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Real World Risk in Virtual World Gaming: Virtual Conferences, Money Laundering, and the Hidden Risks to Game Companies

Tue, 12 Feb 2013 00:00:00 -0600

Companies associated with virtual goods and virtual currencies are some of the hottest right now for acquisition, growth and investment. Due to this growth (and a number of recently-publicized incidents of money laundering), the companies that provide virtual worlds—and the virtual currencies that are used in them—are also now being carefully scrutinized by regulators both in the U.S. and in other countries. Navigant Director Mikhail Reider-Gordon discusses the increased scrutiny of the virtual world and the hiding risks facing game companies.

Financial Statement Frauds: More Than Meets the Eye

Wed, 10 Oct 2012 00:00:00 -0500

Navigant, together with the law firm Winston & Strawn, addresses the nature of financial statement fraud. The authors discuss how fraudsters can hide earnings fraud on the balance sheet and the role of collusion in committing a financial statement fraud.

The authors recommend that whether the board chooses to perform an investigation internally or to involve outside counsel and advisors, that the investigation should focus not only on the predictable accounts and primary alleged fraud scheme, but also on seemingly unrelated accounts that may have been impacted by other concealment schemes.

Medical Loss Ratio: Overview, Key Considerations and Risks

Wed, 03 Oct 2012 00:00:00 -0500

Navigant experts provide an overview of Medical Loss Ratio and outline key considerations and risks for payers, providers and employers.

An important provision of the Affordable Care Act (ACA) impacting the payer industry, healthcare providers, and employers is the newly established, and Federally mandated, national minimum Medical Loss Ratio (MLR), applicable to the commercial healthcare market. Beginning with calendar year 2011, health insurance issuers must meet minimum MLR standards, which were to be reported by June 1, 2012. ACA requires health insurance issuers to maintain an MLR in each state of no lower than:

85% in the large group market (coverage sold to large employers);
80% in the small group market (coverage sold to small employers); and
80% in individual markets.

Issuers not meeting the MLR standard were to have issued premium rebates by August 1, 2012 for calendar year 2011. Many states have established their own MLR requirements or guidelines, which continue to be in effect in addition to the ACA regulations and rebate requirements applicable to all fifty states.

HHS Announces $2.1 Billion Savings Due to ACA as First Round of MLR Audits Begins

Fri, 21 Sep 2012 00:00:00 -0500

In this article for the American Health Lawyer’s Association (AHLA) Payors Plans & Managed Care and Healthcare Liability and Litigation practice groups, Melissa Hulke and Ernest Dixon discuss the Medical Loss Ratio (MLR) regulations and key updates as a result of recent HHS announcements.

On September 11, 2012, the Department of Health and Human Services (HHS) announced that the Affordable Care Act (ACA) saved consumers an estimated $2.1 billion over the course of a one-year time period, comprised of $1 billion in savings due to ACA rate review rules for health insurance issuers, and $1.1 billion in actual rebates related to ACA medical loss ratio (MLR) regulations,[i] which generally require health insurance issuers to spend 80%-85% of premiums on medical care claims.

“The health care law is holding insurance companies accountable and saving billions of dollars for families across the country,” Secretary Kathleen Sebelius said. “Thanks to the law, our health care system is more transparent and more competitive, and that’s saving Americans real money.”[ii]

Consistent with HHS’ transparency theme, issuers’ raw MLR data files are posted at HHS’ website[iii] and show that the $1.1 billion in MLR rebates is concentrated in select states. Nearly half of rebate dollars are going to a handful of states, the highest being Texas ($168.5 million), Florida ($123.6 million), New York ($95.6 million), California ($77.3 million), and Missouri ($61.5 million).[iv]

The majority of covered lives did not receive any rebate. For example, 88% of covered lives in the large group market did not receive any rebate for calendar year 2011. Further, rebates in the group markets are typically distributed to employers, who may be able to retain a portion of the rebate prior to distributing any remainder to plan participants.

