Most whistleblower laws only cover fraud against the government. California law goes further. Under the Insurance Frauds Prevention Act, a person with inside knowledge can file a confidential lawsuit over fraud against private insurance companies, including PPO and HMO health plans, employer health plans, workers’ compensation carriers, and life and disability insurers, and may receive a share of what is recovered.
On this page: Beyond Medicare · What the law covers · Schemes · Who can file · How it works · Whistleblower share · IFPA vs. FCA · Deadlines · Retaliation · Fees · FAQ
Smith Trial Group represents billing and coding staff, office managers, nurses, clinicians, executives and others who know how a provider or company is defrauding insurers. Attorney Cardon Smith spent years defending Fortune 500 companies in complex litigation and served as a law clerk to a federal judge, so he knows how companies and their lawyers respond when an insider speaks up. Consultations are free and confidential.
Medicare Isn’t the Only Fraud You Can Report
Many people assume that fraud against a private insurer is only the insurer’s problem, and that whistleblower rewards apply only to Medicare or Medi-Cal. In California, that is not true. The Insurance Frauds Prevention Act (Insurance Code section 1871.7) allows a private person to sue on behalf of the State of California when someone knowingly submits false or fraudulent claims to an insurance company.
That matters because much healthcare billing goes to commercial plans, not government programs. A clinic that bills a PPO for tests it never ran, or a pharmacy that bills an employer plan for drugs it never dispensed, can be liable even if no government money is involved. If the fraud involves Medicare or Medi-Cal, see our healthcare fraud whistleblower page. Many schemes involve both.
What the Insurance Frauds Prevention Act Covers
The Act reaches two main kinds of conduct:
- False or fraudulent insurance claims. Knowingly presenting a false claim for payment, inflating a claim, or making false statements to get benefits paid. The Act incorporates California’s insurance fraud crimes in Penal Code sections 549, 550 and 551.
- Paid patient recruiting. It is unlawful to knowingly use runners, cappers, steerers or other people to bring in patients or clients for insurance-paid services or workers’ compensation benefits.
It applies across most lines of insurance, including:
- Commercial health insurance: PPO, HMO, employer and union plans
- Workers’ compensation
- Life, disability and long-term care insurance
Common Schemes Against Private Insurers
- Billing for care never provided. Therapy sessions, tests or procedures that never happened, or visits billed as longer than they were.
- Upcoding. Billing a more complex, higher-paying service than the one actually performed.
- Lab and drug-testing schemes. Billing commercial plans for excessive or medically unnecessary urine drug tests, genetic tests or test panels.
- Paying for patients. Kickbacks to recruiters, sober-living homes, “marketers” or other providers for referring insured patients, a recurring problem in Southern California addiction treatment. See addiction treatment and sober-living fraud.
- Workers’ compensation medical fraud. Illegal referral payments, unnecessary treatment or compounded drugs, and false medical-legal billing. See workers’ compensation fraud.
- Misrepresenting who provided care. Billing an unlicensed or lower-level provider’s work under a physician’s name to get a higher rate.
- Pharmacy fraud. Billing for prescriptions that were never dispensed, or for more expensive drugs than the ones dispensed.
Who Can Bring a Case
The law allows “any interested persons, including an insurer” to bring a case for the State of California. Whistleblowers often include:
- Current and former employees: billers, coders, office managers, nurses, therapists, clinicians and executives
- Contractors, consultants and outside billing companies
- Competitors who know how a rival really bills
- Patients billed for care they never received (see billed for medical care you didn’t receive?)
What matters most is specific, firsthand knowledge of how the fraud works: who did what, when, and how it led to false claims. A person who planned and started the fraud cannot share in the recovery.
How an Insurance Fraud Whistleblower Case Works
- Confidential review. We review what you know and which laws may apply. Some cases involve private insurance and government programs together and need both state and federal claims.
- Filing under seal. The complaint is filed confidentially in California superior court. It is served, with a written disclosure of the key evidence, on the local District Attorney and the California Insurance Commissioner, not on the company.
- Government review. The case stays sealed for at least 60 days, and often longer when the government asks for more time to investigate.
- Intervention decision. The District Attorney or the Insurance Commissioner may take over the case. If both decline, the whistleblower may continue the case with their own lawyer.
