Fraud Stats

• 48 states make insurance fraud a specific crime. 30 states make insurer fraud a specific insurance crime. Oregon is the only state without an insurance fraud law of any kind.
• 42 states and the District of Columbia have an insurance fraud bureau. Most deal with all lines of insurance.
• 43 states and the District of Columbia require insurers to report suspected fraud to the state fraud bureau or other agency.
• 22 states have enacted laws making counterfeit airbags a specific crime.

(Coalition Against Insurance Fraud, March 2020)

Fraud plots are getting more complex, often involving multiple industries rather than solely insurance. An insurance investigation, for instance, might reveal evidence of financial fraud.

• 84 percent of insurance organizations say fraud cases they investigate involve more than one industry.
• 76 percent of cross-industry fraud cases have a moderate to high impact on insurance organizations.
• More than half say these cases (61 percent) have severe impacts on responding insurance organizations.

Contractor fraud

Most contractors are ethical and honest. Yet unlicensed and dishonest operators try to exploit often-traumatized homeowners after storms.

Contractors may demand large cash down payments, then disappear without doing work. Shoddy workmanship with substandard materials are other problems. Contractor schemes can cost homeowners thousands of dollars in uninsured bills.

Auto fraud

Fraudsters convince drivers they need a windshield repair or replacement when they don’t. Some glass firms bill for phantom windshield replacements, or replace undamaged windshields. Dishonest glass firms also convince consumers to sign an assignment of benefits (AOB) form. This gives the glass firm the legal right to file claims, make repairs and collect insurance payments. Firms are exploiting AOBs to inflate repair claims.

• 68% of consumers on average aren’t aware of various auto insurance fraud, from faulty windshield replacements to bandit tow truck
  
• Nearly 1 in 3 people (32%) believe they’ve been a victim of insurance fraud 
  
• Auto insurance fraud is underreported, as 29% of those who say they were victims never reported their suspicions. 
  
• Auto insurance fraud is underreported, as 29% of those who say they were victims never reported their suspicions. Women are less likely to report suspected fraud than men (35% versus 24%).
  
• 72% of alleged fraud victims say their auto insurance premiums increased as a result. Premium increases are most likely to affect millennials, 78% of whom saw higher costs after being victims of fraud.
  
• Consumers need more education about the various types of auto insurance fraud to protect themselves and their wallets. For example, 78% haven’t heard about faulty windshield replacement scams, 77% haven’t heard about bandit tow trucks and 77% aren’t aware of faulty air bag replacement scams.
  
• More than one-fifth of drivers lied to their insurer. 22% admit to lying to their auto insurer, most commonly by claiming damage to their vehicle but then pocketing the money intended for repairs, or by lying about their address or number of drivers to get a cheaper premium.

ValuePenguin, Lending Tree (2021)

• Nevada is the worst state for auto-related fraud, with an average of 346 reported auto-related fraud cases per 1 million residents.
  
• The 10 top states for auto-related fraud average 315 cases per one million residents
  
• Many cases of auto-related fraud involve dishonest business practices scamming customers
  
• The two leading businesses behind auto-related scams are auto maintenance shops and dealerships

ClearSurance (2021)

• Michigan ranks 1st  for the most expensive states for car insurance.

Money.com (2020)

• 10% of the nation’s auto glass claims were in Arizona between 2015 and 2019.
• More auto-glass claims are filed in Arizona than California or Texas, with populations 5.5 and 4 times larger.
• Auto glass claims have increased 26% over the last 5 years in Arizona. This suggests a possible spike in fraud.

(National Insurance Crime Bureau, February 2020)

Staged-crash rings injure or kill innocent victims and fleece auto insurers out of billions of dollars a year. Usually these are bogus soft-tissue injuries such as sore backs or whiplash involving billing for unneeded treatment of phantom injuries.

Other frauds include false reporting of actual vehicle drivers, faking information on annual mileage driven, lying to get insurance coverage and claim vehicles are garaged in locations with cheaper insurance rates.

10 Worst States for Auto-Related Fraud (Clearsurance, August 2021)

Arson

• In 2020, a total of 8,898 motor vehicles were set on fire in the United States. 
  
• In total in that year, there were 39,851 arson offenses recorded in the United States, of which 15,079 were structure fires. Statista (2020) 
• The increase in total fires was statistically significant.

National Fire Protection Association (NFPA) (2021) 

• Arson increased nationally by 19.2 percent when compared with the first six months of 2019.
  
• All four regions experienced more arson, with the West seeing the largest increase of 28 percent.
  
• Arson grew the most in cities with populations over 1 million, rising by 52.1 percent.
  
• However, nonmetropolitan counties saw arson increase by 13.7 percent, while metropolitan counties experienced a slightly smaller increase of 11.6 percent.

FBI (2020) – first half of 2020 

• The National Health Care Anti-Fraud Association (NHCAA) estimates that the financial losses due to health care fraud are in the tens of billions of dollars each year. 
  
• A conservative estimate is 3% of total health care expenditures, while some government and law enforcement agencies place the loss as high as 10% of our annual health outlay, which could mean more than $300B.

(NHCAA, 2021)

• HHS’ watchdog agency, the Office of Inspector General, recovered $3.1B in false and fraudulent claims in 2020, according to a July report.
  
• OIG won or negotiated more than $1.8B in judgments and settlements in 2020, which, combined with efforts from previous years, led to 2020’s $3.1B recovery. Of the $3.1B, $2.1B was transferred to the Medicare Trust Fund, and $128.2M in Medicaid funds was transferred to the Treasury.
  
