Unfair policy rescissions hurt everyone
A dozen years ago, when fraud fighters were pushing for stronger anti-fraud laws and more power for insurers, lawmakers expressed a common concern that insurers might use the threat of fraud charges to force claimants to accept low-ball offers.
These many years and thousands of fraud cases later, the record of insurers is quite impressive. With a few exceptions, the 3,000 or so insurers in the U.S. have used their anti-fraud powers wisely, even while reporting more than 100,000 cases of suspected fraud each year.
This clean record has eased the concerns of legislators is recent years, resulting in the enactment of even more anti-fraud laws, such as civil immunity for reporting suspected fraud and sharing anti-fraud information among insurers.
Now come headlines about health insurers rescinding policies of people with serious illnesses. The goodwill built up over the years is fading fast, thanks to the eagerness of a few insurers to yank coverage from policyholders whose applications display the slightest inconsistencies.
Some of the stories are heart-wrenching. People with life-threatening diseases — and huge medical bills — are told their policies are nullified, and thus are forced into financial ruin. Over the last few weeks, the news about health-policy rescissions hasn’t been pretty:
• Anthem Blue Cross and Blue Shield of California was fined $10 million for unfairly rescinding policies.
• California enacted a law banning insurers from giving bonuses to employees for limiting or canceling coverage.
• Congress held hearings on the issue, threatening federal legislation to regulate policy rescission.
• Los Angeles filed a $1 billion-plus lawsuit against Blue Cross of California for illegally rescinding 850 policies.
What’s lost in all of this is that policy rescission is a legitimate response when people willfully submit false information on policy applications. The practice also serves to encourage people to be more honest. But when the practice is abused — as appears to be the case, at least in California — it hurts all insurers and all fraud fighters. It calls into question the credibility of the fraud-fighting community and gives credence to opponents who say anti-fraud efforts unfairly target the little guy.
Industry critics have been quick to capitalize on the unsavory insurer practices. Witness the video cleverly titled Insurance Company Rules, which was posted on YouTube and has been viewed almost 100,000 times.
As time passes and these headlines fade, we hope to tout the good record of insurers once again, and to ask legislators to give fraud fighters more weapons against this crime. In the meantime, it would help if more insurers came out and expressed their outrage at these unfortunate developments.
Hail has no fury . . .
A fierce hailstorm blows through your neighborhood, pelting houses and potentially causing damage, but your home survives nicely. What to do as 30 to 40 contractors come knocking, insisting you need a new roof and should replace your siding? Many of your neighbors are taking advantage of the situation.
Read how one woman handled this potential ethical dilemma. It gives us hope.
Let’s get creative in fraud sentencing
A common refrain was heard throughout the fraud-fighting community when the coalition was formed 15 years ago: Few courts take fraud seriously, and fewer hand out strong-enough punishment.
But a sea change in attitudes has occurred since then. Many more prosecutors try fraud cases, and more judges hand out appropriate sentences. In Florida, you must serve at least two years for staging a car accident.
Increasingly, judges say they’re tired of seeing the same swindlers back in their courtrooms. These judges are handing out tougher sentences to send a strong signal that insurance fraud is a serious crime with serious consequences.
The coalition has tracked 600 criminal convictions over the last three years to gauge sentencing trends. A cursory look says courts are meting out more and longer jail time. When judges do impose probation, the terms appear to be tougher and the length of probation longer. Restitution also is automatic in many states.
Still, many cases leave us shaking our heads. We’ve seen people steal more than $1 million and never set foot inside a jail, while others receive two years for lying on an auto application.
We will get a firmer handle on sentencing trends when a formal research project is completed later this year or next. But in the meantime, there’s one trend the fraud-fighting community must grapple with. That’s the growing reluctance of many states and jurisdictions to house, feed and care for non-violent criminals.
The number of people supervised by the U.S. criminal justice system surpassed seven million in 2006, the highest ever. States spend tens of billions of dollars to house offenders, and monitor them when they leave. With many states facing severe revenue shortfalls, there’s pressure to avoid passing new felony laws that send people to prison.
In California, it’s a felony for a business to under-report payroll to reduce worker compensation premiums, but it’s only a misdemeanor to fail to buy any state-required comp coverage at all. Everybody agrees failure to buy should be a felony, but no one is pushing a bill because the legislature has no appetite (or budget) for jailing more non-violent felons.
The fraud-fighting community needs to get a head of this developing trend and start brainstorming about creative sentencing that not only will be appropriate punishment but serve as a deterrent as well. The threat of prison should always hang over anyone convicted of fraud. Deferred prison sentences can be that threat.
But with real prison time less of an option in the future, more focus will be on restitution, probation and community service.
Doctors and lawyers could perform extensive pro-bono services ⎯ and in a very public way that warns other would-be crooks. Convicted swindlers also could speak out against fraud to civic, church and other citizen groups.
