Why does Health Insurance Cost so Much Part I: Health Insurance Fraud

Everyone knows that health insurance is a coveted fringe benefit for today’s workforce. We know, too, that insurance carriers charge according to risk. The riskier a group or an individual is—the more likely they are to cost the insurance company money in claim payouts—the higher the premiums. We all also know, mostly from personal experience, that if we do actually use our health insurance at the rates agreed to, those rates will go up or the insurance policy could be cancelled. The fact is that insurance companies always react badly to problems and liabilities. One of those problems—a really major one—is fraud. In fact, fraud costs health consumers about $100 billion per year. Who do you think covers the expense of that added risk? Right, we all do.

The Patient as the Victim

Perhaps the most vulnerable victim of these schemes is the patient. The plan usually revolves around a false claim of some sort, which can include any or all of the following components:

  • Billing for services, procedures, and/or supplies that were not provided.
  • Misrepresentation of what was provided; when it was provided; the condition or diagnosis; the charges involved; and/or the identity of the provider recipient.
  • Providing unnecessary services or ordering unnecessary tests.

The following is an example of fraud involving the identity of the person receiving the payment—the provider recipient

A True Story (the names have been changed to protect the victim)
Imagine the following: A person falls ill and takes herself to the emergency room at a local hospital. Let’s call her Dottie. Dottie has health insurance and the hospital intake staff records her insurance and other personal information. Dottie receives treatment and goes home feeling better.

Sounds like a successful medical experience, everything went as planned and Dottie recovered, returned to work. So, where is the problem?

The problem shows up three weeks later in the form of a bill for $75.00. Called an “Insurance Benefit Sheet,” this bill comes from the hospital and it is for the co-pay amount. It has the hospital logo, address and phone number; Dottie’s insurance number, her name, address, the date of treatment and the amount of the co-pay; and the name and phone number of a billing representative. What more would you expect? A simple, straightforward bill, it is easy to read and easy to understand. In fact, there is a section for Dottie to give her credit card information for easier payment. What more could you want?

You would want it to be a real bill. Unfortunately for Dottie (a real person, by the way), this bill was a fake. To make matters worse, she paid it. “I had a stack of bills,” Dottie told me, “you know, electrical, heating, cable and this was just in the stack. I didn’t think about it so I just wrote the check.” Dottie didn’t give it a thought until she received another, more comprehensive and official bill for the same thing the next day. She stopped payment on her original check, contacted the police, the insurance company and the hospital, all of which initiated their own investigations. Dottie did the right thing, but how many others out there have been victimized? How many people have had their credit and their health insurance ruined by being fooled into paying scammers instead of the hospital or insurance company? 

What to Look For
So, how can you figure out whether a bill is legitimate or not? You do it the same way you figure out the legitimacy of an e-mail: By slowing down and using some common sense!

1.      Look at the bill. This is not the same a reading the bill. Actually look at the document itself. Have you ever received a bill from this organization on paper like this (Dottie’s was on copier paper)? Does it look like an official document or something run off on a computer printer or copier? If it isn’t proper letterhead and looks like it came off a copier, be suspicious.

2.      Read for errors. A bill—for that matter any document coming from a professional organization like a hospital, insurance company, bank, etc., or from some governmental agency—should look as if it was created by someone who knows what they are doing and working with a real billing system. Look for mistakes in spelling, things appearing on the wrong lines (such as the word “Telephone” appearing on an address line), numbers out of place (our example above is a co-pay bill and yet the Co-Pay part reads $0.00 instead of the $75.00 demanded), and sloppy changes and corrections.

3.      Check phone numbers. Dottie did something that everyone should do. She took the number for the so-called “Patient Financial Counselor” and checked it against the main number for the hospital. It didn’t match up. In fact, a little checking showed that the number for the counselor turned out to bounce to a Texas cell phone.

What You Can Do
Communicate, and not with the scammer. Those of you who follow this blog know that I am all for scambaiting (also known as “full-contact e-mail”) as a way to payback the lowlifes who prey upon the innocent and the ignorant. However, in a case like this, where the scammer obviously has information about you, that is not a good idea to say the least. Remember, these people are criminals and if they won’t stop at taking advantage of your illness and emergency hospital stay to wring money out of you, it is unlikely that they will stop at putting you right back into that ER if given the chance.
That said, this is who you should communicate with:

1.      Your Bank or Credit Card Company . Defend yourself first by stopping the transaction from going through and alerting the bank or credit company of possible fraud.

a.       Stop the check or credit card payment first thing. This is easier with a check since there is a time lag between the time you write it and the time it is actually presented.

b.      Empty the checking account in question into another account and close the compromised account. Remember, if you wrote a check, the scammer has your account and bank routing numbers. You may be asked (or want to) keep the account open with a minimal amount of money in it just to see what happens with it.

c.       If you feel your credit or debit card number has been cancelled, cancel the card and have a new one issued as soon as possible.

d.      Contact the fraud department at your bank or credit card issuer. Discuss the situation with them and send them all the documentation they ask for. These institutions have programs in place to deal with situations like this so take their advice.

