Health Insurance Fraud Bill Lets Whistleblowers Keep Up To 30%

The text as introduced · 5,096 words

89R10265 SCF-F

By: Paul
H.B. No. 4012

A BILL TO BE ENTITLED

AN ACT

relating to health care and insurance fraud; creating a criminal

offense; authorizing a civil penalty.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 544.0103(e), Government Code, as

effective April 1, 2025, is amended to read as follows:

(e) The office of inspector general may:

(1) assess administrative penalties otherwise

authorized by law on behalf of the commission or a health and human

services agency;

(2) request that the attorney general obtain an

injunction to prevent a person from disposing of an asset the office

of inspector general identifies as potentially subject to recovery

by the office of inspector general due to the person's fraud or

abuse;

(3) provide for coordination between the office of

inspector general and special investigative units formed by managed

care organizations under Subchapter H or entities with which

managed care organizations contract under that subchapter;

(3-a) provide for coordination between the office of

inspector general and the Texas Department of Insurance, as

provided by Section 701.110, Insurance Code, to coordinate health

care fraud detection and prevention in the state;

(4) audit the use and effectiveness of state or

federal funds, including contract and grant funds, administered by

a person or state agency receiving the funds from a health and human

services agency;

(5) conduct investigations relating to the funds

described by Subdivision (4); and

(6) recommend policies to:

(A) promote the economical and efficient

administration of the funds described by Subdivision (4); and

(B) prevent and detect fraud and abuse in the

administration of those funds.

SECTION 2. The heading to Subchapter B, Chapter 701,

Insurance Code, is amended to read as follows:

SUBCHAPTER B. REPORTING FRAUDULENT INSURANCE ACTS ; CIVIL REMEDIES

SECTION 3. Subchapter B, Chapter 701, Insurance Code, is

amended by adding Section 701.053 to read as follows:

Sec. 701.053. CIVIL REMEDIES. (a) Except as provided by

Subsection (c), a person who violates Section 35A.02(a-1), Penal

Code, is liable to the state for:

(1) the amount of a payment made by or the value of a

benefit provided by a health benefit plan issuer, directly or

indirectly, as a result of the violation, including any payment

made to a third party;

(2) interest on the amount of the payment or the value

of the benefit described by Subdivision (1) at the prejudgment

interest rate in effect on the day the payment or benefit was

received or paid, for the period from the date the benefit was

received or paid to the date that the state recovers the amount of

the payment or value of the benefit;

(3) a civil penalty of:

(A) not less than $5,500 and not more than

$15,000 for each violation committed by the person that results in

injury to an elderly person, as defined by Section 48.002(a)(1),

Human Resources Code, a person with a disability, as defined by

Section 48.002(a)(8)(A), Human Resources Code, or a person younger

than 18 years of age; or

(B) not less than $5,500 and not more than

$11,000 for each violation committed by the person that does not

result in injury to a person described by Paragraph (A); and

(4) two times the amount of the payment or the value of

the benefit described by Subdivision (1).

(b) In determining the amount of the civil penalty described

by Subsection (a)(3), the trier of fact shall consider:

(1) whether the person has previously violated Section

35A.02(a-1), Penal Code;

(2) the seriousness of the violation committed by the

person, including the nature, circumstances, extent, and gravity of

the violation;

(3) whether the health and safety of the public or an

individual was threatened by the violation;

(4) whether the person acted in bad faith when the

person engaged in the conduct that formed the basis of the

violation; and

(5) the amount necessary to deter future violations.

(c) The trier of fact may assess a total of not more than two

times the amount of a payment or the value of a benefit described by

Subsection (a)(1) if the trier of fact finds that:

(1) the person reported to the insurance fraud unit of

the department all information known to the person about the

violation not later than the 30th day after the date on which the

person first obtained the information; and

(2) at the time the person furnished all the

information to the insurance fraud unit of the department, the

insurance fraud unit of the department had not yet begun an

investigation under this chapter.

SECTION 4. Section 701.102, Insurance Code, is amended to

read as follows:

Sec. 701.102. INVESTIGATION OF CERTAIN ACTS OF FRAUD. (a)

If the commissioner has reason to believe a person has engaged in,

is engaging in, has committed, or is about to commit a fraudulent

insurance act, the commissioner may conduct any investigation

necessary inside or outside this state to:

(1) determine whether the act occurred; or

(2) aid in enforcing laws relating to fraudulent

insurance acts, including by providing technical or litigation

assistance to other governmental agencies.