• A total of 440 people were convicted of healthcare fraud and related crimes in 2020, the OIG said. The Department of Justice opened 1,148 healthcare fraud investigations in 2020, according to the report.

HHS (2020)

Medicare/Medicaid

• The Department of Justice obtained more than $2.2B in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending Sept. 30, 2020, Acting Assistant Attorney General Jeffrey Bossert Clark of the Department of Justice’s Civil Division announced today.  Recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, now total more than $64B.
  

• Of the more than $2.2B in settlements and judgments recovered by the Department of Justice this past fiscal year, over $1.8B relates to matters that involved the healthcare industry, including drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories, and physicians.  The amounts included in the $1.8B reflect only federal losses, and, in many of these cases, the department was instrumental in recovering additional tens of millions of dollars for state Medicaid programs.

(DOJ, 2020)

• The FY 2020 Medicare FFS estimated improper payment rate is 6.27 percent, representing $25.74B in improper payments. 
  
• This compares to the FY 2019 estimated improper payment rate of 7.25 percent, representing $28.91B in improper payments. 
  
• The decrease was driven by reductions in the improper payment rates for home health and skilled nursing facility claims.
  
• Home Health – $5.90B decrease in estimated improper payments (2016 to 2020) due to corrective actions such as policy clarification and Targeted Probe and Educate (TPE) for home health agencies.
  
• Skilled Nursing Facility – $1.00B decrease in estimated improper payments (2019 to 2020) due to a policy change related to the supporting information for physician certification and recertification for skilled nursing facility services and TPE for skilled nursing facility services.
  
• The FY 2020 national Medicaid improper payment rate estimate is 21.36 percent, representing $86.49B in improper payments.
• The FY 2020 national CHIP improper payment rate estimate is 27.00 percent, representing $4.78B in improper payments.

CMS (2020) 

• Analyzing data from 2015 to 2020, we found a total of 3,013 such scams reported to the BBB from across the U.S.
  
• The worst state for health care, Medicare and Medicaid scams is Ohio, which is home to the 3 cities with the highest number of these types of scams: Vienna, Cleveland and Columbus.
  
• The worst city in 2020 for coronavirus scams – by a considerable margin – was Memphis, Tennessee, with 56 reported COVID-19 scams. That’s nearly 3 times as many scams as were reported in New York City, despite having just 1/13th of the population.
  
• In all, there were 9 cities that were in the top 20 worst cities for healthcare, Medicare and Medicaid scams and also for COVID-19 scams:
  
  • Memphis
    
  • New York
    
  • San Antonio
    
  • Los Angeles
    
  • Cleveland
    
  • Saint Louis
    
  • Columbus
    
  • Miami
    
  • Louisville
    

Medicare Advantage (2020), Better Business Bureau Scam Tracker

Treatment by excluded medical providers

• Patients treated by healthcare professionals later excluded from the Medicare program for committing fraud and abuse are between 14%-17% more likely to die than patients treated by non-excluded physicians, nurses, and other professionals.
• Patients treated by providers banned from Medicare for fraud and abuse are 11%-30% more likely to experience an emergency hospitalization.
• Medical providers banned for fraud and abuse treat patients more likely to be low-income, non-white, and disabled.
• Nearly one-quarter (23%) of patients seen by excluded providers are non-white while approximately 16.5% of patients treated by approved providers were non-white.

(Johns Hopkins Bloomberg School of Public Health, October 2019)

Surprise medical bills

• Surprise medical bills impose large and often-unfair costs on patients for out-of-network expenses they thought their health plan covered. Surprise bills can border on fraudulently inflated. Out-of-network billing can also increase healthcare costs for patients who don’t receive balance bills. Many insurance plans require higher cost-sharing (deductibles, co-insurance, co-pays) for out-of-network care.

• More than 10% of commercial healthcare spending is attributable to services for which surprise billing is common: services by radiologists, anesthesiologists, pathologists, emergency physicians, emergency ground ambulances and emergency outpatient facilities.
• Eliminating provider leverage stemming from the ability to surprise-bill could reduce commercial insurance premiums by as much as 5.1%, or $212 per member per year. This could reduce aggregate premiums by approximately $38 billion for the nation’s commercially insured population.

(American Journal of Managed Care, September 2020)

• 1 in 5 Americans who undergo elective surgery — or surgery they schedule in advance — incur unexpected out-of-network medical bills.
• Patients who incurred surprise medical bills owe $2,011 more, on average. That’s in addition to the nearly $1,800 cost that average privately insured patients would owe to their insurer for elective surgery.

(Journal of the American Medical Association, February 2020)

Some businesses illegally try to avoid paying state-required workers compensation premiums by misclassifying employees as independent contractors. Typically such workers are paid off the books to hide the evidence.

Staff labor and payroll size are two key factors that workers-compensation insurers use to gauge premiums.

Misclassifying employees in high-risk jobs as holding lower-risk jobs is another ruse. A dishonest roofing firm tells high-risk roofers are lower-risk sales staff or clerks. Misclassifying is especially widespread in dangerous professions such as construction, where risky work means high workers-comp premiums.

Misclassifying illegally avoids taxes, wages and other expenses. Shady employers often prey on minority and immigrant communities especially. This crime gives employers an unfair advantage over competitors.

• 1.3 million-2.1 million workers were misclassified or doing cash-only work each month. Hiring seasonal workers increases these rates during peak employment.
• Payroll scams meant employers paid only $38.2-$43.7B — saving $11.7B and $6.2B, respectively. Specific states and regions may differ.

(United Brotherhood of Carpenters, March 2020)