AG: Pres defrauded taxpayers by millions
Health care giant denies allegations, which include falsifying documents
The state’s largest health care provider “engaged in a 15-year fraudulent enterprise” by falsifying deductions and credits, avoiding millions of dollars in taxes, New Mexico’s top prosecutor claims in a lawsuit filed Tuesday.
In a 43-page complaint against Presbyterian Health Plan Inc., Presbyterian Insurance Co. Inc., and Presbyterian Network, state Attorney General Hector Balderas alleges the health system realized “a multimillion-dollar windfall” by evading taxes and surcharges owed on Medicaid premiums the state paid it from 2001 to 2015.
Among the allegations, the state contends Presbyterian Health Plan claimed more than $754 million in unlawful deductions for calendar years 2001 through 2011.
A spokeswoman for the health system denied all the allegations in the complaint.
“As an organization, we are committed to paying all taxes due to the state, which includes premium tax, gross receipts tax, property tax and unemployment,” said Melanie Mozes, Presbyterian communications manager.
In 2016, she said, Presbyterian Health Plan paid more than $52.6 million in premium taxes to the state and $20.1 million in assessments that help fund state-sponsored insurance programs.
The lawsuit, filed in the 1st Judicial District Court in Santa Fe, comes at the same time the State Auditor’s Office with the state Office of the Superintendent of Insurance is conducting a separate investigation of allegations related to underpayment of taxes on insurance premiums by multiple insurers.
“Our work is independent of the attorney general’s lawsuit, and the findings will be made public when it is complete,” State Auditor Tim Keller said.
The attorney general’s lawsuit is independent of that audit and was based on its own investigation of allegations made by three whistleblowers, according to a spokesman for Balderas. The three whistleblowers, who were employees of the Office of the Superintendent of Insurance, are also plaintiffs in the lawsuit.
“We absolutely believe the damages, including underpayments and penalties, will run into the millions of dollars,” said Ken Stalter, senior counsel to Balderas.
The state is seeking actual and punitive damages and has requested a jury trial.
The lawsuit accuses Presbyterian of using various accounting maneuvers to deliberately and systematically underpay premium taxes. Under state law, every insurer operating in New Mexico is required to pay a tax and surcharge on insurance premiums.
“Presbyterian executed its scheme through the filing of premium tax returns signed knowingly by company executives that plainly contravened the insurer’s ability to pay,” the complaint says. “By routinely filing these false claims, Presbyterian filled its coffers, reaping benefits upon its management and shareholders at the expense of the public and to the detriment of New Mexico taxpayers.”
The complaint says Presbyterian “brazenly claimed deductions despite receiving reimbursements from the state for the very taxes it endeavored to underpay.”
Last year, legislative finance leaders, the Auditor’s Office and the state Department of Finance and Administration asked for the attorney general’s help in reviewing possible underpayments of premium taxes by major health care companies.
Meanwhile, the superintendent of insurance and the state auditor hired an independent auditor after a special report said the five largest health insurance companies operating in New Mexico owed at least $193 million in premium taxes, although that figure has been disputed. In addition to Presbyterian, those firms are Molina Healthcare Inc., UnitedHealthcare, Blue Cross Blue Shield of New Mexico and Amerigroup.
The independent audit is expected to be completed by Sept. 30.
Stalter said the AG’s Office did not wait for that audit because its investigation was based on allegations independent of the audit.
“New Mexicans deserve a health care system they can trust,” Balderas said in a statement Tuesday. “When insurance providers break the rules, they must face consequences. My office is working with the State Auditor to make sure that Presbyterian — and any other companies that engaged in similar fraudulent conduct — are held responsible for the serious injuries imposed on New Mexican taxpayers.”
The complaint includes counts alleging violation of the Fraud Against Taxpayers Act, violation of the New Mexico Insurance Code, unjust enrichment, fraud and negligent misrepresentation.
Presbyterian “vehemently rejected the allegations made today and we look forward to a positive resolution to this matter,” Mozes said in a prepared statement.
“We are genuinely alarmed and surprised by the timing and nature of these allegations,” the statement said. “The premium taxes paid by Presbyterian Health Plan have been audited multiple times by independent firms and state agencies.
“We have consistently and fully participated in the review of our financial records, including the audit currently underway by the Office of the Superintendent of Insurance.”
Mozes said the company has acted in good faith and with the intent to comply with its legal obligations. “Presbyterian has always acted with the utmost integrity in the Medicaid program for the members we serve, as well as state taxpayers,” she said.
Founded more than a century ago, the not-for-profit Presbyterian Healthcare Services has grown into a locally owned network of hospitals and clinics around the state with nearly 11,000 employees. Presbyterian’s separate for-profit health plan has more than 450,000 members.