(b) In exercising the commissioner's authority under

Subsection (a), the commissioner shall prioritize investigating

alleged violations of Section 35A.02(a-1), Penal Code.

(c) Except as provided by Section 701.214, the department

may retain up to 50 percent of any money recovered as a result of an

investigation conducted under Subsection (b). The department shall

remit the remaining amount of money to the person or persons harmed

by the offense.

SECTION 5. Subchapter C, Chapter 701, Insurance Code, is

amended by adding Section 701.110 to read as follows:

Sec. 701.110. FRAUD PREVENTION PARTNERSHIP. (a) The

department shall, in coordination with the Health and Human

Services Commission office of inspector general, establish the

fraud prevention partnership to detect and prevent health care

fraud in this state across the private and public markets.

(b) The partnership shall include:

(1) a representative of one or more Medicaid managed

care organizations;

(2) a representative of one or more health benefit

plan issuers, as defined by Section 1222.0001; and

(3) any other appropriate person as determined by the

commissioner and inspector general.

SECTION 6. Chapter 701, Insurance Code, is amended by

adding Subchapter E to read as follows:

SUBCHAPTER E. ACTION BY PRIVATE PERSON

Sec. 701.201. ACTION BY PRIVATE PERSON AUTHORIZED. (a) A

person may bring a civil action for a violation of Section

35A.02(a-1), Penal Code, on behalf of the person and the state. The

action must be brought in the name of the person and of the state.

(b) In an action brought under this subchapter, a person who

violates Section 35A.02(a-1), Penal Code, is liable as provided by

Section 701.053.

Sec. 701.202. INITIATION OF ACTION. (a) A person bringing

an action under this subchapter shall serve a copy of the petition

and a written disclosure of substantially all material evidence and

information the person possesses on the attorney general in

compliance with the Texas Rules of Civil Procedure.

(b) A person shall file a petition for an action under this

subchapter in camera and, except as provided by Section 701.203(b)

or (c), the petition must remain under seal until the earlier of:

(1) the 180th day after the date the petition is served

on the attorney general; or

(2) the date on which the state elects to intervene.

(c) A person bringing an action under this subchapter may

not serve process on a defendant until the court orders service of

process.

Sec. 701.203. STATE INTERVENTION. (a) The state may elect

to intervene and proceed with an action under this subchapter not

later than the 180th day after the date the attorney general

receives the petition and the material evidence and information

under Section 701.202(a).

(b) At the time the state intervenes in an action under this

subchapter, the attorney general may file a motion with the court

requesting that the petition remain under seal for an extended

period.

(c) In an action under this subchapter, the state may, for

good cause shown, move the court to extend the 180-day periods

prescribed by Subsection (a) or Section 701.202(b). A motion under

this subsection may be supported by affidavits or other submissions

in camera.

Sec. 701.204. CONSENT REQUIRED FOR DISMISSAL. An action

under this subchapter may be dismissed only if the court and the

attorney general consent in writing to the dismissal and state

their reasons for consenting.

Sec. 701.205. ANSWER BY DEFENDANT. A defendant is not

required to file in accordance with the Texas Rules of Civil

Procedure an answer to a petition filed under this subchapter until

the petition is unsealed and served on the defendant.

Sec. 701.206. STATE DECISION; CONTINUATION OF ACTION. (a)

Not later than the last day of the period prescribed by Section

701.203(a) or an extension of that period as provided by Section

701.203(c), the state shall:

(1) proceed with the action; or

(2) notify the court that the state declines to take

over the action.

(b) If the state declines to take over an action under this

subchapter, the person bringing the action may proceed without the

state's participation. A person proceeding under this subsection

may recover for a violation for a period of up to six years before

the date the action was filed, or for a period beginning when the

violation occurred until up to three years from the date the state

knows or reasonably should have known facts material to the

violation, whichever of these two periods is longer, regardless of

whether the violation occurred more than six years before the date

the action was filed. Notwithstanding this subsection, a person

proceeding under this subsection may not recover for a violation

that occurred more than 10 years before the date the action was

filed.

