Insurance Fraud-Busting System - Essay Example

Insurance Fraud-Busting System Insurance fraud has always been a problem. It has increased massively in the United States as of late, however. As the economy struggles, more people are tempted to find new ways to bring in some money. Insurance fraud causes policies to increase, as insurance companies pass on their losses to their customers. As insurance companies raise their rates, businesses and governments become deeply affected as well. This report will outline some of the most common cases of insurance fraud and some ideas on how insurance companies may be able to combat this growing problem in a cost-effective way. There are two case studies which were referenced within this current assignment. One is a case involving an insurance claim to replace a computer network, after a company experienced an unexpected energy surge. The second involved a woman who had unnecessary dental work, after an unethical dentist advised her that she needed filings. Both of these instances are, unfortunately, not uncommon these days. An additional insurance scam that I am familiar with is one involving chiropractors. A relatively healthy person will visit a chiropractor’s office and receive multiple chiropractic adjustments and massages. The patient, in many cases, will not pay any out-of-pocket costs for these services. Instead, the chiropractor will claim that the person has a problem and is in need of constant care. The office assistant will bill the insurance company for each visit made by the patient. The patient enjoys multiple massages and chiropractic adjustments for however many visits the health insurance allows. The reason why this is a fraud is because it is expressly stated within the policy that a patient must have a legitimate medical condition and be in need of treatment, in order to receive benefits. This type of fraud is rampant as well. Still there are other insurance scams that many people are familiar with. Some people stage car accidents or leave their own keys in the car so that it will be stolen. Others fake an accident at work so that they can file a worker’s compensation claim and/or file for short/long-term disability. All false claims have a profit motive of some type. If the claim is not filed for actual cash, the purpose of the claim may be to replace a valuable damaged item. The attitude of Americans towards fraud is disheartening. On the Coalition Against Insurance Fraud website, there is a statistic cited from a survey conducted by Accenture Ltd, that “one of four Americans say it’s ok to defraud insurers” (Accenture, 2002). Another study, cited on the same website by Progressive Insurance, stated that “Nearly one of 10 Americans would commit insurance fraud if they knew they could get away with it. Nearly three of 10 Americans (29 percent) wouldn't report insurance scams committed by someone they know” (NICB, 2011). This is a startling statement of American lack of morality. The proceeding information leads to a very important question. How do insurance companies combat fraud at the present time? Most insurance companies have an in-house Special Investigation Units (SIU). They normally seek to hire those with a law enforcement background for such positions. These groups are specifically tasked with attempting to uncover and investigate cases of fraud, specifically as it relates to claims filed through the insurance company. The group specifically will look for holes in a customer’s story. If there was an auto accident, for example, and both parties’ statements do not match, this can raise a red flag. This is one of the reasons why a police report can be very important, so that there is another eyewitness who will testify as to what they observed in relation to an accident. Another way that insurance companies currently combat fraud is by tips that are provided by regular people who do not work for the insurance company at all. The National Insurance Crime Bureau (NICB) is a not-for-profit organization, which is dedicated to fighting fraud. The organization encourages people to “speak up,” when they know or suspect that someone is committing some kind of fraud against an insurance company (Our Story, 2011). They hope that by educating the public about how fraud raises taxes, insurance rates, and other indirect costs, that it would motivate people to tell on their neighbors and associates. It must be working to some degree, however this researcher would be willing to bet that most people don’t even know that this organization exists. In the case of the unethical chiropractor, an insurance company may begin to suspect fraud if a chiropractor bills a patient an unusual number of times, when there is no x-ray showing that the patient has a medical condition that would require excessive treatments. In the example of the company who sought to replace their entire computer network, after a power surge, an insurance company might send someone to the site to investigate why the entire computer system was damaged. If the company had not been the victim break-in, accompanied by a police report, it is very possible that they could safely deny the claim. Lastly, in the case of the dentist, this may be the most difficult of fraud cases to prevent. It is simply not cost-effective to challenge a dentist each and every time he sees it appropriate to have a patent get tooth fillings. Nor is it competitive practice to ask dentists to get pre-authorization each time they seek such a minor procedure. After a certain amount of paperwork, most doctor/dentist offices would simply drop the insurance provider. They would