2.      Your Health Insurance Company . Remember, the scammer has personal information about you that comes from your health insurance card. You will want them to:

a.       Look into the matter and find out if the scammer is at the hospital or within the health insurance company or somewhere in between. The sad truth is that scams like this are usually perpetrated by someone who works with people’s billing information and they have to be rooted out.

b.      Change your insurance number so that the compromised number cannot be used.

3.      The Hospital . They need to watchdog these matters just as the insurance companies do. The hospital administration can help you determine if the problem is one of fraud or not; however, remember that hospital staff works for the best interest of the hospital and so may not be as forthcoming as you would wish. If you are unsatisfied, continue to consider the matter fraud until it is proven otherwise.

4.      The Police . File a police report as soon as is practical. This will begin an official investigation into the matter and may result in a faster conclusion. Do not be afraid of being accused of filing a false police report. If you are acting in good faith and can show that you have supporting evidence, then it is not a false police report even if it turns out to be wrong

Fake Insurance Scams
According to the General Accounting Office, there are a number of bogus health insurance plans out there. These plans are fraudulent in and of themselves. One GAO report describes how, between 2000 and 2002, 144 unauthorized entities, which for the most part had names similar to real insurance companies, enrolled at least 15,000 employers and more than 200,000 policyholders. These people ended up being stuck for over $200 million in unpaid claims. How can you tell if an insurance company is real or not? The Coalition against Insurance Fraud offers these 10 warning signs:
  • The coverage costs 25 percent or more below the norm, yet promises generous benefits and a large provider network.
  • The plan readily accepts people with serious illnesses and other medical conditions that other plans normally reject.
  • The insurance has few or no underwriting guidelines—the agent or rep appears almost too eager to sign you up.
  • You're approached by an insurance agent, phone or direct mail. Honest group plans normally are sponsored by your employer—and aren't sold directly to individuals.
  • The plan isn't licensed in your state, and the agent (falsely) assures you the federal ERISA law exempts the plan from state licensing.
  • The plan seems like insurance, but the agent or rep avoids calling "insurance," and instead uses evasive terms such as "benefits."
  • The agent or rep doesn't have clear answers to your questions, seems ill-informed, or avoids sharing information.
  • You've never heard of that health insurance company—and nobody else has, either.
  • You have to join an "association" or "union" to obtain the health coverage. But you get no voting rights, receive no bylaws or other material, and aren't involved in the group's activities.
  • Your hospital keeps calling you to complain that your health plan isn't paying your medical bills. Often the plan's reps keep making flimsy excuses, or stop returning phone calls altogether.


Provider Fraud

These are group efforts aimed at defrauding not the patient, but the health insurance provider. With the way so many of these companies treat people, it is hard to work up much sympathy for the insurance companies. However, it must be remembered that these activities are illegal and the cost gets passed on to the rest of us in higher premiums.

The Personal Injury Mill
This is the classic of provider fraud schemes. It involves crooked lawyers, shady healthcare providers—usually chiropractors or mixed chiropractic/medical clinics—and either unwitting or fully cooperative paid patients. The goal, of course, is to maximize the medical and legal expenses. Here is how it works:

Usually there is an auto accident or some other traumatic situation that leads to an injury. Once a patient has been identified, they are contacted, usually by the attorney, who would then try to convince them that they need a second opinion, or that he can get the victim free medical care or any one of a number of other promises such as:

  • Insurance claimants being told that they can make big money by doing what they’re told and that not cooperating could damage their legal case.
  • The lawyer sets up a diagnostic evaluation process involving multiple practitioners such as orthopedists, chiropractors, internal medicine practitioners, neurologists and physical therapists.
  • The treatment providers offering unnecessary transportation at the expense of your insurance company.
  • Suspicious professional appointments. Tip-offs include:
    • Multiple medical and/or legal appointments at the same facility or on the same day.
    • No real consultation between the doctors on the case.
    • You never see the original physician again.
    • Brief, superficial physical examinations.
    • Multiple diagnostic tests are ordered with little or no explanation, prior notice or post-test discussion. These tests may be administered by "visiting" physicians or technicians and/or conducted in a minivan that comes to the office. Common tests include:
      • Nerve-conduction tests to find nerve damage.
      • Surface electromyography, also to find nerve damage.
      • Spinal ultrasound to look for soft-tissue injury.
      • Inclinometry to look for restriction of joint motion.
  • Participants are told that they have suffered significant injury even though they have few or no symptoms.
  • Treatments don’t change as the patient improves. They stay the same whether the patient is feeling better or not.
  • Insurance claims are handled strangely. Patients may not be charged the deductible or the co-pay; or payment reports are sent directly to the attorney instead of the patient.