Community service also should include the anti-fraud community. Fraudsters should be required to fully divulge their tactics so fraud fighters can hone their skills.
Creativity also can go a long way. A college student accidentally dropped his laptop then lied that someone had stolen it. The student seemed remorseful, so the insurer didn’t pursue charges but did require him to write an apology to the company president. Nice touch.
This probably was appropriate, but I also would’ve required the student to publish the letter in his college newspaper. That would’ve alerted others that attempting to commit fraud is a lousy idea.
A great place or what!
Read the news story below and ask yourself:
1 - Why no jail time?
2 - Why is he allowed to stay in this country?
3 - What kind of message does this send to criminals around the world?
Russian immigrant stages crashes, steals $439K, but gets no jail time
A Russian immigrant who recruited people to take part in an insurance fraud scam focused on phony automobile accidents was sentenced today in federal court.
Radislav Lankin, 31, of Brooklyn, identified by a prosecutor as the third-ranking organizer of the Buffalo-based fraud ring, was sentenced by U.S. District Judge William M. Skretny.
After pleading guilty to fraud charges, Lankin was sentenced to five years on probation and ordered to repay $439,000 to insurance companies that were cheated. Skretny ordered him to spend three months of the probation period in home confinement and three months in a halfway house.
Lankin is the latest of 29 people convicted in connection with a fraud ring that has been investigated by the Western New York Health Care Fraud Task Force, Assistant U.S. Attorney John Rogowski said. Authorities have been investigating the group for about four years.
Lankin admitted that he would recruit people in the Buffalo area who agreed to falsely claim they were injured in car crashes. Members of the ring ran a fraudulent medical clinic, sold them unneeded crutches and other medical equipment and helped them file paperwork for false insurance claims.
A Russian immigrant who is now an American citizen, Lankin told Skretny he now works as a consultant for small businesses.
Think again about falsifying receipts
A website selling fake receipts recently posted a link to this blog, which previously included an item about the website. We certainly do not wish to give this website any publicity, but felt we should warn anyone about using fake receipts to submit insurance claims.
It’s a dumb thing to do because insurance companies do check the authenticity of receipts. The penalties for submitting fake receipts to boost a claim can be severe. Our files are filed with arrests and convictions involving false receipts. Check out these recent cases:
What fraud looks like
Think about a Middle Eastern terrorist, and a certain image comes to mind. How about a street mugger? You can picture him too. A corporate con man? White guy in an expensive suit, right? Think Enron or Worldcom execs. All of these are readily available images stored in our brains.
But what does insurance fraud look like?
It’s not easy stereotyping people who commit fraud. They’re of every stripe — male, female, young, old, black, white, brown, rich, poor, well-educated, poorly educated — and come from virtually every corner of the land and in between.
When the coalition was created 15 years ago, one of our founders challenged us to put a face on fraud. That’s a figure of speech — and something we’ve done.
But now we’ve done it literally, too. A new section of our website — Faces of Fraud — features photographs of people who’ve been convicted of insurance fraud, along with a little information on what they did and how they’re paying for their crime.
The purpose of the photo display is to illustrate that insurance fraud is not a faceless crime. The people who commit fraud look like us, our friends, neighbors and co-workers. And they demonstrate that anybody who does it can get caught and punished.
Take a look at what fraud looks like.
Toyota - most reputable?
Toyota — the preeminent car maker that ran TV ads six months ago encouraging people to dump their cars — has been named the most reputable company in the world.
According to the Reputation Institute, a New York consulting group, the car maker bested 600 of the world’s largest corporations in a survey about product and service quality, innovation, workplace, governance, leadership, performance and . . . citizenship.
Citizenship? What good corporate citizen flagrantly encourages people to commit crime? How sad.
Car giveups are certainly on the rise, and that likely is due more to the bad economy than Toyota commercials. Still, this recognition seems to be another example of a corporation getting away with unsavory behavior.
Perhaps we should give those surveyed the benefit of the doubt. Perhaps they placed more emphasis on product than citizenship.
In any event, in the list of top-rated U.S. companies, five insurers placed in the top 75 — Travelers (#61), State Farm (#63), Hartford (#65), Metlife (#72) and Chubb (#74). At a time when insurers’ standing with the public is sagging, it’s good to see the industry represented on the list — as tainted as it may be with Toyota at the top.
And speaking of lists, Wards published its annual compilation of the top 50 insurers based on financial performance, safety and consistency. Eight insurer members of the coalition made the grade: Allstate, Erie Insurance, Fireman’s Fund, Hartford, MetLife, Progressive, Selective and Travelers.
Congratulations to all — all that is, except Toyota.
