The tough economic environment means even healthcare cash plans are now being targeted for fraud. Sam Barrett assesses the consequences
Fraud is an issue across the insurance industry, accounting for annual losses of around £2.1 billion according to figures from the National Fraud Authority. But while staged accidents and faked deaths grab the biggest headlines, healthcare cash plan providers are increasingly concerned about the growth of fraud in their sector.
Medicash recently reported a 500 per cent increase in the number of fraudulent claims since 2009. Although Marj Murphy, head of customer operations at Medicash, says this increase is from a low base, she is concerned by the trend.
“It was a shock when we realised the size of the increase,” she says. “It’s something you have to keep an eye on: left unchecked it could become a much bigger problem.”
She is not alone in seeing an increase in fraud with Westfield Health and Health Shield among those prepared to admit they are seeing more fraud among their policyholders. Jonathan Burton, chief executive at Health Shield, believes it’s a symptom of the times. “The tough economic climate puts pressure on people’s finances, making them more likely to commit fraud. On top of that, technology makes it much easier for policyholders to fake a receipt. You have to be vigilant, especially as so many people perceive it as a victimless crime,” he says.
In spite of these views, the insurance industry is keen to point out that there are victims of fraud. According to the Association of British Insurers, fraud adds an extra £50 to the average policyholder’s insurance each year and the cash plan providers admit that, left unchecked, fraud would force premiums up on their products too.
Types of fraud
In the healthcare cash plan arena fraud takes a number of guises. Unlike the medical insurance market where the majority of fraud is perpetrated by the healthcare providers using techniques such as exaggerating the type and range of treatment delivered or extending the length of time it was delivered, with cash plans the majority of fraud is committed by policyholders.
Fake receipts and invoices for treatment are rapidly becoming the number one form of fraud as computer technology becomes more sophisticated. Fraudsters, says Burton, can copy information off the internet or use existing receipts to produce their own documentation for a claim.
While this is a fast-growing but emerging risk, simply altering receipts also remains a popular way of defrauding the cash plan providers. Medicash’s Murphy says the number one on a receipt can be a gift to a fraudster. “A receipt for £17.50 can be changed to £47.50 or £117.50 with a couple of pen strokes. We also see people inserting a one at the beginning of a figure to add another hundred pounds to their claim,” she says.
As well as inflating the size of a claim, fraudsters also adjust the details of who received the treatment. For example, if their child or partner isn’t covered by the cash plan, they may look to change the initial on their treatment receipt so they can claim for it on their own policy.
And while the bulk of the fraud is taking place within the individual market, corporate clients are also happy to fiddle their claims. As a result of the growth in fraud on the corporate side, Medicash changed the terms and conditions on its group policies.
Now, where a member of a group scheme is caught defrauding the provider, their policy is cancelled and the employer is informed of the cancellation and told to speak to the employee for more details. “Fraud does happen to a lesser degree in the corporate market but it is surprising when we see it,” says Murphy. “These people don’t seem to care that their employer will find out they’ve been breaking the law.”
With fraud on the increase, the cash plan providers are taking additional steps to combat it. As an example Health Shield has recruited a fraud manager to help understand the extent of the problem and ensure action is taken to prevent it occurring wherever possible.
With cash plan fraud relating to claims, attention is particularly being paid to the ways these are handled. “We’ve stepped up vigilance in the claims paying stages to ensure potentially fraudulent activity is detected as it happens,” says Terri Ball, customer services manager at Westfield Health. “We also ensure claims handlers are trained to raise awareness of fraud and we refer cases of fraud to the relevant authority for further action.”
Although cash plan providers are beginning to introduce electronic claims in some areas, for instance Westfield’s Good4you and Advantage customers can claim for optical, dental and chiropody online, the majority of claims remain paper-based.
And while they might receive thousands of claims a week, all of these are checked manually by claims handlers.
Murphy says it’s the experience and expertise of these claims handlers that ensures fraudulent claims are picked up. “They know all the tricks and can tell instantly if something isn’t right,” she says. “It might be there’s a slightly different ink colour or the pen strokes aren’t the same. Even the feel of the paper can be wrong.”
If suspicions are raised, the claim is passed to the company’s fraud team and further investigations take place. Older claims may be examined to see whether the receipt is genuine or the amount being charged is reasonable.
Where a claim doesn’t add up, the claims handler contacts the healthcare provider to validate it. If this doesn’t clarify matters, they contact the member and ask them to explain why it isn’t right. “Sometimes there’s a valid reason or they’ve made a genuine mistake but if they can’t show this then we will cancel their policy,” Murphy explains.
Advances in fraud detection
Technological advances means it’s not only a matter of spotting a fraudulent claim manually. Cash plan providers are also using computer systems to dig deeper into their claims records. “We’ve invested in claims software to enable us to manage and analyse the data more effectively,” says Burton. “This will help us identify any trends and set up rules around claims behaviour.”
As examples this might flag up people who’ve claimed at the maximum level year after year for some of the less core benefits or it might set treatment cost parameters so that any outliers can be investigated further.
But while it’s possible to pump money into helping identify fraud, the cash plan providers are also conscious that, while this might reduce fraud, it might end up costing them more than the fraud did in the first place. Burton says it has to come down to a cost benefit analysis. “We process 400,000 claims a year and we pay 85% of these in less than two days. We need to find ways to have robust counter fraud measures in place that don’t cost more than they save but also enable us to continue paying claims quickly,” he explains.
Because of this balance, deterrents are important and the cash plan providers are ensuring their position on fraud is clear in all their customer literature. Ball explains: “We are very clear in our literature of the company’s stance with regards to false claims. We also advise policyholders of the implications of this on our claims forms.”
She would also like to see employers playing a bigger part in preventing fraud. “They can help by continually raising awareness among their staff of the implication of committing fraud,” she adds.
Beating fraud together
The industry is also working together to beat fraud through the Health Insurance Counter Fraud Group. This was set up in 2001 to help prevent and detect fraud in healthcare by enabling the providers to exchange information and suspicions about potential fraud.
The Group, which runs in partnership with the Association of British Insurers, now has more than 30 health insurance company members including many of the cash plan providers. “We’ll discuss trends, look at practitioners where there might be issues and use the information to educate benefit administrators,” says Murphy. “There’s no competition between the providers when it comes to beating fraud.”
BOX: Fraud case study
A cash plan provider member of the Health Insurance Counter Fraud Group (HICFG) became suspicious when a policyholder submitted numerous claims for a variety of different treatments over a short period of time.
The claims were reviewed with the treatment providers and it was found that 15 of them were fraudulent. Further investigation by the cash plan provider revealed that the policyholder had taken out two further policies with the same company using aliases.
Through the HICFG, the provider shared details of the policyholder with other member firms. When they looked at their records they also discovered that fraudulent claims had been made against them by the same individual.
As a result of this all the individual’s policies were cancelled and the police were informed. The individual was convicted in a criminal court and received community service as well as being ordered to repay the money fraudulently claimed.