March 31, 2026

Court Denies Motion to Dismiss in the eHealth Case: What Healthcare Practitioners Need to Know

LinkedIn Facebook X Send Embed

A federal False Claims Act (FCA) case examining the intersection of Medicare Advantage marketing, broker compensation, and FCA and Anti-Kickback Statute (AKS) compliance cleared a critical hurdle. In United States ex rel. Shea v. eHealth, Inc., et al., Chief Judge Denise Casper of the U.S. District Court for the District of Massachusetts denied defendants’ motions to dismiss as to Counts I through VII, allowing the government’s core FCA claims to proceed, while dismissing only the government's unjust enrichment claim in Count VIII. The government’s claims—alleging Medicare Advantage (MA) health insurers paid kickbacks to brokers to incentivize enrollments for certain beneficiaries while deterring enrollments of disabled beneficiaries—will now move into the discovery phase.

As we previously noted, the government and relator alleged that leading Medicare Advantage Organizations (MAOs) and e-brokers engaged in improper administrative and marketing payment practices designed to steer beneficiaries to certain Medicare Advantage plans, while also discriminating against disabled beneficiaries to prevent their enrollment in those plans—practices the government claimed amounted to kickbacks in violation of the FCA and AKS. In their motions to dismiss, the defendants argued that the government’s novel theories reach well outside the bounds of both statutes, as the Centers for Medicare & Medicaid Services (CMS) has long been responsible for regulating permissible broker marketing and compensation arrangements; the marketing payments neither exceeded fair market value nor induced inappropriate broker conduct; and the government did not adequately plead causation or identify a claim submitted for payment under its discrimination theory.

This ruling does not resolve the merits of the case—at the motion to dismiss stage, a court must accept the complaint's factual allegations as true and ask only whether those allegations plausibly support a reasonable inference of liability. As the Court itself put it: “here and now, where plausibility is the touchstone, the government has adequately alleged that defendants exchanged payments for enrollments.” The case now proceeds to what promises to be a significant discovery phase. But the Court's ruling on defendants’ legal arguments is essential reading for any healthcare company—insurer, broker, or otherwise—operating in the Medicare Advantage space.

Background: The Alleged Scheme

At its core, the government alleged two distinct theories of FCA liability, each arising from a different set of alleged conduct.

The kickback theory. The government alleges that from 2016 through at least 2021, the MAOs paid hundreds of millions of dollars to three brokers—payments labeled as “marketing,” “co-op,” or “market development” funds—to induce those brokers to steer Medicare beneficiaries into the insurers’ MA plans and away from competitors. These brokers publicly held themselves out as unbiased, "carrier-agnostic" advisors. Behind the scenes, the government alleges, they were operating under agreements that imposed specific enrollment targets and commitments, creating dedicated "pods" of sales agents for particular plans, and cutting off sales of competitor plans in order to direct enrollments to designated insurers.

The discrimination theory. The government further alleges that two of the MAOs used their payment arrangements to pressure brokers into reducing enrollment of disabled Medicare beneficiaries under age 65. The MAOs allegedly viewed disabled beneficiaries as more costly to insure and conditioned marketing payments on brokers' efforts to minimize their enrollment.

How does this become a False Claims Act problem? The False Claims Act is the government’s primary tool for fighting fraud against federal healthcare programs. It imposes significant penalties on entities that submit—or cause the submission of—false or fraudulent claims for government payment. Under the government's theory, MAOs certify their compliance with the AKS and other fraud and abuse laws when they submit claims for payment to CMS. When those certifications are false—because the underlying enrollments were tainted by kickbacks—the claims themselves become false under the FCA. On the discrimination side, the government alleges that the two MAOs made the same kinds of false certifications regarding anti-discrimination statutes while simultaneously working with brokers to limit enrollment of disabled beneficiaries.

What Did the Court Decide?

1. Marketing Payments And Fair Market Value

The Court rejected defendants’ argument that payments for “marketing” are authorized under the existing CMS regulatory framework if, in practice, the “marketing” payment is actually made in exchange for enrollments. In other words, “the substance of the agreements and payments control, not their form.”

The Court held that the CMS regulation in effect from 2016 to 2021, 42 C.F.R. § 422.2274, required that amounts paid for services other than selling insurance products be at fair market value and commensurate with prior payments—the regulation did not authorize “fee-per-enrollment arrangements.” The Court also noted that CMS has explicitly stated that assisting in enrollment does not constitute “marketing”—defeating defendants’ argument that their payments to brokers were covered by this regulation.

Because the Court found that the government adequately alleged that the payments were not authorized administrative or marketing payments in the first place, it did not need to reach whether they were at fair market value or commensurate with prior payments.

2. “Item” or “Service” Under The Anti-Kickback Statute Applies To MA Enrollment

Defendants argued that the government’s AKS theory fails because MA plans are not an “item” or “service” under the AKS, which prohibits offering or paying remuneration to induce referrals for “items or services.” Defendants contended that MA plan sales are distinct from actual medical care or treatment and that the AKS therefore does not reach the MA enrollment context at all.