(c) On request by the state, the state is entitled to be

served with copies of all pleadings filed in an action under this

subchapter and be provided at the state's expense with copies of all

deposition transcripts. If the person bringing the action proceeds

without the state's participation, the court, without limiting the

status and right of that person, may permit the state to intervene

at a later date on a showing of good cause.

Sec. 701.207. REPRESENTATION OF STATE BY PRIVATE ATTORNEY.

The attorney general may contract with a private attorney to

represent the state in an action under this subchapter with which

the state elects to proceed.

Sec. 701.208. INTERVENTION BY OTHER PARTIES PROHIBITED. A

person other than the state may not intervene or bring a related

action based on the facts underlying a pending action under this

subchapter.

Sec. 701.209. RIGHTS OF PARTIES IF STATE CONTINUES ACTION.

(a) If the state proceeds with an action under this subchapter, the

state has the primary responsibility for prosecuting the action and

is not bound by an act of the person bringing the action. The person

bringing the action has the right to continue as a party to the

action, subject to the limitations set forth by this section.

(b) The state may dismiss an action under this subchapter

notwithstanding the objections of the person bringing the action

if:

(1) the attorney general notifies the person that the

state has filed a motion to dismiss; and

(2) the court provides the person with an opportunity

for a hearing on the motion.

(c) The state may settle an action under this subchapter

with the defendant notwithstanding the objections of the person

bringing the action if the court determines, after a hearing, that

the proposed settlement is fair, adequate, and reasonable under all

the circumstances. On a showing of good cause, the hearing may be

held in camera.

(d) On a showing by the state that unrestricted

participation during the course of the litigation by the person

bringing an action under this subchapter would interfere with or

unduly delay the state's prosecution of the action, or would be

repetitious, irrelevant, or for purposes of harassment, the court

may impose limitations on the person's participation, including:

(1) limiting the number of witnesses the person may

call;

(2) limiting the length of the testimony of witnesses

called by the person;

(3) limiting the person's cross-examination of

witnesses; or

(4) otherwise limiting the participation by the person

in the litigation.

(e) On a showing by a defendant in an action under this

subchapter that unrestricted participation during the course of the

litigation by the person bringing the action would be for purposes

of harassment or would cause the defendant undue burden or

unnecessary expense, the court may limit the participation by the

person in the litigation.

Sec. 701.210. STAY OF CERTAIN DISCOVERY. (a) On a showing

by the state that certain actions of discovery by the person

bringing an action under this subchapter would interfere with the

state's investigation or prosecution of a criminal or civil matter

arising out of the same facts, the court may stay the discovery for

a period not to exceed 60 days.

(b) The court shall hear a motion to stay discovery under

this section in camera.

(c) The court may extend the period prescribed by Subsection

(a) on a further showing in camera that the state has pursued the

criminal or civil investigation or proceedings with reasonable

diligence and that any proposed discovery in the civil action will

interfere with the ongoing criminal or civil investigation or

proceedings.

Sec. 701.211. PURSUIT OF ALTERNATE REMEDY BY STATE. (a)

Notwithstanding Section 701.201, the state may elect to pursue the

state's claim through any alternate remedy available to the state,

including any administrative proceeding to determine an

administrative penalty. If an alternate remedy is pursued in

another proceeding, the person bringing an action under this

subchapter has the same rights in the other proceeding as the person

would have had if the action had continued under this subchapter.

(b) A finding of fact or conclusion of law made in the other

proceeding that has become final is conclusive on all parties to an

action under this subchapter. For purposes of this subsection, a

finding or conclusion is final if:

(1) the finding or conclusion has been finally

determined on appeal to the appropriate court;

(2) no appeal has been filed with respect to the

finding or conclusion and all time for filing an appeal has expired;

or

(3) the finding or conclusion is not subject to

judicial review.

Sec. 701.212. AWARD TO PRIVATE CLAIMANT. (a) If the state

proceeds with an action under this subchapter, the person bringing

the action is entitled, except as provided by Subsection (c), to

receive at least 15 percent but not more than 25 percent of the

proceeds of the action, depending on the extent to which the person

substantially contributed to the prosecution of the action.

