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Editorial: What was the reason behind AG fraud claims?

When New Mexico Attorney General Hector Balderas announced his lawsuit against Presbyterian Healthcare Services in a July 11 news conference, he said the company had “engaged in a 15-year fraudulent enterprise,” had claimed more than $754 million in unlawful deductions and realized “a multimillion-dollar windfall” by evading taxes and surcharges owed on Medicaid premiums the state paid it from 2001 to 2015.

The 43-page suit included counts alleging violation of the Fraud Against Taxpayers Act, violation of the New Mexico Insurance Code, unjust enrichment, fraud and negligent misrepresentation.

It would appear, in hindsight, that the AG’s claims were overblown. The two settled for $18.5 million – and 20 percent of that will go to three whistleblowers who work in the state Office of the Superintendent of Insurance and their attorneys, who filed the original lawsuit. Balderas took over their case earlier this year.

At the same time the AG was negotiating this settlement, a company hired by the Office of the Insurance Superintendent under the auspices of the state Auditor’s Office was conducting an audit, which showed Presbyterian owed the state $28.9 million. In addition to what the AG settlement covers, the audit found another $14 million in estimated underpayments related to tax credits that offset Presbyterian’s contributions to a high-risk insurance pool. That amount remains in dispute, but Presbyterian is working with the state insurance superintendent’s office to address the discrepancy.

Given that the audit was already underway, it’s still unclear why Balderas would charge ahead with such hard-hitting allegations.

The AG didn’t bring up any claims of fraud against 17 other insurance companies doing business in the state that are also alleged to have underpaid insurance premium taxes. Those companies have also reportedly negotiated or are in the process of negotiating settlements with the state. Collectively, the amounts in dispute for those companies total about $35 million.

It’s also worth noting PHS worked closely with Insurance Superintendent John Franchini’s office, and that office signed off on the premium taxes that turned out to be incorrect.

Lawmakers had to be licking their chops when an earlier special report said the five largest health insurers in the state owed at least $193 million in premium taxes. Now it turns out that fiscal feast is more of a snack.

But now that there has been a settlement, the public will probably never know what was behind Balderas’ over-the-top language in his lawsuit and the op-ed he authored in the July 17 Journal.

In announcing the settlement, Balderas appears to be walking back his harsh criticism of Presbyterian and redirecting it at bureaucrats. He said New Mexico “has done a horrible job of assessing, recovering, and collecting taxes owed by insurance companies,” and can ill-afford to have the same regulatory body set rates for insurers and also collect taxes.

At this juncture, it would appear no fraud took place on PHS’ end – even though Balderas’ emphatic allegations had the potential to wreak havoc with the state’s largest health care insurer’s reputation, as well as its clients’ trust.

This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.