a second-degree offense. Second-degree theft offenses in New Jersey are serious crimes; previously, $75,000 was the minimum threshold to constitute a second-degree theft.

The clear message is that the State of New Jersey will be tough on persons who engage in a pattern of insurance fraud, even if the claims are relatively small. Although there must be five frauds to constitute a pattern, they can all occur in one claim form, e.g. a claim for five separate services that deliberately misrepresent the fees charged or services actually rendered. L.2003, c.89, § 73(b) (codified at N.J.S.A. 17:33A-33(b).) The crime is a third-degree offense if there are fewer than five claims or if the $1,000 threshold is not met.

A similar provision has been on the books for healthcare claim fraud of licensees for the last five years. The State of New Jersey has increasingly utilized that law since its enactment. This law complements the health care claim fraud law, increases the stakes for both practitioners and non-practitioners, and expands it beyond health insurance.

The new law has also "upped the ante" against insurance fraud by creating a system to provide financial rewards to those individuals who provide "information leading to the arrest, prosecution, and conviction of persons or entities who have committed healthcare claims fraud, insurance fraud or any other criminal offense related to an insurance transaction." L. 2003, c.89, § 74(d) (codified at N.J.S.A. 17:33A-34(d).) Patients who suspect their provider is overbilling, office staff who suspect upcoding, or former employees who have pertinent information about similar misconduct can now receive a reward of up to $25,000.

Now, more than ever, is the time to review your claim preparation and submission practices to assure that your claims are accurate and that your personnel understand the stakes involved in submitting false information to dental or medical carriers (as well as other carriers such as automobile insurers and professional liability insurers).

This is not legal advice. We recommend that you confer with your legal counsel for advice concerning this and other laws.