(b) If the state does not proceed with an action under this

subchapter, the person bringing the action is entitled, except as

provided by Subsection (c), to receive at least 25 percent but not

more than 30 percent of the proceeds of the action. The entitlement

of a person under this subsection is not affected by any subsequent

intervention in the action by the state in accordance with Section

701.206(c).

(c) If the court finds that an action under this subchapter

is based primarily on disclosures of specific information, other

than information provided by the person bringing the action,

relating to allegations or transactions in a Texas or federal

criminal or civil hearing, in a Texas or federal legislative or

administrative report, hearing, audit, or investigation, or from

the news media, the court may award the amount the court considers

appropriate but not more than 10 percent of the proceeds of the

action. The court shall consider the significance of the

information and the role of the person bringing the action in

advancing the case to litigation.

(d) A payment to a person under this section shall be made

from the proceeds of the action. A person receiving a payment under

this section is also entitled to receive from the defendant an

amount for reasonable expenses, reasonable attorney's fees, and

costs that the court finds to have been necessarily incurred. The

court's determination of expenses, fees, and costs to be awarded

under this subsection shall be made only after the defendant has

been found liable in the action or the claim is settled.

(e) In this section, "proceeds of the action" includes

proceeds of a settlement of the action.

Sec. 701.213. REDUCTION OF AWARD. (a) If the court finds

that an action under this subchapter was brought by a person who

planned and initiated the violation on which the action was

brought, the court may, to the extent the court considers

appropriate, reduce the share of the proceeds of the action the

person would otherwise receive under Section 701.212, taking into

account the person's role in advancing the case to litigation and

any relevant circumstances pertaining to the violation.

(b) If the person bringing an action under this subchapter

is convicted of criminal conduct arising from the person's role in

the violation, the court shall dismiss the person from the civil

action and the person may not receive any share of the proceeds of

the action. A dismissal under this subsection does not prejudice

the right of the state to continue the action.

Sec. 701.214. AWARD TO DEPARTMENT. (a) If the state

proceeds with an action under this subchapter, the department is

entitled to receive at least 15 percent but not more than 25 percent

of the proceeds of the action, depending on the extent to which the

department substantially contributed to the prosecution of the

action.

(b) In this section, "proceeds of the action" includes

proceeds of a settlement of the action.

Sec. 701.215. AWARD TO INJURED INSURER. If the person

bringing an action under this subchapter is not an insurer harmed by

the violation that is the subject of the action, the insurer is

entitled to any money remaining after all awards and costs are

distributed as provided by this subchapter, including, in an action

where the state proceeds, reasonable expenses, reasonable

attorney's fees, and costs to the state that the court finds to have

been necessarily incurred.

Sec. 701.216. AWARD TO DEFENDANT FOR FRIVOLOUS ACTION.

Chapter 105, Civil Practice and Remedies Code, applies to an action

under this subchapter with which the state proceeds.

Sec. 701.217. CERTAIN ACTIONS BARRED. (a) A person may not

bring an action under this subchapter that is based on allegations

or transactions that are the subject of a civil action or an

administrative penalty proceeding in which the state is already a

party.

(b) The court shall dismiss an action or claim under this

subchapter, unless opposed by the attorney general, if

substantially the same allegations or transactions as alleged in

the action or claim were publicly disclosed in a Texas or federal

criminal or civil hearing in which the state or an agent of the

state is a party, in a legislative or administrative report of this

state, or other hearing, audit, or investigation in this state, or

from the news media, unless the person bringing the action is an

original source of the information. In this subsection, "original

source" means an individual who:

(1) before a public disclosure described by this

subsection, has voluntarily disclosed to the state the information

on which allegations or transactions in a claim are based; or

(2) has knowledge that is independent of and

materially adds to the publicly disclosed allegations or

transactions and who has voluntarily provided the information to

the state before filing an action under this subchapter.

Sec. 701.218. STATE NOT LIABLE FOR CERTAIN EXPENSES. The

state is not liable for expenses that a person incurs in bringing an

action under this subchapter.

