Health Insurance Exchanges Approved

Insurance exchanges have now been approved by the Obama administration for 17 states.  The exchanges will operate as an open marketplace for individuals and small businesses that will be able to log in to an insurance portal to purchase their preferred insurance product.  Open enrollment will begin in October and by January, people and businesses will be able purchase insurance products through the exchanges with assistance from Federal subsidies.

As the implementation of exchanges begins, all eyes will be looking toward fraud detection and avoidance.  The health care IT industry will have a massive task ahead of them as these exchanges become live.  Data mining and data detection will become key components in the fight against fraud within the exchange models.  Experts assert that feedback and data pattern detection technology will play a large role in this process.  The fraud detection systems will need to be incredibly nimble as well, due to the large numbers of transactions that will occur daily through the exchanges.  There will be a sharp learning curve in this sector of the IT industry and the ability to be nimble and reactive will be important.

Planning for this undertaking can only be done partly, as there are many unknowns and live data will be needed to ascertain the fraud opportunities and problems that may arise.  There are parallel industries that can help the exchanges prepare, such as existing health insurance IT models and disability insurance programs where fraud is commonly sought and detected.

As health insurance exchanges move forward, the perpetrators of fraud will surely continue their efforts.  It remains to be seen how effectively the industry will be able to combat fraud in health insurance, and how much this prevention and detection will ultimately cost the industry and taxpayers.

Fore! Hole In One Scam

Hole in one insurance – it’s a real thing and offered for many golf tournaments to pay a cash prize in the event that a participant is lucky enough to drain a hole in one.  One wonders how the perpetrator of insurance fraud might take advantage of this type of insurance.  Insurance Fraud Digest has found a story for you.

Kevin Walter Kolenda found a way to do just that.  He created a bogus insurance company called Golf Marketing Worldwide, LLC and convinced several tournaments to purchase Hole in one insurance for the event.  Then he pocketed the premiums and never made good on those events where someone actually did get a hole in one.

Kolenda refused to pay prizes to lucky golfers in Bremerton, WA, Vancouver, WA, and Snohomish, WA.

As of December 21, 2012 Kolenda is free on bond.

US Medicare Fraudster Caught In Canada

Leonard Nwafor, a US suspect in a $1 million medicare fraud scheme was arrested on Wednesday January 2, 2013 in Toronto, Canada.  Nwafor stands accused of bilking Medicare by selling power wheelchairs that were not required by patients through a company operated by Nwafor in Los Angeles.

In August, U.S. Marshals contacted Canadian authorities in Toronto to request their help in located in Nwafor and they later issued an extradition warrant.  Nwafor had fled the country after being convicted of the fraud, and he was later sentenced to nine years in prison.  Restitution orders included $500,000 in repayments to Medicare and $25,000 in fines.

New Florida Law Now In Effect

As of 1/1/2013 Florida, lawmakers are getting tough on auto/motor insurance
fraud. A new law designated as House Bill 119 is designed to address
weaknesses in their Personal Injury Protection (PIP) program and it
goes into effect this year. Personal Injury Protection pays for
medical bills, lost wages and certain other expenses incurred by those
injured in an auto accident. When it comes to auto insurance costs,
PIP coverage is mandatory for drivers in Florida, and it accounts for
about 20 percent of the total premium depending on the type of
coverage you may have.

This new law defines insurance fraud as "knowingly presenting a PIP
claim to an insurer for payment or other benefits on behalf of a
person or entity that committed fraud when applying for health care
clinic licensure, seeking an exemption from clinic licensure, or
demonstrating compliance with the Health Care Clinic Law."

PIP fraud occurs largely with the help of hospitals, doctors, or
clinics that are billing for false treatments, or which are providing
bogus medical reports outlining injuries that never really existed.
As part of the new law, certain types of treatment will no longer be
covered under Florida's PIP program, such as massages or acupuncture.
There is also a much lower cap on payments for non-emergency
treatments from $10,000 down to $2,500.

The new laws allows for the punishment of those who submit false PIP
applications for benefits. While this is already illegal in Florida
under other insurance fraud statutes, the new law focuses on PIP
benefits and serves to reiterate the penalties for false motor insurance applications.

