Tale of 2 states: differing paths to curbing cons

Michigan and Minnesota look to tighten anti-fraud laws

Several years ago I was part of a group of insurers, consumers and others who met in Lansing, Mich. We drafted a proposal to create an automobile insurance-fraud authority. The measure was introduced, and the insurance commissioner at the time showed interest. Still, the proposal fell short.

A version of that proposal now is part of a larger effort by insurers and legislators to reform Michigan’s no-fault automobile insurance system. But the reform effort is far from universally liked and appears to have little momentum.

So this means the fraud authority is drifting as well. A worthy cause may fizzle despite widespread agreement that Michigan needs such an agency to help coordinate and energize the fight against auto-insurance schemers, especially staged-crash rings. Michigan is the second-largest state without some form of central anti-fraud agency.

Last month I spoke with several Michigan legislators — Democrats and Republicans — and an insurance regulator. They all appeared supportive of the fraud authority. But the proposal sits, moored to a drifting reform package that likely will run out of steam.

Conversations about when the anti-fraud community should push to jettison the fraud authority from the larger package are in the infancy stages. Supporters think strategies to move the fraud authority as a stand-alone measure should move forward at some point.

Now we have Minnesota.

For years the legislature has heard about the need to strengthen Minnesota’s insurance-fraud laws. So a key legislative committee chair created a working group of lawmakers last year. It was tasked with studying the state’s diverse insurance-fraud issues.

The working group held public meetings, inviting interested parties to make recommendations. The Coalition was among the insurers, consumer groups, medical-provider groups and attorney organizations that offered remedies. The working group issued its report in mid-February, and legislation was introduced soon after the session opened.

I submitted testimony for a hearing two weeks ago praising several of its anti-fraud measure which would:

  • Give the Department of Commerce authority to civilly fine fraudsters, in addition to imposing criminal penalties;
  • Encourage state license boards to de-certify crooked medical providers from receiving insurance money; and
  • Strengthen fraud investigations by allowing insurers to freely exchange information about cases with insurers, law enforcement and organizations like NICB.

But much like Michigan, the fraud provisions are tied to a larger reform bill aiming to tighten the auto-insurance system. Many key legislators support the anti-fraud provisions. Yet the measure is just beginning to test the waters. Supporters are cautiously optimistic.

Fraud fighters can make the difference. Last year the Coalition and IASIU created a grassroots response system for IASIU’s investigator members to use in states where timely action is needed.

The Engage system channels the robust energy of fraud fighters into writing supportive letters to their legislators. A similar campaign this year on an anti-fraud measure in Colorado is already underway. The effort has generated more than 50 letters in just its first month.

We’ve begun urging Minnesota investigators to take similar action to support SF 2372. Fraud fighters work hard to be credible and effective crime fighters. Now is the time to translate those worthy qualities into votes that turn anti-fraud measures into law.

And, look soon for grassroots efforts to get the New York governor to push efforts to strengthen the state’s auto fraud effort.

About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.

A taxing idea to help curb workers comp premium fraud

Insurers and states could team up to detect more rate evaders

A grand jury empaneled by Manhattan DA Cyrus Vance yesterday issued a sweeping report on widespread premium fraud in the Empire State’s workers compensation system. New York insurers lose nearly $500 million in premium in just the construction industry, the report says.

Vance highlighted the report in a keynote speech yesterday at the annual meeting of the New York Alliance Against Insurance Fraud (NYAAIF). He outlined several useful reform ideas, including:

• Increasing penalties, especially for large-dollar fraud schemes,

• Requiring insurers to conduct more audits of insured businesses,

• Creating a uniform application form, and issuing IDs injured workers can use to get medical treatment; and

• Developing an integrated database of information on applications, audits and certificates of insurance.

The last recommendation details how data analytics can be employed to better detect fraud, but it needs to go further.

What’s still needed is a simple solution to determine if an insured is accurately reporting payroll. The state could set up a relatively simple database with aggregate payroll data that it maintains from tax information all employers are required to report by law. Using tax-ID numbers, insurers could query the database and determine if there are discrepancies with data reported on comp applications.