Sec. 701.219. RETALIATION AGAINST PERSON PROHIBITED. (a)

A person, including an employee, contractor, or agent, who is

discharged, demoted, suspended, threatened, harassed, or in any

other manner discriminated against in the terms or conditions of

employment because of a lawful act taken by the person or associated

others in furtherance of an action under this subchapter, including

investigation for, initiation of, testimony for, or assistance in

an action filed or to be filed under this subchapter, or other

efforts taken by the person to stop one or more violations is

entitled to:

(1) reinstatement with the same seniority status the

person would have had but for the discrimination; and

(2) not less than two times the amount of back pay,

interest on the back pay, and compensation for any special damages

sustained as a result of the discrimination, including litigation

costs and reasonable attorney's fees.

(b) A person may bring an action under this section in the

appropriate district court not later than the third anniversary of

the date on which the cause of action accrues. For purposes of this

subsection, the cause of action accrues on the date the retaliation

occurs.

Sec. 701.220. SOVEREIGN IMMUNITY NOT WAIVED. Except as

provided by Section 701.216, this subchapter does not waive

sovereign immunity.

Sec. 701.221. ATTORNEY GENERAL COMPENSATION. The attorney

general may retain a reasonable portion of the amount recovered

under this subchapter, not to exceed amounts specified in the

General Appropriations Act, for the administration of this

subchapter.

SECTION 7. Section 35A.01, Penal Code, is amended by adding

Subdivisions (2-a), (2-b), and (2-c) and amending Subdivision (9)

to read as follows:

(2-a) "Health benefit claim" means a written or

electronically submitted request or demand that:

(A) is submitted by a person who provides or

purports to provide a service or product to an individual covered

under a health benefit plan or by that person's agent and identifies

a service or product provided or purported to have been provided to

the covered individual as reimbursable under the health benefit

plan, without regard to whether the money that is requested or

demanded is paid and without regard to whether the individual was

eligible for benefits under the health benefit plan; or

(B) states the income earned or expense incurred

by a person in providing a service or product to an individual

covered by a health benefit plan and is used to determine a rate of

payment under the plan.

(2-b) "Health benefit plan" means a health insurance

policy, a health care plan, as defined by Section 843.002,

Insurance Code, or another agreement, contract, or evidence of

coverage under which a person undertakes to provide, arrange for,

pay for, or reimburse any part of the cost of health care services.

(2-c) "Health benefit plan issuer" means a person who

is authorized or otherwise permitted by law to issue a health

insurance policy, to arrange for or provide a health care plan, as

defined by Section 843.002, Insurance Code, or to otherwise provide

health benefit plan coverage.

(9) "Service" includes care or treatment of a health

care recipient or an individual covered under a health benefit

plan .

SECTION 8. Section 35A.02, Penal Code, is amended by adding

Subsection (a-1) and amending Subsections (b) and (d) to read as

follows:

(a-1) A person commits an offense if the person:

(1) knowingly makes or causes to be made a false

statement or misrepresentation of a material fact to permit a

person to receive from a health benefit plan issuer a benefit or

payment that is not authorized or that is greater than the benefit

or payment that is authorized;

(2) knowingly conceals or fails to disclose

information that permits a person to receive from a health benefit

plan issuer a benefit or payment that is not authorized or that is

greater than the benefit or payment that is authorized;

(3) knowingly makes or causes to be made a health

benefit claim to a health benefit plan issuer for:

(A) a service or product that has not been

approved or acquiesced in by a treating physician or health care

practitioner;

(B) a service or product that is substantially

inadequate or inappropriate when compared to generally recognized

standards within the particular discipline or within the health

care industry; or

(C) a product that has been adulterated, debased,

or mislabeled or that is otherwise inappropriate; or

(4) knowingly enters into an agreement, combination,

or conspiracy to defraud a health benefit plan issuer by obtaining

or aiding another person in obtaining an unauthorized payment or

benefit from a health benefit plan issuer.

