American Transit Insurance Co. (ATIC), the largest provider of taxi insurance in New York, has taken a bold step by filing a lawsuit estimated at over $450 million against numerous medical providers.
The company alleges that these providers are engaged in a large-scale fraudulent operation that takes advantage of the state’s no-fault insurance regulations, posing serious challenges to ATIC’s financial health and compliance with regulations.
Details of the Lawsuit
This extensive complaint spans 698 pages and has been filed under both federal Racketeer Influenced and Corrupt Organizations Act (RICO) and New York State common law.
ATIC is seeking triple damages, along with punitive compensation, from more than 180 ambulatory surgical centers and healthcare entities, as well as individual practitioners operating in New York and New Jersey.
The lawsuit aims to recover losses from payments made to medical providers accused of submitting illegitimate bills for services, including surgeries conducted at inadequately licensed surgical centers.
New York’s no-fault insurance framework mandates that insurers like ATIC cover personal medical expenses up to $200,000 for injuries sustained in accidents, irrespective of fault.
Unfortunately, ATIC argues that these regulations may unintentionally incentivize healthcare providers to over-diagnose, over-treat, and inflate charges purely for profit.
Impact on Insurance and Transportation
Additionally, the complaint underscores the negative ramifications of these fraudulent activities for livery vehicles and the insurance companies that back them.
ATIC claims that deceptive practices connected to the no-fault insurance laws have led to hundreds of millions of dollars in fraudulent payments.
The insurer warns that such schemes are destabilizing the livery insurance market in New York City, leading to increased insurance premiums for honest taxi and livery drivers while also harming the general public.
According to the allegations, the defendants collaborated with unnamed medical clinics and healthcare professionals to develop a fraudulent treatment protocol that resulted in over $400 million in claims for services deemed medically unnecessary by ATIC.
The chain reaction started with claimants receiving initial care at no-fault clinics, followed by referrals for orthopedic evaluations that often led to needless procedures and follow-up treatments at the same facilities.
Financial Challenges for ATIC
The complaint further asserts that many billed services were either never performed or were grossly misrepresented.
In many cases, treatments were deemed unnecessary, orchestrated solely to maximize reimbursements without consideration for the actual medical needs of patients.
Some of these services involved improper kickbacks or referral arrangements.
While tackling this legal battle, ATIC is also facing significant financial troubles and regulatory scrutiny.
The insurer, which covers roughly 60% of taxis, livery vehicles, black cars, and rideshare services in New York City, has reported over $700 million in net losses in just the second quarter.
This alarming trend has stirred concerns among industry analysts and cab drivers regarding ATIC’s long-term viability.
Regulators from the New York Department of Financial Services (DFS) are closely watching ATIC, voicing concerns that the failure of this major player could wreak havoc on New York’s taxi industry and the wider economy.
They have highlighted that ATIC’s reserves are alarmingly low, a challenge that has lingered for years.
The DFS encourages ATIC’s management to explore funding options, including a potential sale to stabilize its financial standing.
The DFS also cautioned about the potential risks if ATIC’s situation remains unresolved, warning that it could have serious economic implications for livery drivers, passengers, healthcare providers, and the broader economy, all while disrupting essential transportation services.
ATIC acknowledges that a significant portion of its financial struggles stems from fraudulent activities within the realm of no-fault insurance.
In fact, the insurer asserts that no-fault-related fraud accounted for 94% of all healthcare fraud cases reported in 2023.
They further estimate that 60-70% of the more than 250,000 claims they handle annually may be fraudulent.
This rampant fraud inflates commercial auto insurance costs and undermines the financial well-being of no-fault insurers, complicating the claims process and reducing access to coverage for patients in need of legitimate medical care.
Source: Insurancejournal.com
