The National Association of Insurance Commissioners (NAIC) and The Center for Insurance Policy and Research (CIPR) define insurance fraud as “an insurance company, agent, adjuster, or consumer who commits a deliberate deception to obtain an illegitimate gain.” Insurance fraud exceeds $100 billion in losses every year. Accordingly, consumers should beware when dealing with purported insurers.
Key Signs of a Fake Insurer
1. Questionable Premiums
Phony insurance companies often offer policies at much lower rates than the ordinary market price. Suspect any premiums that cost 15 to 20 percent less (or greater) than other companies offer. Fraudulent companies may even employ legitimate agents, making it difficult to discern whether a quote is reasonable or not.
2. Aggressive Sales Tactics
Overly aggressive agents or brokers that pressure consumers to act immediately present obvious red flags. Threats that policy prices will increase if customers don’t sign up immediately, for example, constitute a warning sign to consumers. A reputable insurer is unlikely to place undue pressure on a prospective customer. Trust your instincts if an agent makes you feel uncomfortable.
3. Suspicious Contact Information
Consumers who have trouble getting a listed phone number, or difficulty reaching someone at the company, should suspect the legitimacy of the company. Often, fraudulent insurers will attempt to cover their tracks with spotty contact information. If a company does not provide valid phone numbers, business addresses, or similar contact information, you have a clear sign of a disreputable insurer.
Combating Insurance Fraud
The NAIC created the Anti-fraud Task Force to assist state insurance officials with detection, referrals for investigation, and monitoring of insurance crime. It maintains a Special Activities Database (SAD) to keep track of entities involved in market activities, as well as legal actions of firms involved with the insurance business.
The Federal Bureau of Investigation (FBI) documents prosecution of insurance fraud. Patterns emerge when company workers and clinics process fraudulent insurance claims. One example of chiropractic healthcare insurance fraud and two instances of healthcare fraud uncovered in two separate FBI sting operations follow below.
Case #1: Chiropractor Jeffrey R. Shope, 44, of Blacklick, Ohio, pleaded guilty to insurance fraud in U.S. District Court. Shope defrauded federal healthcare benefit programs while collecting $700,000 as the owner of True Health Chiropractic in Westerville, Ohio. Shope failed to render equipment and services billed to insurance companies, and would charge two separate applications of the same services to a patient in one day.
Case #2: Special Agent Terry Nestor investigated the Gotcha-Sting Insurance Fraud case. Nestor states that, with time, insurance representatives can see patterns when people stage accidents. The same patients, doctors, and lawyers will often show up repeatedly, signaling the possibility of people staging phony accidents. In this case, patients visited clinics that billed for services they never actually provided. This case uncovered more than 30 people participating in a prescription billing scheme, and later convicted of healthcare fraud, bankruptcy fraud, and wire fraud.
Staged Impact was the second phase of this sting; here, FBI agents invited suspects to attend a phony clinic with the promise of a settlement payments after the generation of fake medical records. The convicted fraudsters had to compensate insurance companies for $1.5 million in settlement claims and $300,000 in medical bills.
Case #3: In a $16 million health insurance fraud scheme, a father and son falsified patient records, forged patient signatures, and collected deductibles for free hearing tests and hearing aids. Anderson Optical & Hearing fraudulently submitted claims to BCBS for free hearing aids on behalf of American Airlines employees. Anderson would then attempt to “collect deductibles and coinsurance years after the subscriber was offered a free hearing test and free hearing aids.”
The Cost of Insurance Fraud
According to the FBI, more than 7,000 insurance companies bill $1 trillion each year in premiums. Insurance fraud costs the average U.S. household $400 to $700 per year in increased premiums, for a total of over $40 billion. Healthcare fraud carries maximum penalties of $250,000 in fines and maximum prison sentences of 10 years.
Despite the efforts of law enforcement, insurance fraud still presents a significant risk to Americans. If you were a victim of healthcare or insurance fraud, Brauns Law, PC, can help. Contact us by phone, 24 hours a day, at (404) 418-8244 to learn how.