Yes, some employers do defraud both insurers and the state in under-reporting payroll, but most don’t because penalties for tax fraud are much steeper than premium schemes.

To protect privacy, the aggregated data from the state wouldn’t have to be disclosed to insurers — only whether the data doesn’t match. A mismatch then would trigger an audit.

This solution — combined with advanced analytics to detect misclassification — could deter and detect much of the fraud, except for the very sophisticated schemes.

Unneeded spinal surgeries in California beg a few answers

How it could go on for so long — and how it could’ve been prevented

This con likely is one for the record books — a half-billion in fraudulent claims, kickbacks, bribery, money laundering and political intrigue.

The case involving Pacific Hospital in Long Beach, Calif. will take months and maybe years to unwind. Former hospital owner Michael Drobot devised a scheme where more than $500 million in unnecessary surgeries were performed, mostly on workers-comp claimants. He offered kickbacks to doctors to recommend the surgery and the hospital.

He also allegedly bribed state senator Ron Calderon $100,000 to keep a law on the books that allowed the hospital to overbill insurers. The FBI has charged Calderon with taking the bribe. His brother Tom, a former state assemblyman, is charged with money laundering and conspiracy in helping to receive and hide the bribes.

Calderon took a leave of absence this week. That upsets the political landscape in California because his departure now denies Democrats a super majority in the legislature.

Drobot now has pleaded guilty and is cooperating with investigators, so more details soon will surface. This is the largest such insurance scheme in California history, prosecutors say.

Questions involving the impact on victims — the injured workers and their employers — unfortunately, may never be answered:

• How many of these spinal surgeries were necessary?

• How many patients were injured further by needless surgeries?

• How much more in workers comp premiums do businesses have to pay because of huge scam like these?

• How many new businesses were never created because the high cost of worker comp in California got even higher thanks to such scams?

This insurance scandal begs for a deep dive to understand how it could’ve happened, why it went on for so long (1997 to 2013) and how it could’ve been prevented — or at least detected much earlier. I hope fraud fighters, legislators and the medical community have an opportunity to discover the truth. The exercise would be a good case study that prevents honest businesses and workers from being so flagrantly abused in the future.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

More Obamacare cons may loom in March

Approach of signup deadline could spur ID-theft cons

Beware the Ides of March, Shakespeare famously penned. Millions of Americans today should beware the Obamacare scams of March.

The deadline for signing up for health coverage under the Affordable Care Act is March 31. The runup to that moment symbolically begins when the calendar rolls into March 1.

Consumers should be on high alert for lowdown cons exploiting the oncoming deadline. It’s a tailor-made hook for swindlers to barrage people with swindles designed to steal consumer identities. Enrollment is picking up steam — signup has passed the 4-million mark. That suggests more Americans gradually are becoming aware of the potentially helpful health-insurance options that health reform is offering them.

This is just the kind of awareness scammers want to take advantage of.

Imagine you’re watching TV in your living room when the phone rings. A stranger says he’s from the federal government. The signup deadline is fast approaching, he warns. You could go to jail unless you register with the feds NOW to receive your federally required Obamacare health card. Even if you protest that you’ve already bought health coverage through an exchange, the smooth talker insists that federal law still requires you to register.

It’s easy, the stranger purrs. Just share your credit card and bank-account info plus your Social Security number. You’re registered with the government, as “required” by health reform. You might even be told to sign up via a bogus state “exchange” or federal “health reform” website. If you take the bait, the con artist has stolen all the info needed to steal your identity, clear out your bank accounts and wreck your credit.

However absurd and divorced from reality such come-ons may be, a well-trained pitch artist can give the ploys great authority and scare value. Scammers propositioned possibly millions of consumers with similar scare tactics during the months leading up to the launch of last October’s open-enrollment period. Bogus exchange websites also popped up.

More Americans are aware of such ploys after flurries of blogs, social-media posts and news stories warned people about scams for months as October 1 approached. But people often have short memories. And the smoothly offered threats by professional hucksters can easily break down your defenses. So be especially alert for shady Obamacare pitches throughout March, and beyond.

