Investing.com -- Shares of SelectQuote (NYSE: SLQT ) plummeted 40%, while shares of eHealth (NASDAQ: EHTH ) tumbled 13% following a False Claims Act complaint filed by the United States against three national health insurance companies and three brokers, including SelectQuote. The complaint alleges that from 2016 through at least 2021, illegal kickbacks were paid by insurers to brokers in exchange for enrollments into the insurers’ Medicare Advantage plans.
The lawsuit, which implicates some of the largest health insurance companies such as Aetna, Elevance Health (formerly known as Anthem), and Humana (NYSE: HUM ), also names insurance brokers eHealth, GoHealth, and SelectQuote. The brokers are accused of directing Medicare beneficiaries to plans that paid the highest kickbacks, irrespective of the plans’ suitability for the beneficiaries’ needs.
According to the complaint, brokers were incentivized to prioritize sales of plans from insurers offering the highest kickbacks. They allegedly set up teams dedicated to selling only those plans and at times outright refused to sell plans of insurers who did not pay enough. Furthermore, it’s alleged that Aetna and Humana conspired with brokers to discriminate against disabled Medicare beneficiaries perceived as less profitable by threatening to withhold kickbacks, leading brokers to divert these beneficiaries away from their plans.
The United States Department of Justice has expressed its commitment to holding accountable those who seek to profit from kickbacks, emphasizing the importance of protecting federal health care programs and their beneficiaries. The lawsuit was initiated under the whistleblower provisions of the False Claims Act, allowing private parties to sue on behalf of the United States and potentially share in any recovery. The case is now being handled by the Justice Department’s Civil Division and the U.S. Attorney’s Office for the District of Massachusetts, with assistance from the Department of Health and Human Services Office of Inspector General and the FBI.
This significant legal action has clearly rattled investors, reflecting in the substantial drop in SelectQuote’s stock price. The financial repercussions and potential penalties, if the companies are found liable, could be severe, including the possibility of the United States recovering three times the amount of its losses plus penalties. The unfolding legal situation will be closely monitored by shareholders and the broader market as it progresses.
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