By: Dr. Vivek Chauhan, (Zonal Medical Head,Star Health & Allied Insurance Company Ltd)
LUCKNOW: It is a matter of concern that ‘insurance fraud’ is not defined under the insurance Act. IRDA recently quoted the definition provided by the international Association of insurance supervisors (IAIS) which defines fraud as “an act or omission intended to gain dishonest or unlawful advantage for a party committing the fraud or for other related parties.”
Other instruments within the Indian legal system, such as the Indian Penal Code (IPC) or Indian Contract Act, also do not offer specific laws. Sections of the IPC which deal with issues of fraudulent act, forgery, cheating etc. are sometimes applied but none of them are specifically targeted at insurance fraud and are inadequate for purpose of acting as an effective deterrent. In absence of specific laws and harsh punishments, prosecution will rarely be successful and if successful, the penalty inadequate to deter others. As social Health Insurance grows the central and state governments will become one of the largest victims of health insurance fraud and that may be catalyst that leads to the development of a comprehensive legal framework to tackle health insurance fraud.
In simple parlance insurance fraud can be defined as: The act of making a statement known to be false and used to induce another party to issue a contract or pay a claim. This act must be willful and deliberate, involve financial gain, done under false pretences and is illegal.
Healthcare Fraud as defined by the National Health Care Anti-Fraud Association (USA): “The deliberate submittal of false claims to private health insurance plans and /or tax-funded public health insurance programs.” Intentional deception or misrepresentation that the individual or entity makes, knowing that the misrepresentation could result in some unauthorized benefit to the individual, or the entity, or to another party.
Abuse can be defined as practices that are inconsistent with business ethics or medical practices and result in unnecessary cost to claims.
The billing of services that may not be fraudulent but may be of marginal utility, are inconsistent with acceptable business and/or medical practices, and are intended for financial gain of a particular individual or corporate can be classified as abuse. Few examples of common health insurance abuse would be excessive diagnostic tests, conversion of day care procedures to overnight admission, admission limited to diagnostic investigations etc.
Fraud is willful and deliberate involves financial gain, done under false pretense and is illegal. Abuse generally fails to meet one or more of these criteria, hence the subtle differences. Needless to say that the main purpose of both fraud and abuse is financial gain.
Parties involved in Health Insurance Fraud and types of Fraud committed by each:
IRDA guidelines classify various insurance frauds as under:
- Policyholder fraud and/or claims fraud- Fraud against the insurer in the purchase and/or execution of an insurance product, including fraud at the time of making a claim.
- Intermediary Fraud- Fraud perpetuated by an intermediary against the insurer and/ or policyholders.
- Internal Fraud- Fraud/mis-appropriation against the insurer by a staff member.
As relevant to health insurance, the type of fraud committed by customer, intermediary- agent, broker, health care provider either individually or jointly or in connivance with internal staff of insurance company/TPA vary in nature and in modus operandi.
Commonly committed fraud by a customer of health insurance relate to: concealing pre-existing disease(PED)/chronic ailment, manipulating pre policy health check-up findings fake/ fabricated documents to meet policy terms conditions , duplicate and inflated bills, impersonation, participating in fraud rings, purchasing multiple policies, staged accidents and fake disability claims.
The agents and brokers are usually involved in fraud relating to providing fake policy to customer and siphoning off premium, manipulating pre- policy health check-up records, guiding customer to hide PED/ material fact to obtain cover or to file claim, participating in fraud rings and facilitating policies in fictitious names, channelizing customers to rouge providers fudging data in group health covers.
Due to absence of standard medical protocols, no oversight of a regulator, the provider induced fraud and abuse in India forms quiet a large portion of fraudulent claims. It would be quiet difficult for a customer to file a fraudulent claim or fake medical documents without connivance of treating doctor or hospital. Provider related fraud usually pertain to:
Overcharging, inflated billing, billing for services not provided.
Unwarranted procedures, excessive investigations, expensive medicines, unbundling and upcoming.
Overutilization, extended length of stay, fudging records, patient history.
The employees of insurance company/TPA could also be involved in committing fraud by expecting receiving favors/kickbacks, colluding with other fraudsters/ fraud rings, siphoning premium etc.
Triggers: one of the ways to control fraud is to establish triggers/red alerts for early detection and corresponding action. These can be managed automatically through systems capabilities or manually detected through inspection of a physical file. It should be noted that the presence of a risk management trigger only warrants special attention and further investigation of the claim to collect evidence is required. The exercising of a trigger is not proof of fraudulent claim, only an indication of possible fraud.