Know the warnings and general health-reform information your exchange sends out:

  • Back off if you’re approached by pushy pitchmen who claim they’re from the feds, demand you register, and ask for your financial info.
  • Know what real navigator credentials look like.
  • Don’t allow a supposed navigator to sign you up for a specific health plan, or to charge fees and health premiums.
  • Know what your state exchange website looks like, and how it operates.
  • Visit www.healthcare.gov to find your exchange website and learn more about health reform.

For many Americans, March is the runup to warm spring days ahead. For potential victims, March heralds the approach of icy-cold Obamacare swindles. A little knowledge will chase the cheaters away.

About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud.

Sandy victim in New Jersey beats shady adjuster in court

Jury rules against Texas adjuster for charging thousands for doing no work

Soon after Megastorm Sandy struck New Jersey in October 2012, unsavory contractors and public adjusters began coming out of the woodwork to reap the riches from stricken homeowners and their insurance companies.

While most contractors and adjusters are honest and honorable, natural disasters tend to bring out the ethically challenged ones, even some that are unlicensed and from far-away states.

That’s a reality that resident Mike Kramer lived through for the last year or so as he battled a Texas-based public adjuster who showed up at his doorstep after the storm. The surge from Sandy brought two feet of water into Mike’s bay-front summer home in Harvey Cedars, N.J. An affable and convincing salesperson used the typical sales line that Mike was apt to get a lot more out of his insurance company by hiring a public adjuster.

Having neither the experience of a major loss nor working with a public adjuster, Mike signed on — even though his insurer already had given him a $12,000 check as a down payment on his claim.

Months passed, the water receded and soon the insurance company paid the remainder of the claim — a total of $80,000. Mike began to rebuild. Then a bill for $10,700 from the public adjuster showed up in Mike’s mailbox. He refused to pay.

“There was no evidence that the public adjuster did anything to help settle my claim,” Mike told me in a phone interview last week.

The public adjuster sued Mike, telling him that he’d better pay up because it would cost him more to hire a lawyer to fight the suit. Little did the public adjuster know that Mike had a good friend who was an ace attorney and who was just as outraged over the public adjuster’s arrogance. He took Mike’s case pro bono.

The drama played out last week in a New Jersey courtroom.The adjuster couldn’t produce any evidence that he did any work on Mike’s behalf. In fact, he apparently didn’t even send Mike’s insurer a letter of representation. Still, Mike did sign a legal contract to pay.

But that didn’t matter in the end. The jury decisively ruled against the adjuster, dismissing his suit. In effect, the jury said “Don’t come into our state, make promises and take advantage of people by failing to do any work.”

Mike also hopes others will learn from his experience. He’s posted a YouTube video, advising storm victims to:

• Don’t sign on with a public adjuster until after you’ve received a settlement offer from your insurer. Know that you have up to a year to negotiate a claim with the insurer.

• Give the insurer adequate time to fully respond to your claim. That could take months during a significant weather event. Hire a public adjuster if the insurer doesn’t respond to your claim.

• If you sign on with a public adjuster, request weekly updates with time sheets and e-mail logs to ensure the adjuster is working on your behalf.

Good advice — and a warning to would-be scammers.

Note: For more tips on avoiding scams by public adjuster, visit the consumer section of InsuranceFraud.org.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Rebounding economy should aid anti-fraud initiatives

A record number of state fraud bills are expected in 2014

The nation’s economy is pulling out of the deep trough of 2008-11 and appears to be picking up. That bodes well for state anti-fraud legislation. Legislatures advanced fraud bills at a record pace in 2013 after spending most of their time during the past several years balancing shaky state budgets.

Look for another high-action year in 2014, with contractors plus auto fraud and staged-crash gangs the primary targets.

Michigan is among the few states without a fraud bureau of any kind. An automobile fraud authority is embedded in a larger reform package. Having a state agency will allow a more coordinated and focused clampdown. Some 70 percent of residents support creating a state authority, reveals research by the Michigan Insurance Fraud Awareness Coalition. In other words, the time is right. This may be the year for success.

