Amends the definition of insurance fraud

Summary of provisions

Section 1 of the bill amends Insurance Law § 403(a) to make a technical amendment by deleting "an" in the phrase "an insurance fraud."

Section 2 of the bill amends Penal Law § 176.05 to include the activities that currently constitute a "fraudulent health care insurance act" within the definition of "fraudulent insurance act. "

Section 3 states that this bill takes effect immediately.

Existing law

Currently, Insurance Law § 403 states that it is a violation of the Insurance Law for any individual, firm, association, or corporation subject to the Insurance Law to commit a fraudulent insurance act, and for the purposes of Article 4 of the Insurance Law, defines a "fraudulent insurance act" as "an insurance fraud as defined in section 176.05 of the penal law."

Penal Law § 176.05 is titled "Insurance fraud; defined," and sets forth when a "fraudulent insurance act" is committed and when a "fraudulent health care insurance act" is committed.

Prior legislative history

This is a new bill.

Statement in support

In 1998, the Legislature amended a number of state laws to expand health coverage for children through the Child Health Plus program and Medicaid and concomitantly amended the Penal Law to strengthen New York's ability to deter Medicaid fraud and abuse. As part of these amendments, the Legislature added a new subdivision to Penal Law § 176.05, which defines a "fraudulent health care insurance act." However, the Legislature failed to amend Penal Law §§ 176.10 through 176.30, which prescribe penalties for five different degrees of insurance fraud and permit penalties only for a person who commits a "fraudulent insurance act."

In 2003, a chief operating officer and executive vice president of a managed health care provider was indicted on charges that included

two counts of insurance fraud in the first degree. The indictment charged that the defendant committed fraudulent insurance acts in 2003 when he submitted marketing plans to Medicaid that he knew contained materially false information. The State asserted that marketing plans allegedly submitted by the defendant were fraudulent health care insurance acts, which are a species of fraudulent insurance acts. The defendant moved to dismiss the insurance fraud counts, asserting that he did not commit a "fraudulent insurance act" as defined in the Penal Law. The New York Supreme Court granted defendant's motion and the Appellate Division and Court of Appeals affirmed. The New York State Court of Appeals held in People v. Boothe, 16 N.Y.3d 195 (2011), that "a 'fraudulent health care insurance act' is not included within the definition of 'fraudulent insurance act'" and that "the Legislature plainly failed to criminalize the conduct at issue." The Court of Appeals further stated that "if this deficiency is to be corrected, it must be done through legislative action."

The Legislature's failure to criminalize activities that currently constitute a "fraudulent health care insurance act" was not intentional, and as a result, this deficiency in the law should be remedied so that the Legislature may achieve its original goal of strengthening New York's ability to deter Medicaid fraud and abuse. Thus, this bill fixes the foregoing deficiency by amending Penal Law § 176.05 to include the activities that currently constitute a "fraudulent health care insurance act" within the definition of "fraudulent insurance act."

Budget implications

There are no budget implications from this bill.

Effective date

This bill takes effect immediately.