Maryland insurance company sues brothers for ‘breathtaking’ $50 million fraud scheme

CareFirst of Maryland filed a federal lawsuit against a Maryland insurance broker and his brother for what it called a “health insurance fraud conspiracy of breathtaking scale and audacity.”

CareFirst filed the suit Monday in U.S. District Court for Maryland, saying Avraham Rappaport, an insurance broker, and his brother Eliezer Rappaport, a financial planner, defrauded the company of more than $50 million from their Towson-based business.

According to the suit, the brothers’ scheme allowed international patients to fly to America for expensive, specialized medical procedures — and stuck CareFirst with the bills.

Here’s how it allegedly worked: Patients signed up for a Maryland-based BlueCross BlueShield insurance plan using a variety of addresses connected to the Rappaports, paid some monthly premiums, and CareFirst covered their medical bills. After receiving the treatment, the patients would fly home and stop paying their premiums.

According to the lawsuit, the Rappaports ran some version of this scheme with at least 259 patients from 2018 through 2022.

The civil suit, filed under a federal racketeering statute designed to dismantle the Mafia, says the brothers committed numerous violations of federal and state law to commit and conceal their activities, though it was unclear if the matter was referred to law enforcement for criminal investigation.

The suit said that Avraham Rappaport lives in Olney but submitted fraudulent policy applications listing Baltimore-area homes the brothers owned or controlled as addresses for their clients. Sometimes 20 different clients were identified with the same address.

By selling these fraudulent policies, the brothers collected hundreds of thousands of dollars in commissions and kickbacks from clients, the suit said.

The suit also includes 20 unnamed coconspirators, but does not identify their roles. Some who referred or participated in the scheme also may have done so unknowingly, such as charities and religious organizations, but lent credibility to the Rappaports.

The suit said some policyholders were directed to submit falsified documents to support their fraudulent residency claims when challenged by CareFirst.

The suit contends that CareFirst ended up paying millions in “high-end” medical treatment at facilities around the country, with clients often holding the policies just long enough to get the services.

The insurer said in the suit that it does pay for care outside of Maryland for enrollees when patients need rare, specialized services — a loophole officials said was exploited.

CareFirst officials declined to comment on the ongoing litigation.

Lawyers who have represented the Rappaports did not respond to requests for comment. The brothers also did not respond to emails sent to their Towson financial firm listed in legal documents, as well as to Avraham Rappaport’s LinkedIn page.

Potentially fraudulent policies were first flagged by the Maryland Health Benefit Exchange, which oversees the online marketplace for Affordable Care Act policies.

State records show that Avraham Rappaport has had an insurance broker’s license since 2004 and has been an exchange broker since 2017.

Exchange officials investigated and alerted CareFirst about their concerns, and the insurer ended up rescinding more than 200 policies. Also alerted was the Maryland Insurance Administration, which revoked Avraham Rappaport’s broker’s license last year and fined him $4,000, according to a consent order from the state insurance agency.

At the time of the order, exchange officials said no other broker had had more than one policy revoked.

Rappaport agreed to the order but did not admit to the agency’s “factual narrative or legal conclusions.” The order said he signed for “the sole purpose of resolving this matter.”

Not part of the lawsuit but mentioned was that this comes as a third Rappaport brother, Jacob Rappaport, has faced legal entanglements. The Towson attorney pleaded guilty earlier this year to bank fraud related to a real estate investment scheme.

The plot, federal prosecutors said, centered on a group of 42 East Baltimore rowhomes that were sold and resold at artificially inflated prices in order to get bigger loans. All 42 homes were eventually bought by a group of New York investors whose portfolio has imploded, causing hundreds of foreclosures across Baltimore.

Banner reporter Hallie Miller contributed to this article.