- Resolution. Cases end in settlement, judgment or dismissal. Investigations and litigation can take years, and not every case results in a recovery.
Whistleblower Share and Penalties
The Act penalizes each false claim, not just the total amount of fraud. A defendant can owe a civil penalty of $5,000 to $10,000 for each fraudulent claim, plus an assessment of up to three times the amount of each claim. If the case recovers money, the whistleblower may receive a share:
| If the case is… | Whistleblower’s share of the recovery |
|---|---|
| Taken over by the District Attorney or Insurance Commissioner | 30% to 40% |
| Pursued by the whistleblower after the government declines | 40% to 50%, plus reasonable attorney’s fees and costs paid by the defendant |
| Based mainly on information that was already public | Up to 10% |
The exact share depends on how much the whistleblower contributed, the facts of the case and the court. No amount is guaranteed.
Insurance Frauds Prevention Act vs. False Claims Act
| Insurance Frauds Prevention Act | Federal False Claims Act | |
|---|---|---|
| Fraud against | Private insurers | Medicare, Medicaid (Medi-Cal), TRICARE and other federal programs |
| Government reviewer | Local District Attorney and California Insurance Commissioner | U.S. Department of Justice |
| Court | California superior court | Federal district court |
| Whistleblower share | 30–40% if the government takes over; 40–50% if it declines | 15–25% if the government takes over; 25–30% if it declines |
When a provider bills private plans and government programs the same way, the Insurance Frauds Prevention Act, the federal False Claims Act and the California False Claims Act may all apply.
Deadlines and Why Timing Matters
- Filing deadline. Generally three years after the facts are discovered, and no more than eight years after the violation.
- First to file. Once a case is pending, other private parties generally cannot bring a related case based on the same facts.
- Public information. A case based on allegations already disclosed in public hearings, audits, reports or the news is barred unless the whistleblower is an “original source” with direct and independent knowledge who gave the information to the government before filing.
Protection From Retaliation
An employee who is fired, demoted, suspended, threatened or harassed for lawful acts in support of an insurance fraud case may be entitled to reinstatement, two times back pay plus interest, special damages and attorney’s fees. California Labor Code section 1102.5 separately protects employees who report suspected violations of law. See whistleblower retaliation.
Before You Report
- Use a personal phone, email and computer, not a work device, to contact a lawyer.
- Do not discuss your concerns with coworkers or post about them online.
- Talk to a lawyer before you copy or take any documents, especially records that contain patient information.
Our Role and Fees
Smith Trial Group represents whistleblowers from the first confidential meeting through investigation, settlement or trial. We handle whistleblower cases on a contingency fee basis. You pay no attorney’s fees unless there is a recovery. Smith Trial Group is based in Newport Beach and represents whistleblowers throughout California.
Frequently Asked Questions
Can I get a reward for reporting fraud against a private insurance company?
In California, possibly. The Insurance Frauds Prevention Act lets a whistleblower receive 30 to 50 percent of a recovery, depending on whether the District Attorney or Insurance Commissioner takes over the case. No amount is guaranteed.
Do I have to be an employee to bring a case?
No. The law allows any interested person to bring a case, so former employees, contractors, competitors and patients may qualify. What matters most is specific, firsthand knowledge of how the fraud works.
Will the company know I filed?
Not at first. The complaint is filed under seal and is not served on the company until the court orders it. Your identity may become known if the case moves forward, and we will talk with you about that before anything is filed.
What if the fraud involves both Medicare and private insurance?
Then state and federal laws may both apply. The same billing practice can support claims under the Insurance Frauds Prevention Act and the federal and California False Claims Acts.
How long do I have to file?
Generally three years after the facts are discovered, and never more than eight years after the violation. Waiting can also allow someone else to file first.
What if I already reported it to my employer or the insurer?
You may still be able to bring a case. Internal reports and tips to an insurer do not by themselves make you a whistleblower under the Act, so talk with a lawyer before taking further steps.
What does it cost to hire an insurance fraud whistleblower lawyer?
We handle whistleblower cases on a contingency fee basis. You pay no attorney’s fees unless there is a recovery.
Talk confidentially with an insurance fraud whistleblower lawyer
Free, confidential consultation. Tell us what happened and we will give you a straightforward assessment of your options.
