Sentences for Leaders in ACA Fraud Scheme: A Case Study on Insurance Integrity
Two corporate leaders have received 20-year prison sentences for orchestrating a fraudulent scheme that exploited the Affordable Care Act (ACA). The individuals, a president of an insurance brokerage and a CEO of a marketing firm, improperly enrolled vulnerable individuals in fully subsidized ACA plans. This scheme generated substantial commission revenue from insurance carriers.
Attorney General Pamela Bondi stated, “Fraud schemes like this rob citizens and shake faith in our institutions.” FBI Director Kash Patel also noted that the scheme defrauded taxpayers and risked disrupting critical medical care for many. The fraud revealed significant vulnerabilities in regulatory compliance requirements within the insurance industry.
During the trial, evidence showed that Cory Lloyd from Florida and Steven Strong from Texas developed an elaborate fraud that sought over $233 million in fraudulent ACA subsidies. The federal government disbursed at least $180 million, targeting low-income individuals and manipulating their enrollment in subsidized ACA plans. This not only led to disruptions in beneficiaries' existing Medicaid or insurance coverages but also raised concerns about payer and provider trust.
Lloyd received financial incentives from an insurance company for these enrollments and paid Strong for consumer referrals. The duo employed misleading sales techniques, bypassing federal income verifications and manipulating application processes. Their actions ensured continuous commission flows, highlighting critical lapses in regulatory compliance and risk management.
The fraudulent activities resulted in substantial ill-gotten gains used for personal luxuries, showcasing a breach of ethical practices in the insurance sector. Consequently, both offenders face a restitution order of $180.6 million, emphasizing the importance of adherence to underwriting and claims integrity.
In a related case, Dafud Iza, another participant, admitted to major fraud against the United States and received a nearly three-year prison sentence. The rigorous investigation by the FBI, HHS-OIG, and IRS Criminal Investigation highlights ongoing efforts to combat health care fraud and its impact on federal health care programs.
The Department of Justice’s Fraud Section led the prosecution through its Health Care Fraud Strike Force Program, demonstrating the scale and financial implications of health care fraud. Since 2007, this program has been crucial in charging thousands and recovering significant funds, underscoring essential regulatory and compliance measures in the insurance industry.