Presbyterian settles state lawsuit for $18.5 million
Health care giant allegedly filed fraudulent tax returns
Presbyterian Healthcare Services, New Mexico’s largest health care provider, has agreed to pay $18.5 million to the state to settle a lawsuit that alleged it filed fraudulent tax forms to avoid Medicaid premium taxes dating back to 2003.
“We are pleased that we can announce today that we have been working alongside the Attorney General’s Office and mutually agreed on a settlement going forward,” said Dale Maxwell, president and chief executive of Presbyterian. Maxwell said fraud allegations are dismissed under the settlement agreement, but it doesn’t address the insurer’s entire tax liability identified in a recent audit.
“We place a high priority on honoring our obligations to the state we have served for 109 years,” Maxwell said. “In fact, we have paid more than $345 million in premium tax payments over the past 15 years.”
The state’s case against Presbyterian stemmed from a whistleblower lawsuit filed by three employees at the Office of the
Superintendent of Insurance: accountant and auditor Monica Galloway, financial audit bureau chief Shawna Maestas and chief administrative officer Jolene Gonzales. The AG’s Office took over the case earlier this year.
The settlement comes almost four months after the lawsuit was filed against Presbyterian Health Plan Inc., Presbyterian Network Inc. and Presbyterian Insurance Co. Inc.
The original plaintiffs and their attorney will receive 20 percent of the settlement, according to the agreement and terms of the state’s Fraud Against Taxpayers Act. They stood to receive more if they had prevailed in court without the attorney general’s intervention.
In its defense, Presbyterian says state insurance regulators reviewed and approved the company’s amendments to past tax payments.
Maxwell said the payment to the state will come from reserves and operating funds.
Attorney General Hector Balderas said Presbyterian “stepped up and did the right thing” with the settlement, and the payment “returns critical funds to the state coffers” to fund Medicaid coverage.
Balderas said New Mexico “has done a horrible job of assessing, recovering and collecting taxes owed by insurance companies” and said the state can ill afford having the same regulatory body responsible for setting rates for insurers to also be collecting taxes.
The settlement represents a larger amount than the roughly $14.6 million in unpaid Medicaid premium taxes and fees due from Presbyterian, as described in the state’s industrywide audit of insurance companies that shows them $65 million in arrears.
According to Presbyterian, $15.3million of the settlement amount reflects the payment in full by PHP of premium taxes related to health insurance premiums for 2003 and 2004 “where there were complex, and in some cases contradictory, changes in the state’s premium tax laws.” The $3.5 million figure “reflects a compromise of disputed claims to avoid time-consuming and expensive litigation, the outcome of which was uncertain,” Presbyterian said in a prepared statement.
Presbyterian and state officials said the settlement resolves those debts, but not an additional $14 million in estimated underpayment related to tax credits that offset Presbyterian’s contributions to a high-risk insurance pool for people who are denied insurance or are considered uninsurable.
Maxwell said those estimated underpayments are related to a recent regulatory change that delays insurance-pool tax credits until the year after payments to the insurance pool. Presbyterian will be working with the OSI to clear up the rest of its tax liability.
“We look forward to getting this issue behind us,” he said.
A newly released audit places Presbyterian Health Plan at the top of a list of 17 insurance companies with unpaid taxes that are owed to the state.
Records released by the New Mexico Office of the State Auditor last week show a $28.9 million underpayment of taxes at the for-profit arm of Presbyterian Healthcare Services since 2003.
The state collects hundreds of millions of dollars each year through a 3 percent tax on insurance premiums and additional surcharges.