DOJ withdraws from Sentara investigation

The federal government is withdrawing from intervening in a whistleblower complaint against Sentara Health that alleges the Hampton Roads health care system improperly inflated local insurance rates in 2018 and 2019.

On June 19, the federal government sent a notice of its decision to withdraw its prior notice of partial intervention, and that it is declining to intervene on the matter. The DOJ declined to comment when asked to elaborate on its reason for withdrawing.

“We are pleased that the U.S. Department of Justice has declined to intervene in this matter,” Sentara spokesperson Mike Kafka said in a statement. “We have consistently maintained that the facts and evidence are on our side. At a time when Virginians were at risk of losing access to Affordable Care Act plans, Sentara stood with the commonwealth and quickly extended coverage to a much larger population than we had previously served. We stand by those actions and, if necessary, will continue to vigorously defend ourselves against these meritless claims while staying focused on our not-for-profit mission to improve health in the communities we serve.”

The whistleblower complaint was filed in 2020 by Charlottesville residents Sara Stovall, Ian Dixon and Karl Quist, who were motivated to act after Sentara’s Optima Health insurance division (now part of Sentara Health Plans) significantly increased rates for 2018 and 2019 health insurance coverage under the federal Affordable Care Act. At the time, Sentara was the only insurer offering health coverage on the ACA exchange in the Charlottesville region.

In 2021, the U.S. Department of Justice launched a civil federal False Claims Act investigation into how Sentara set its 2018 and 2019 premiums. The investigation was made public in November 2023, when the Justice Department filed a petition in U.S. District Court in Charlottesville, alleging Sentara withheld relevant documents from government investigators.

Previously, under the Biden administration, the federal government sent a notice on Dec. 20, 2024, to the U.S. District Court for the Western District of Virginia saying it intended to intervene on the allegations made by Stovall, Dixon and Quist that Sentara and Optima and Milliman (a Seattle-based independent actuarial and consulting firm that certified Optima’s insurance rates) violated the False Claims Act by making materially false statements and omissions in Optima’s rate filings for the 2018 and 2019 plan years. However, the government at the time also declined to intervene in allegations against Milliman based solely on its marketing and use of its health cost guidelines.

An uphill battle

With the federal government now declining to intervene, the court ordered on July 2 that Stovall, Dixon and Quist must file an amended complaint within 60 days of the order and serve the amended complaint upon the defendants within 21 days of filing it.

Marty Bienstock, a civil litigator representing the whistleblowers, indicated last week that Stovall, Dixon and Quist intend to continue pursuing the complaint.

“The relators and I are absolutely committed to seeing this case move forward, and having Optima, Sentara and Milliman held accountable for fraudulently increasing insurance rates by 81% across the state of Virginia,” Bienstock said in a statement.

Although the federal government declined to intervene, it said the relators — Stovall, Dixon and Quist — can maintain the action in the name of the United States, providing, however, that the “action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.”

The court states that if the relators or defendants propose that the action be dismissed, settled, or otherwise discontinued, the court will solicit the written consent of the federal government before ruling or granting its approval.

Attorney John P. Fishwick from Fishwick & Associates says it’s unlikely that the federal government will shut down the case at Sentara’s request, believing it will more likely take a hands-off approach when monitoring the case.

Nevertheless, the DOJ’s withdrawal from the case is “certainly a blow to the plaintiffs. … Because you always want the full might and power of the DOJ when you bring these False Claims Act cases,” Fishwick said. “[The federal government was] firmly planted in the case. They no longer are firmly planted in the case. They have certain veto rights as the case moves forward, but if you’re the plaintiff, you’d much rather have them on your side, helping to investigate the case.”

Fishwick said the plaintiffs can still move forward with the case without the federal government being directly involved, but noted it will be “a tougher hill to climb.” For instance, he added, plaintiffs do not typically get access to evidence the government has collected in an investigation unless the government is involved in the case.

“Plaintiffs can always move forward with the False Claims Act without the government,” Fishwick said. “But it’s always better if you’re the plaintiffs to have the government intervene in the case. They have the right to go forward without them. It’s just more challenging without the government.”

He said the change in presidential administrations from Biden to President Donald Trump is a possible factor in why the government withdrew from the matter.

Seeking damages

According to the original complaint, Stovall, Dixon and Quist are seeking to recover over $200 million in damages and civil penalties on behalf of the federal government from Sentara Healthcare, Optima Health Plan and Milliman.

The trio alleged Sentara, Optima and Milliman imposed “knowingly fraudulent surcharges,” falsifying calculations and engaging in intentional cost shifting to generate “massive illicit profits.” The complaint accuses Sentara of violating the federal False Claims Act, which prohibits knowingly falsifying records or statements to the U.S. government. Those found in violation are liable for treble damages.

In September 2017, when Sentara announced it would expand the availability of its Optima Health plans in Virginia, the health system said that 70% of existing customers statewide would see their premiums go up just $4 a month on average, thanks to federal subsidies. However, the remaining 30% would see a more significant average increase of 81.8%.

In fall 2017, when Optima was selling insurance plans on the exchange for the coming year, Quist and Stovall found alternative insurance plans outside of Optima, and Dixon signed up for a 2018 Optima small group plan, although he said in an interview with Virginia Business last year that he was forced to hire an employee he didn’t need to qualify for the plan.

The three plaintiffs aired their concerns in a November 2017 interview with The New York Times, and they met with state and federal officials and filed complaints with the state Bureau of Insurance and the American Academy of Actuaries.

In court filings and public statements, Sentara had denied all the plaintiffs’ allegations and has said the company was being a good corporate citizen that stepped up during a politically volatile time to prevent vulnerable Virginians from losing health insurance coverage.