While all of this is going on, the attorney is busily working on getting the largest settlement that he can. After all, the bigger the settlement, the bigger his paycheck. For the hapless patient—I am not talking about those patients that are in on the scam—it means a great deal of unnecessary medical tests and procedures. It also means trouble down the line for patients that apply for certain jobs, or for insurance, or who really do become disabled and need to go on disability.

I know that it is hard to be fully alert right after a trauma such as an auto accident, but you have to be alert. Know what to look for and check all medical bills very carefully. If you have a family physician, then trust their judgment rather than that of an attorney who shows up even before the smoke clears. If you don’t, then ask at the hospital emergency room. They, at least, are disinterested third parties without a stake in your choice of doctor.

If you do suspect that you have been contacted by, or have fallen into the hands of, a personal injury mill, contact the fraud division of your insurance company, your state attorney general and the FBI to investigate. If the fraud involves Medicare and Medicaid, then you should also contact the federal Office of the Inspector General.

Quackery and Inappropriate Types and Amounts of Testing
Using unproven or experimental treatments or doing unnecessary and excessive testing can be considered quackery. This definition covers many of the practices, tests and treatments of “non-traditional healers.” Take, for example, the chiropractic idea of subluxation. In the regular medical establishment, subluxation is an incomplete or partial dislocation—a condition, visible on x-ray films, in which the bony surfaces of a joint no longer face each other exactly but remain partially aligned. This is not something that can be treated by chiropractic.

Not so, say the chiropractors! In 1996, the Association of Chiropractic Colleges adopted this definition: A subluxation is a complex of functional and/or structural and or pathological articular changes that compromise neural integrity and may influence organ system and general health. Then, in 1997, the Foundation for Chiropractic Education and Research tried to clarify the issue in a pamphlet called "Subluxation: What It Means to You," which stated: What the above means is that a subluxation is a joint problem (whether a problem with the way the joint is functioning, a physical problem with the joint, or a combination of any of these) that affects the function of nerves and therefore affect the body's organs and general health.

To get around the impediment posed by being seen as a quack and get paid, these practitioners often misrepresent their tests and treatments so as to fool the insurance company into paying for them. According to Inside Chiropractic: A Patient's Guide, by Samuel Homola, D.C., some of the treatments and tests used by unscrupulous practitioners and falsely claimed include:

  • Chelation therapy for those falsely diagnosed with lead or mercury poisoning may be billed as "infusion therapy" or as an office visit.
  • Quack cancer remedies may be billed as "chemotherapy."
  • Live-cell analysis may be billed as a test for vitamin deficiency.
  • Questionable allergy tests may be billed as standard allergy tests.
  • Computerized inclinometry to measures joint flexibility. While useful for some disability evaluations, it is not useful to “gauge a patient's progress.”
  • Nerve conduction studies, which offer useful information about the affect of injury and certain diseases are useless as a method of "following the progress" of patients.
  • Surface electromyography, which measures the electrical activity of muscles, is not an effective screen for subluxations nor can it be used to gauge patient progress.
  • Thermography shows slight temperature differences between sides of the body as images. They cannot detect nerve problems nor show the effects of chiropractic treatments.
  • Ultrasound is used by these practitioners diagnosing muscle spasm or inflammation or for following the progress of patients treated for back pain. It isn’t good for either.
  • Unnecessary x-rays are used by chiropractors who routinely x-ray each patient to find subluxations or to measure the progress of spinal manipulation patients.
  • Spinal videofluoroscopy produces and records x-ray pictures of the spinal joints that show the extent to which joint motion is restricted. It is unnecessary since in most cases, a simple physical examination offers the same information as the test.
Miscellaneous Illegal Practices

What’s left is a hodge-podge of activities that are purely illegal. These are red-light activities that warrant investigation by both law enforcement and the appropriate regulatory agencies involved. The key here is to look at everything and keep very close tabs on how procedures, tests, exams and drugs line-up with the bills and the insurance statements. If something doesn’t look right, check into it. Some of the things you want to look for are:

  • Charges for services that were never rendered.
  • Billing separately for procedures normally covered by a single fee.
  • Double billing.
  • Upcoding (charging for more complex services than were performed).
  • Miscoding (using the wrong code for a given procedure).
  • Kickbacks and Bribes to steer patients to certain specialists, drugs, etc. that pay the physician for the referrals.

The Bottom Line
If someone was stealing from your friend and you had to help cover their expenses because of it, you would be very interested the capture of the thief, right? Well, people are stealing from the insurance companies, and from the hospitals and doctors, and from the patients and their employers, and it is all of us, through higher and higher premiums, that cover the losses. True, this isn’t the only reason why health insurance is so high, we’ll get into other reasons in a later article, but it is a real and unnecessary component to that high cost.

It is time to do something about insurance fraud. If you have an insurance benefit for your company, have your insurance company come in and teach your people how to spot fraud and what to do when they find it. As with all kinds of scams, education and attention to detail are the best defenses.