Prosecutorial innovation
Prosecutorial innovation
Few aspects of insurance fraud are simple. Sophisticated techniques such as predictive modeling are used to detect it. Forensic science, often involving voluminous paper trails, is used to investigate it. Complex strategies are employed to prosecute it.
So when something simple comes along that’s effective, we take notice.
That’s a good description of the Fraud Interdiction Program established by the Los Angeles District Attorney’s office. It’s the kind of idea that leaves you scratching your head, wondering why no one thought of it before.
The idea arose when someone surmised that medical providers who steal from insurance companies probably cheat on their taxes, too. It was a theory easily validated: Just find out how much insurers have paid individual providers and compare that with the providers’ tax returns.
That’s what Asst. District Attorney Al MacKenzie began doing in 2004, launching a long line of successful prosecutions of crooked doctors and lawyers. Tax cases are a slam dunk compared to the many fraud cases that require proof of intent and documentation of medical procedures. Confronted with simple facts involving tax evasion, many defendants quickly cop a plea and go straight to jail. Plus, prosecutors don’t have to convince juries that insurance companies are victims and that doctors — often seen as pillars in the community — are criminals.
Al’s program earned him the first “Prosecutor of the Year” award conferred by the coalition this week.
His track record with this novel program is impressive. In the last year, he’s landed 15 convictions entailing more than $20 million in stolen money. What’s more, the program has identified some 200 suspects who may have defrauded as much as $300 million. So, expect similar cases rolling out of this pipeline for many years to come.
In accepting his award, Al explained that suspicion of tax evasion permits prosecutors to obtain search warrants more quickly, which helps them gather evidence of insurance fraud that they may not have discovered otherwise.
Al’s program is now being emulated elsewhere around the country. And, to his credit, he is enthusiastically assisting other jurisdiction in setting up their own fraud interdiction programs.
We’re thrilled to recognize such a deserving public servant.
And as a side note, Al’s boss, District Attorney Steve Cooley, deserves praise as well for backing a new program and supporting Al’s efforts. As an elected official, it takes courage to embrace unconventional ideas that potentially could backfire. Kudos to both.
P/C carriers, health insurers coming together
The big news in the world of insurance fraud this week is the announcement of the creation of the Consortium to Combat Medical Fraud.
The Consortium is a joint project of the coalition, the National Health Care Anti-Fraud Association and the National Insurance Crime Bureau. It’s the first time that property-casualty insurers and health carriers have come together in a meaningful way to better detect and investigate fraud by medical providers.
Activities underway include cross-matching data on suspected fraud cases, cross-training investigators, getting insurers comfortable with sharing information across industries and conducting research.
A joint education program last week drew more than 60 investigators from both sides. Many eyes were opened about the different approaches the two industries take to resisting bad claims, detecting fraud and dealing with fraudulent medical providers.
Case studies have made clear the advantages of sharing intelligence and developing joint investigative strategies. One obvious benefit is that prosecutors are more likely to take cases that cross industry lines.
A full story on this effort will soon be published in our quarterly newsletter, Fraud Focus, also available online.
In the meantime, there’s been a lot of good press this week about the announcement. But Sam Friedman, editor of the National Underwriter, writing in his blog, had one biting comment:
When we posted a news story yesterday reporting that “anti-fraud associations representing both the property-casualty and health insurance sectors will pool their resources to increase detection and prevention of health care fraud,” the first question that came to mind was, what took them so long?
He went on to answer his own question:
I suppose I should not be surprised that the p-c and health-disability insurance sectors were off on their own all this time in trying to prevent fraud. While the public perceives the “insurance industry” as two sides of the same coin, the p-c and life-health groups have long operated as if they were two different currencies altogether.
He’s correct that the two sides of the industry have acted as if each has its own set of bad guys. As we have found, these fraudsters are equal-opportunity crooks.
This new effort should take a few more out of action.
Getting an “A” in insurance fraud
Insurance fraud may be a dull, boring topic for some, but high school and college students increasingly choose it as a subject of research reports and term papers. At the coalition, we get a good deal of e-mail from students asking for assistance with papers, and we are always eager to help recruit young people into the fraud-fighting community.
A group of students at Centenary College has demonstrated exceptional leadership: They’ve created a website about insurance fraud and produced an anti-fraud public service message for radio.
These young fraud-fighters. enrolled in the “College Students in Free Enterprise” program, did an outstanding job of researching and writing about fraud and they’ve published useful information on their website. The radio spot is especially good, and hopefully it’s getting well-deserved airtime.
The students were aided by a few industry veterans who were delighted that kids are taking an interest in a topic dear to their hearts. Hopefully, this program will encourage other students and schools to examine the issue of insurance fraud.
And, if you ever have an opportunity to help students learn about fraud, do it.
Whether through a structured program like this one, speaking at your child’s school or just offering to be a source for a term paper, your interaction with young people may be your best chance to make a long-term impact on fraud.