The Court rejected this argument. The AKS does not define “item” or “service,” and the Court, citing decisions from the Third Circuit and the Southern District of Florida, held that the statute’s reach is not limited to referrals for direct patient care. It extends to “any item or service” paid for under Medicare, including MA plans enrollments.

3. But-For Causation

Under the 2010 amendment to the False Claims Act, the government must allege that an AKS violation was the but-for cause of each false claim submitted—a demanding causation standard that defendants argued the government had not satisfied.

The Court found the government’s pleading sufficient because the government alleged detailed beneficiary claims submitted by the MAOs to CMS and asserted that these claims were the result of the alleged kickback arrangements. The Court acknowledged that “Defendants’ conduct may not have been the sole reason a beneficiary enrolled” in a particular plan, but concluded, without citing judicial precedent, that “the complaint sufficiently connects their conduct to claims for payment for purposes of establishing FCA liability.”

4. False Certification

The Court also sustained the government's false certification theory, again finding that the numerous claims alleged by the government in the complaint were submitted by the MAOs and required certifications of AKS compliance. As to materiality, the Court held that the government's continued payment of claims from 2016–2021 cannot be treated as tacit approval. The MAOs’ contracts with CMS explicitly identified AKS compliance as material to payment, and the Court held that would have been sufficient to cause the government to withhold payment had it known of the MAOs’ conduct.

5. The Discrimination Theory

The government’s discrimination theory similarly survived dismissal. The Court found falsity adequately alleged based on the complaint’s account of the steps brokers allegedly took to minimize enrollment of disabled beneficiaries, including turning off telephonic sales in certain states and redirecting these leads to other plans. These allegations, the Court held, plausibly supported the inference that any certification of compliance with anti-discrimination requirements was false. On materiality, defendants argued that CMS’s continued payment of claims throughout 2016–2021 without objection amounted to implicit approval of the alleged noncompliance. The Court rejected that argument and held that intentionally minimizing enrollment of disabled beneficiaries directly undercuts the purpose of the MA program. On damages, the Court rejected the argument that CMS received exactly what it paid for, holding that, as alleged, CMS funded discriminatory practices and therefore did not receive the benefit of its bargain.

6. Non-Submitting Entities

The Court held that a defendant who does not directly submit claims to CMS can still face FCA liability if it “knowingly caused” the submission of false claims. The Court found that brokers’ FCA exposure extended across both theories: on the kickback theory, the government adequately alleged that brokers knew their agreements were, in essence, “fee-per-enrollment” arrangements that violated CMS regulations, and that claims for payment from the government resulted from those arrangements. On the discrimination theory, the Court found that the government adequately alleged that brokers knew the MAOs wanted them to minimize enrollment of disabled beneficiaries and that the brokers took steps to do so.

7. Conspiracy

The Court held that the government adequately pled FCA conspiracy, as the agreements were a pretextual workaround to CMS’s compensation caps and, for two of the MAOs, a mechanism to reduce the enrollment of disabled beneficiaries.

8. Unjust Enrichment Dismissed

The Court granted defendants' motion to dismiss the unjust enrichment claim. Because the FCA provides an adequate remedy at law, the claim was dismissed—a consistent result in this district where FCA and unjust enrichment claims arise from the same conduct.

Key Takeaways

Today’s ruling resolves only whether the government’s allegations are sufficient to state a claim at the motion to dismiss stage. What lies ahead is a discovery process in which the government must develop a factual record, followed by a summary judgment phase at which the facts, not the pleadings, will control.

Sheppard will continue to monitor and report on significant developments as this case moves into discovery.

Send Print Report

Latest Posts

• Court Denies Motion to Dismiss in the eHealth Case: What Healthcare Practitioners Need to Know
• Token Fraud Decision Sets Limits on Crypto Platform Liability
• The FTC Launches a Dedicated Healthcare Task Force
• Second Circuit Curtails Securities Act Claims, Holding That Reverse Split Was Not a “Sale” and Post-Split Notes Could Not Be Traced
• Poured Out: Sixth Circuit Overturns NLRB Order, Signaling Cracks in Cemex See more »

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
Attorney Advertising.

©
Sheppard, Mullin, Richter & Hampton LLP
2026

Written by:

Sheppard, Mullin, Richter & Hampton LLP Contact + Follow Calla Simeone + Follow Madeline Townsley + Follow

PUBLISH YOUR CONTENT ON JD SUPRA

• ✔ Increased readership
• ✔ Actionable analytics
• ✔ Ongoing writing guidance Join more than 70,000 authors publishing their insights on JD Supra

Start Publishing »

Published In:

Anti-Kickback Statute + Follow Discovery + Follow False Claims Act (FCA) + Follow Healthcare Fraud + Follow Insurance Brokers + Follow Insurance Industry + Follow Medicare + Follow Medicare Advantage + Follow Motion to Dismiss + Follow Statutory Interpretation + Follow Civil Procedure + Follow Health + Follow Insurance + Follow more

Sheppard, Mullin, Richter & Hampton LLP on:

Solve with 2Captcha

Solve with 2Captcha