(b) An offense under this section is:

(1) a Class C misdemeanor if the amount of any payment

or the value of any monetary or in-kind benefit provided or claim

for payment made under a health care program, or the amount of a

payment made by or the value of a benefit provided by or claim for

payment made to a health benefit plan issuer, directly or

indirectly, as a result of the conduct is less than $100;

(2) a Class B misdemeanor if the amount of any payment

or the value of any monetary or in-kind benefit provided or claim

for payment made under a health care program, or the amount of a

payment made by or the value of a benefit provided by or claim for

payment made to a health benefit plan issuer, directly or

indirectly, as a result of the conduct is $100 or more but less than

$750;

(3) a Class A misdemeanor if the amount of any payment

or the value of any monetary or in-kind benefit provided or claim

for payment made under a health care program, or the amount of a

payment made by or the value of a benefit provided by or claim for

payment made to a health benefit plan issuer, directly or

indirectly, as a result of the conduct is $750 or more but less than

$2,500;

(4) a state jail felony if:

(A) the amount of any payment or the value of any

monetary or in-kind benefit provided or claim for payment made

under a health care program, or the amount of a payment made by or

the value of a benefit provided by or claim for payment made to a

health benefit plan issuer, directly or indirectly, as a result of

the conduct is $2,500 or more but less than $30,000;

(B) the offense is committed under Subsection

(a)(11); or

(C) it is shown on the trial of the offense that

the amount of the payment or value of the benefit described by this

subsection cannot be reasonably ascertained;

(5) a felony of the third degree if:

(A) the amount of any payment or the value of any

monetary or in-kind benefit provided or claim for payment made

under a health care program, or the amount of a payment made by or

the value of a benefit provided by or claim for payment made to a

health benefit plan issuer, directly or indirectly, as a result of

the conduct is $30,000 or more but less than $150,000; or

(B) it is shown on the trial of the offense that

the defendant submitted more than 25 but fewer than 50 fraudulent

claims under a health care program or to a health benefit plan

issuer, as applicable, and the submission of each claim constitutes

conduct prohibited by Subsection (a) or (a-1), as applicable ;

(6) a felony of the second degree if:

(A) the amount of any payment or the value of any

monetary or in-kind benefit provided or claim for payment made

under a health care program, or the amount of a payment made by or

the value of a benefit provided by or claim for payment made to a

health benefit plan issuer, directly or indirectly, as a result of

the conduct is $150,000 or more but less than $300,000; or

(B) it is shown on the trial of the offense that

the defendant submitted 50 or more fraudulent claims under a health

care program or to a health benefit plan issuer, as applicable, and

the submission of each claim constitutes conduct prohibited by

Subsection (a) or (a-1), as applicable ; or

(7) a felony of the first degree if the amount of any

payment or the value of any monetary or in-kind benefit provided or

claim for payment made under a health care program, or the amount of

a payment made by or the value of a benefit provided by or claim for

payment made to a health benefit plan issuer, directly or

indirectly, as a result of the conduct is $300,000 or more.

(d) When multiple payments or monetary or in-kind benefits

are provided under one or more health care programs or by one or

more health benefit plan issuers as a result of one scheme or

continuing course of conduct, the conduct may be considered as one

offense and the amounts of the payments or monetary or in-kind

benefits aggregated in determining the grade of the offense.

SECTION 9. Section 3(a)(3), Article 37.07, Code of Criminal

Procedure, is amended to read as follows:

(3) Regardless of the plea and whether the punishment

is assessed by the judge or the jury, during the punishment phase of

the trial of an offense under Section 35A.02, Penal Code, subject to

the applicable rules of evidence, the state and the defendant may

offer evidence not offered during the guilt or innocence phase of

the trial concerning the total pecuniary loss to the affected

health care program or health benefit plan issuer, as applicable,

caused by the defendant's conduct or, if applicable, the scheme or

continuing course of conduct of which the defendant's conduct is

part. Evidence may be offered in summary form concerning the total

pecuniary loss to the affected health care program or health

benefit plan issuer, as applicable . Testimony regarding the total

pecuniary loss to the affected health care program or health

benefit plan issuer, as applicable, is subject to

cross-examination. Evidence offered under this subdivision may be

considered by the judge or jury in ordering or recommending the

amount of any restitution to be made to the affected health care

program or health benefit plan issuer, as applicable, or the

appropriate punishment for the defendant.

SECTION 10. The change in law made by this Act applies only

to an offense committed on or after the effective date of this Act.

An offense committed before the effective date of this Act is

governed by the law in effect at the time the offense was committed,

and the former law is continued in effect for that purpose. For

purposes of this section, an offense was committed before the

effective date of this Act if any element of the offense occurred

before that date.

SECTION 11. This Act takes effect September 1, 2025.