How Two States Are Recovering Tens of Millions Otherwise Lost to Fraud

The federal and state False Claims Acts empower whistleblowers to fight fraud against the government. But fraud targets private insurers too, and every American pays for the high cost of this fraud through higher insurance premiums every day. Private insurance fraud costs the public over $100 billion per year and takes an estimated $1,400 per year from the average family through excess insurance premiums.1 This is as much as the average household will pay for water ($1,000) or electricity ($1,464) each year.

Whistleblowers can help fight this private insurance fraud too. Illinois and California are on the cutting edge of confronting this problem. 

They have qui tam laws—which operate like the False Claims Act—to enable whistleblowers to expose fraud on private insurers and recover stolen funds.

Illinois adopted the Illinois Insurance Claims Fraud Prevention Act2, to empower whistleblowers to “alleviat[e] the social costs of increased insurance rates due to fraud.”

California adopted the California Insurance Fraud Prevention Act3, to reduce “insurance premiums,” observing that “fraudulent activities account for billions of dollars annually in added health care costs nationally,” and “fraudulent activities account for 15 to 20 percent of all auto insurance payments.”

These laws protect huge insurance markets worth trillions of dollars. Private health insurance is estimated to cost the public $1.1 trillion every year. And these laws protect all variety of other insurance markets including the mandatory auto insurance that every driver must buy (a $300 billion market), property insurance (a $715 billion market), the workers compensation system (a $40 billion market), and every other type of insurance paid for by individuals and businesses.

The laws work. Actions under the Illinois and California laws have recovered tens of millions of dollars in settlements over the last decade. For example, in 2015, pharmaceutical company Warner Chilcott paid $23.2 million, in 2016, pharmaceutical manufacturer Bristol Myers Squibb paid $30 million, [6] and in 2020, drugmaker AbbVie paid $24 million—all to settle claims related to private insurance fraud. Other litigation under these laws fights fraud in auto insurance, workers compensation, and vision insurance.

Fraud knows no limits. Whistleblowers have long protected government funds, and these laws can protect the public’s pocketbooks directly too. The more whistleblowers that come forward, resources available to investigate and prosecute these claims, and states that follow the lead of Illinois and California, the more the public can save on insurance.

Written by Margaret Truesdale and Charlie Wysong of Hughes Socol Piers Resnick & Dym. Edited by James King of Taxpayers Against Fraud. Fact checked by Julia-Jeane Lighten of Taxpayers Against Fraud.

  1. Johnny Parker, Detecting and Preventing Insurance Fraud: State of the Nation in Review, 52 Creighton L. Rev. 293, 294 (2019)
  2. 740 ILCS 92/1 et seq
  3. Cal. Ins. Code § 1871