The MLR regulations are open to interpretation as to which medical care and quality improvement expenses should be included in the calculation and how they ought to be allocated across various states and markets. ACA gives HHS the authority to conduct audits of health insurance issuers’ MLR filings, but if a state conducts an audit, HHS may, at its discretion, accept the state’s findings.[v] There has been some speculation as to whether HHS or the state departments of insurance have the resources necessary to conduct MLR audits and some expect that states may initiate the audit process.

For instance, California announced that it is in the process of auditing the largest six health insurance issuers in the state as well as some smaller issuers in order to verify the accuracy of the data they provided on medical expenses, administrative costs, and profits. “We will continue to take any and all necessary steps to ensure that health insurers are complying with the law, Insurance Commissioner Dave Jones said. “The Department of Insurance is auditing the health insurers to make sure that consumers who are entitled to rebates receive the full amount they are owed.”[vi] A presentation by Dennis Balmer, a Deputy Director at the California Department of Managed Health Care, indicates that the first plan notification is scheduled for late August with subsequent audits to “be scheduled as resources become available.”[vii]

The Department would not disclose which companies it is auditing, but Mr. Balmer’s presentation highlights the MLR percentages of several health insurance issuers who reported an MLR in California exactly equal to the minimum MLR requirement of 80.0%-85.0%. The raw MLR data files allow for comparison across health insurance issuers by state, market, and across various expense categories. In California, 129 MLRs[viii] were reported and, of those,

30 were less than the minimum MLR requirement,
55 were exactly equal to the minimum MLR requirement of 80.0%-85.0%, and
44 were greater than the minimum MLR requirement.

Areas of risk for health insurance issuers may include:[ix]

Ensuring administrative expenses are properly excluded from medical care claims,
Determining which expenses can be included in activities that improve healthcare quality, and
Proper allocation of premiums and expenses across states and markets.

Such complexities could lead to government investigations and potential litigation. It has yet to be seen whether other states will follow California’s lead or defer to HHS to analyze MLR data and initiate audits of health insurance issuers in their states, which may be based on trends and anomalies in the data.

[i] http://www.hhs.gov/news/press/2012pres/09/20120911a.html. See also, http://www.healthcare.gov/law/resources/reports/rate-review09112012a.html.

[ii] http://www.hhs.gov/news/press/2012pres/09/20120911a.html.

[iii] The MLR raw data files are posted at http://cciio.cms.gov/resources/data/mlr.html.

[iv] HHS has updated the raw MLR data files periodically, most recently in August, due to revisions and late submissions of issuers’ MLR forms. The figures quoted in this article are based on HHS’ most recent raw MLR data files, dated August 5, 2012.

[v] Issuer Use of Premium Revenue: Reporting and Rebate Requirements, 45 C.F.R. § 158.401(a)-(c), .402, .403(a) (2011).

[vi] http://www.insurance.ca.gov/0400-news/0100-press-releases/2012/release101-12.cfm.

[vii] http://www.dmhc.ca.gov/library/fssb/presentations/FSSB-MLR_Summary_080812.pdf.

[viii] Health insurance issuers submit information for each legal entity in each market within a given state. The counts of MLRs for the state of California are based on each filing entity in each market for which premiums were reported.

[ix] Complexities of MLR reporting are discussed in greater detail in the article, “A Pivotal Year for Medical Loss Ratio,” by Melissa J. Hulke, CPA, and Ernest N. Dixon, CPA, published in the American Health Lawyers Association Payors Plans and Managed Care Practice Group, Volume 15, Issue 1, April 2012.

Collecting and Analyzing iPads: What You Need to Know

Tue, 10 Apr 2012 00:00:00 -0500

Navigant’s Cuyler Robinson examines the challenges to collecting and analyzing potentially discovery-relevant business documents on iPads and tablets in this article for the ABA Section of Litigation, Technology for the Litigator newsletter.

Click here to read the full article.

GAO Prods DCAA on Internal Audits

Thu, 15 Mar 2012 00:00:00 -0500

Navigant Director Pete McDonald addresses the legal and regulatory issues surrounding the US government’s requirement to obtain government contractor internal audit reports. The author argues that GAO’s No. GAO-12-88, Report to the Senate Armed Services Committee, will encourage litigation when DCAA issues subpoenas to obtain contractors’ internal audit reports.