Top 10 Insurance Scams

 1. Auto Theft

Cars are stolen quite often and there are two main ways that the bad guys make a living with stolen cars.  The first involves “chop shops” where crooked mechanics disassemble cars and sell the parts off.  The second method involves the sale of the vehicle to overseas buyers with no paperwork.

2. Staged Auto Accidents

Quite often two or more people will conspire to stage an accident in order to collect on insurance claims for totaled vehicles.  If the value of the car is inflated, the perpetrators will scheme to collect and profit from the insurance payoff.  Claims for faked injuries from a staged accident are also common.

3. Pocketing Repair Costs

Often people will forego repair costs to their damaged car and pocket the cash, or spend it on something other than the actual repairs.  This can be done quite easily, especially in cases where a car is damaged but still drivable. 

4. Medical Insurance Claims

There are many reported cases of medical insurance fraud every year involving crooked health care providers.  In these cases, doctors and clinics bill insurance companies for procedures and/or medications that were never needed.  In the worst cases, procedures get billed to an insurance company that were never even completed.  In other cases, fake patient names are used to scam insurance companies.

5. Unnecessary Medical Treatments

You may already have been involved in a medical insurance scam without even realizing it.  If your doctor is prescribing treatments that are unnecessary and billing your health insurance company, this is a form of medical insurance fraud.  Beware of doctors who continually change the types of procedures, and be especially cautious if you are asked to undergo various unsuccessful treatments.

6. Arson Fires

Burning down a house to profit from an insurance policy is all too common.  Those who are deep in debt or who may be behind on their mortgage routinely seek to collect from an insurance policy, and the most lucrative way to do this is often from a total loss resulting from a fire.  Forensics in this area has become quite advanced, and most of these criminals are caught.  While the bad guys in these cases may go to jail, and won’t get any insurance money, most policies contain a section that requires the insurance company to pay off any mortgage, even if the policyholder intentionally set the fire.  This is a huge cost to the insurance industry.

7. Storm Damage Claims

A common type of insurance fraud involving homeowners insurance involves making new claims every year for the same damage.  The scam works like this; an insured may have a roof that leaked one year causing some water stains in the house.  They make a claim with the insurance company, and get paid for the roof damage and for the interior damage. They fix the roof so it does not leak any more, but never fix any interior damage, pocketing that cash.  The next year they switch insurance companies and make a claim for interior water damage, which is not new damage at all, but which is the same damage from the prior year. 

8. Theft Claims

One of the most common forms of homeowner’s insurance fraud involves theft of personal items.  People will submit a claim for a break-in and theft, and tell the insurance company lies about what was stolen.  In some cases, there may have been a few things taken, but the actual list of items submitted to the insurance company is a fake inventory created by the insured to inflate their claim.

9.  Life Insurance Fraud

While this is quite an elaborate scheme, it is not uncommon.  This involves a person who takes out a life insurance policy naming their cohort as a beneficiary.  The perpetrator then fakes his own death and hides for several months.  Once the beneficiary is able to collect the payout, they both disappear pocketing the cash.

10. Fake Injury Claims

People who intend to collect money for injuries can easily fake a fall down or auto accident.  While injuries often do occur, sometimes there is no physiological damage apparent.  While a doctor can diagnose physical trauma, they cannot diagnose pain.  If a patient tells them it hurts, the doctor must put that in a medical report even if they believe it to be untrue.  

Extra Living Expense Fraud

A report of alleged insurance fraud comes from Watertown, NY.  Timmy A. Barrows and Victoria J. Barrows of Constableville, NY were arrested last week on charges of insurance fraud.

The couple lost a home in a fire in September of 2009.  They had made an insurance claim for the damage through their insurance company, New York Central Mutual Insurance.  As part of the claim, they sought benefits available under the “additional living expense” section of the policy, and produced rent receipts for a residence they said they were renting.  The lease agreement was apparently false, and they had been living elsewhere during the period of repair, apparently pocketing the $17,360 in expense payments made by the insurance company.

Victoria Barrows was charged with second-degree criminal possession of a forged instrument, third-degree insurance fraud and first-degree falsifying business records.  Timmy Barrows has been charged with fifth-degree conspiracy.

 

Compare Car Insurance Fraud

If we compare car insurance fraud to other types of fraud we find that according to the Insurance Research Council automobile insurance fraud added between $4.8 billion and $6.8 billion to auto claim payments in 2007.  This staggering figure pales in comparison to insurance fraud across the U.S., which costs the industry over $30 billion per year.

