Insurance Fraud: Can You Afford to Look the Other Way?

Organized crime has traditionally been the high-profile target of the Department of Justice. However, the most sought-after lawbreakers in recent years have been those who commit healthcare fraud.

Healthcare fraud is an intentional deception or misrepresentation that a person or entity makes knowing that the misrepresentation could result in an incorrect payment or benefit.

Published reports estimate that medical professionals account for about 72% of suspected healthcare fraud. Billing for services not rendered and up-coding account for about 56% of this suspected fraud.

In 1998, the State of New Jersey established healthcare fraud as a separate crime carrying enhanced penalties. Penalties can be very severe. Guilty parties can be providers, subscribers, insurance companies, brokers and groups as well as anyone knowingly benefiting from someone else's insurance fraud. Carriers who do business in New Jersey are required (under heavy penalty) to report all reasonable suspicions to the state's Office of the Insurance Fraud Prosecutor (OIFP), which investigates and pursues violators.

Additionally, insurance companies must maintain special investigative units, and provide anti-fraud training to all claims processing and underwriting staff.

We All Pay the Price for Fraud

Many people view insurance fraud as a low-risk activity that can generate large rewards. Consumers often feel that insurance fraud is acceptable, a crime without an apparent victim. In truth, insurance fraud victimizes all of us. This attitude makes it easier for wrong doers to operate.

Studies show that two out of three Americans will tolerate insurance fraud to varying degrees. One reason may have something to do with the way health insurance policies are structured. Most health insurance policies are structured so that the subscriber and the insurance company share treatment costs. This helps keep premiums lower, and helps to insure that the services or treatments billed for were actually rendered. Very few people will pay for something they did not receive.

Unfortunately, many consumers do not understand their coverage or their benefits. When people find out they must pay expenses they assumed their insurance would cover, they often perceive the insurance company as being unfair. Because of this view, two-fifths of the American public feels that there should be little or no punishment for insurance fraud.

Most people are probably unaware of the high price they already pay for this criminal activity. Insurance companies must pass on the large cost of insurance fraud to policyholders. This drives up everyone's insurance costs and in turn causes the cost of consumer goods to increase. Prices of clothes, appliances, automobiles and food all rise when businesses must pass on the higher costs of their employee health insurance coverage. Honest businesses lose money and may close because fraud increases their operating costs. Individual subscriber coverage may be drained by unnecessary or fraudulent services, and taxes are higher because billions of tax dollars pay for fraudulent insurance claims every year.

Health insurance fraud accounts for an estimated 10% of the annual expenditure on health care in the United States. Studies show that a 1% rise in insurance premiums results in approximately 400,000 more people nationwide who cannot afford health insurance at all.

Other types of insurance fraud include auto insurance fraud (which costs the insurance industry an estimated $14 billion each year), workers' compensation fraud ($2.1 billion annually), Medicaid fraud, collecting illegal unemployment benefits, collecting illegal Social Security disability benefits, collecting on false homeowner's property damage, buying or selling fake automobile insurance identification, identity theft, and many more.

New Jersey Educates Public About Fraud

Many states, including New Jersey, have begun educating consumers about the cost of insurance fraud. This includes an advertising campaign geared to create public awareness. Tips are given on how to detect fraud, as well as how to report fraud. The messages put out to the public stress simple themes:

1. Insurance fraud is a crime.

2. Everyone pays a high price.

3. Getting caught has heavy consequences.

4. There is a strong likelihood of getting caught.

How to Report Fraud

If you think you have knowledge of a fraud, contact the insurance carrier listed on the Explanation of Benefits statement. The insurance company may be reached by telephone, letter, or e-mail. Most insurance carriers also have Web sites that contain specific instructions for reporting fraud.

Delta Dental Plan of New Jersey can be reached at reportfraud@deltadentalnj.com. Delta Dental also has a Fraud Hotline at 888-696-3262.

In the State of New Jersey you can also contact the Office of Insurance Fraud Prosecutor at www.njinsurancefraud.org, or at 877-55-FRAUD (37283). The OIFP keeps all tips anonymous and strictly confidential.