6/F - Fraud

Question 1

Insurance Fraud

Answer 1

Occurs when:

• Consumers deceive an insurer for financial gain
• Insurers deceive consumers for illegal profit

Question 2

Hard & Soft Fraud

Answer 2

Hard Fraud: Deliberately planning or faking a loss

Soft Fraud: Exaggerating a claim to inflate the indemnity

Question 3

Fraud is a Big Problem

Answer 3

Why is fraud such a big problem?

• It goes mostly undetected
• It is very expensive

Fraud Facts

• Healthcare fraud costs Americans $54 billion per year
• A third of all doctors will exaggerate patients’ illnesses to help them avoid early discharge from the hospital
• Exaggerated injury claims from car accidents add $13-$18 billion to America’s healthcare bill

Question 4

Reasons Why Fraud is a Problem

Answer 4

Reasons why fraud is widespread:

• Some insurers would rather pay claims than go to court
• The health system is an easy target
• Doctors under pressure to control costs may feel tempted to cheat
• Immigrants can be easy victims for con-artists

Question 5

Low Risk, Low Legal Priority

Answer 5

More reasons why fraud is widespread:

• Seen as a low risk crime
• Prosecutors treat it as a low legal priority

Question 6

Types of Fraud

Answer 6

Common types of Insurance Fraud

• Stage auto accidents
• Arson
• Faked death
• Murder for insurance
• Corporate health insurance fraud
• Individual health insurance fraud
• Insurer fraud
• Property insurance fraud

Question 7

Staged Auto Accidents

Answer 7

• Planning or staging car crashes in order to collect insurance money
• Accidents can turn deadly

Question 8

Arson

Answer 8

Deliberately setting fire to insured goods or property so that you can collect the insurance money

Question 9

Faked Death, Murder for Insurance

Answer 9

Faked death: Claiming life insurance on a still living person
Murder for insurance: Taking it a step further

Question 10

Health Insurance Fraud

Answer 10

Both companies and individuals can commit Health Insurance Fraud

• Corporate Health Insurance Fraud - corporate healthcare chains overbill insurance companies
• Individual Health Insurance Fraud - a doctor may prescribe procedures that are not necessary in order to get the insurance payments

Question 11

Insurer Fraud

Answer 11

• Employees, managers, or executives of an insurance company steal money from the company
• Also called Internal Fraud

Question 12

Property Insurance Fraud

Answer 12

• Destroying or damaging insured property or merchandise in order to inflate or generate a claim
• Similar to arson

Question 13

Insurance Companies’ Response

Answer 13

Insurance companies are responding to fraud:

• Starting fraud busting units staffed with ex-detectives and policemen
• Educating customers and sponsoring hot-lines
• Training employees to spot fraudulent behavior
• Sponsoring the NICB (National Insurance Crime Bureau)

Question 14

Model State Fraud Law

Answer 14

The Coalition Against Insurance Fraud developed a tough model state fraud law:

• Creates state fraud bureaus
• Requires insurance companies to develop plans for preventing and detecting fraud
• Requires insurance forms to warn that fraud is a serious crime

Nearly 20 states have adopted this model, or used it to strengthen their existing anti-fraud laws.

Question 15

State Fraud Bureaus

Answer 15

State regulators have increased pressure by:

• Creating fraud bureaus in 41 states and D.C.
• Enforcing closer scrutiny of insurers and their finances

Question 16

Federal Government

Answer 16

The Federal Government is fighting Health Insurance Fraud by:

• Enacting tougher penalties
• Expanding current fraud laws to cover all payers
• Imposing stiff prison terms and heavy fines
• Forbidding convicted felons from returning to insurance without permission
• Sharing fraud info with health insurers on a large scale; the Justice Department has shared its field intelligence with insurers since 2000