There are significant dangers involved with those who commit car insurance fraud.  If we compare car insurance fraud to medical insurance fraud, we find that the only real harm in medical cases is financial.  The chances of someone being injured are far less in this type of fraud.

If we compare car insurance fraud to homeowner’s insurance fraud we find that there are significant dangers in both, especially when you consider the danger to life and property caused by arson.  Incidentally, a large proportion of fraudulent claims involving automobiles involves arson as well.

Car insurance fraud that involves arson and staged accidents cause more issues than just financial damages.  This type of fraud places people in danger of being injured.  If you compare car insurance fraud to other types of insurance fraud, it will stand out as one that poses more dangers to the public than other types of insurance fraud.

Small Business – Saturday Workers Compensation Claims

Small business Saturday reflections should include a detailed review of workers compensation costs as well as claims.  For a small businesses, a large number of workers compensation claims could place the business in jeopardy.

Employers do not need to do a detailed or involved surveillance program to limit the number of workers compensation claims.  Small business Saturday and weekend reviews of safety methods and equipment should be done on a weekly basis.

Also small business Saturday review should include an assessment of how easy it may be to perpetuate fraud in the workplace.  Look for opportunities that could be taken advantage of through the week and limit your exposure now.

Not Fraud

But a safety issue nonetheless.

Please do not drink and drive. Drunk driving killed 37,261 people in 2008 according to the National Highway Traffic Safety Administration.   

This is equivalent to over 100 people every day.

A&O Entities $100 Million Life Insurance Fraud Scam

Russell Mackert, a 51 year old attorney from Spring Texas admitted in U.S. District Court in Richmond, VA that he helped to facilitate a huge life insurance fraud scheme that stole over $100 million from innocent insurance policyholders and investors.

Mackert plead guilty to conspiracy charges stemming from his work as an attorney for A&O Entities, which is a group that collectively dealt in over $100 million of fake investments marketed to over 800 investors in the U.S. and Canada.  Many of those victims were elderly retirees.

The plea involved the admission by Mackert to making material misrepresentations and omissions to investors about the money they were investing.  He also failed to inform investors that the vast majority of the money invested was being used for purposes wholly unrelated to the purchase and maintenance of fund portfolios as had been promised to investors.

Mackert faces 25 years in prison on combined charges, as well as $500,000 in fines.

Mustang Collision Did Not Injure Her Back

Linda Ann Rose of King County, Washington was ordered to pay $300,000 in restitution after it was determined that she faked an injury from a minor fender bender in Issaquah, Washington near Seattle.

The accident involved a minor collision between an SUV and Rose’s car, a rented Ford Mustang.  She claimed severe back injuries and sued the driver of the SUV.  A demand of over $650,000 was made against the SUV driver’s insurance company.

It was later found out that Rose had prior back injuries and altered medical reports that were provided to her own attorney.

The $300,000 restitution involved a repayment of $250,000 to Progressive Insurance, $25,000 to MetLife and she had to forfeit $25,000 of a structured settlement that had not yet been paid to her.

Rate Evasion Constitutes Insurance Fraud

Criminal charges have been filed against Philadelphia insurance agent Paul Franck Baptiste along with Daniel Charles, also of Philadelphia and Bernard Pierre of Brooklyn, NY arising out of an elaborate scheme to defraud insurance companies according to a report by Gantdaily.com.

The scheme involved rate evasion whereby 22 residents of New York filed false applications for insurance claiming they were residents of Pennsylvania because auto insurance rates are lower there.  In many cases, applicants not only falsified their address but they also provided false information to the Pennsylvania Department of Transportation in order to obtain Pennsylvania State Driver’s licenses.

Baptiste actually provided a fake address for many of the applicants.  They used one of his own properties in Philadelphia.  Some used an address in Clarion, PA on a street that does not even exist, and others used addresses in Philadelphia, Allentown and State College.  The investigation revealed that non of the fraudsters lived at any of these addresses, but instead most came from Brooklyn, NY and surrounding areas.

The charges for insurance fraud alone could mean up to 7 years in prison and $15,000 in fines.  Baptiste and others also face charges for corruption, criminal conspiracy, filing false title application, and unsworn falsifications to authorities, which adds thousands in fines and several years in prison.