probably figure that they did not go through over 16 years of education to have their decisions scrutinized by accountants without a medical degree. It is necessary to seek some solutions to the above problems, if the problem of fraud is to go away. Keeping cost-effectiveness in mind, the best way to combat fraud is quite possibly to either set up an agency, similar to NICB, or strengthen the impact of the NICB through increased funding. For the purpose of this report, however, this researcher will focus on the first idea of setting up a powerful membership agency. Currently, the NICB is funded and run as a partnership between the leading insurance companies in the United States. This researcher suggests that the new membership agency do exactly the same thing. This organization should be heavily promoted in each state within the United States, on a much larger scale than the NICB. Commercials should be run on television and radio designed to educate people about the harmful effects of insurance frauds and what it costs society. Through a targeted series of ads, there will be a positive shift in society. People will no longer feel comfortable bragging about how they got over on the insurance companies. It will no longer be politically correct to be the guy getting paid excessively for a minor accident which caused little to no harm. People should be made to feel disgraceful, if they are caught in the midst of an insurance scam on any level. The commercials must provide a toll-free number for people to call, which is easy for people to remember. The commercials should give real examples of people who were caught committing insurance fraud and what their punishments were. Giving their names and showing their faces would be an excellent way to discourage would-be offenders from daring to attempt to defraud an insurance company. Another aspect of this plan would be that a substantial reward ought to be offered for anyone who blows the whistle on someone who is found guilty of insurance fraud. They should be assured that they may remain anonymous to the public and that they will get a reward worth perhaps 10% of what the offender was collecting from the fraud – minimum $50. The offender must pay the insurance company back for the reward that they paid out. This makes the reward system very cost-effective for the insurance companies and the public alike. This researcher is proposing that two sources of funding be used for this proposed project. The first source of funding would be from the insurance companies themselves. Insurance companies will be solicited for membership and will pay a monthly fee to reap the benefits of the organization. The insurance companies will be contacted when they receive tips concerning fraud involving member companies. In addition, the organization will take advantage of public citizen volunteers, who also work to combat fraud. Volunteers will help the organization expand, without adding additional fixed costs. The second source of funding will be public funding. This researcher believes that it is in the best interests of the public citizen to keep insurance fraud down to a minimum. Therefore, it is in everyone’s best interest to have a very small portion of tax proceeds go to producing the commercials outlined above. In fact, the federal government ought to be able to get a good rate for these commercials because public service announcements cost less than for-profit advertisements. After awhile, the organization would become a household name and insurance fraud would decrease. A law needs to be passed in Congress to allow tax proceeds to be utilized for these public service announcements and also to allow for people who are convicted of fraud to be exposed for the public to see. This will ultimately bring the cost to society for insurance fraud down. After this program is successfully implemented, the resulting effect will be that insurance companies will be able to retain more profits, cut premiums, and cut additional costs unto the public and the businesses they serve. The average citizen will have a sufficient motivation to begin to tell on others who are doing wrong. They will know that they will be able to speak up without being found out or being shunned by their peers. Morality will increase and people will begin to hold each other more accountable for bad behavior. It will become increasingly hard for an employer to feel comfortable defrauding an insurance company. Dentists and chiropractors will also have to be more careful about what they do and how they do it. Part of the strategy’s strength will be in its ability to create a stigma in the public. This researcher estimates that the organization can be run by a few board members and public volunteers. It will be a not-for-profit organization and will only need to invest in a computer software system to process data, a website that all parties involved can access, and a handful of board members who will run the organization and receive a modest salary for their management efforts. The salaries might run between $25.000-$40,000 per person. The computer software does not need to be custom-made. It is quite possible to find a simple system in combination with a website for less than $100 a month to maintain. Insurance companies will join after a series of press releases get released. The investment would be a no-brainer for them. Works Cited "Accenture Study." Coalition Against Insurance Fraud. N.p., 2002. Web. 2 May 2011. . National Insurance Crime Bureau. N.p., 2011. Web. 2 May 2011. . "Our Story." National Insurance Crime Bureau. N.p., 2011. Web. 2 May 2011. . Read More