Minnesota. A legislative task force soon will recommend ideas for anti-fraud bills to be introduced this year. Among the priority ideas:

  • Expanding the exchange of information among insurers, law enforcement and NICB;
  • Allowing the state Department of Commerce to impose civil fines on cheaters while preserving the state’s ability to file criminal charges; and
  • Better educating consumers about fraud and alerting them how to avoid being conned. The Coalition recommended this measure, noting that outreach efforts have benefitted anti-fraud efforts in New York and Pennsylvania.

Maryland. Prosecutors will have have an easier time proving jurisdiction in Maryland to bring a fraud case if a bill championed by the state insurance administration becomes law. Suspects could be tried in any county where a) the insurance loss occurred; b) the insurance policy provides coverage; c) the insurer or its agent received the false statement; d) the defendant resides; or e) the fraudster received the stolen insurance money. The bill tracks laws in other states.

Colorado. Raising fraud penalties to a higher-level felony will be on the agenda. Anyone with prior a fraud sentence will receive a stiffer penalty for the next fraud conviction. The insurance department also would gain authority to yank the license of agents, brokers or others for fraud convictions.

New York. Once again Albany is likely to debate bills aimed at sham clinics and staged-crash gangs. Measures routinely fizzle even though New York drivers suffer under the thumbs of widespread no-fault gangs. Among the issues the Coalition has pursued is to criminalize staging crashes and recruiting fake passengers for setup car crashes.

Albany also is looking into expanding the state’s ability to boot deceitful medical-equipment providers from the no-fault system. A bill would enlarge the insurance department’s authority to stop payments to crooked equipment peddlers.

A related idea being discussed in Albany is to allow the Department of Financial Services to impose civil penalties on medical providers kicked out of the no-fault system.

Meanwhile, the governor has proposed welcome budget funding to help curb no-fault fraud. The money would help fund prohibiting payments to crooked health providers, levying civil fines for violations, and authorizing the Department of Financial Services to perform unannounced facility audits and inspections.

Albany needs to end its dysfunction and muster enough political will to pass legislation that everyone agrees is needed. The governor’s buy-in and political clout will be essential to breaking the logjam.

New Jersey. The legislature once again will look to:

  • Restrict outsider access to crash reports for soliciting crash victims to receive potentially bogus injury treatment;
  • Expand the exchange of case information allowing insurers to exchange fraud info with each other and NICB; and
  • Make it a specific crime for drivers to lie about where they garage their vehicles to illicitly lower their auto premiums.

Shady Contractors. We expect several states to consider bills targeting dishonest contractors who prey on homeowners and insurers, especially after major storms. This continues the trends of 2012 and 2013, when at least 14 states enacted new or stiffer laws during those years combined.

Airbags. Bills making it a specific crime to manufacture and market counterfeit airbags likely will rear up in several states. I already testified before the Maryland legislature in November to support an expected 2014 measure. A bill already has been introduced in Alabama. Action also is expected in Pennsylvania. And a senior Louisiana legislator has sought the Coalition’s advice about a bill.

This will be a busy year for the anti-fraud community. Opportunities will abound to move America’s collective fraud laws to a new level. Fraud fighters should closely eye their statehouses for openings to get involved in moving new fraud laws onto the books. And the time to get organized is now.

About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.

Medical ID chase online seniors

Crooks install Facebook malware to steal passwords

It may just be a perfect storm: online medical info, more seniors online, and the threat of medical identity theft. The Internet, especially social-media sites like Facebook, is a thief’s wildest dream.

Older adults are among the fastest-growing internet and social-media users. And now that seniors can manage their Medicare accounts online, they’re even more connected — and vulnerable. They’re less likely to be Internet savvy and more likely to be taken by attractive offers that actually are scams.

An AARP fraud study found the average age of medical ID victims is 69. Not surprising because older adults are longtime targets of cons.

Studies show that as we age, the area of the brain that helps process risk becomes damaged. Essentially, people with older brains are more gullible to scams like medical ID theft.

More than 1.5 million Americans were victimized in 2012, says a Ponemon Institute survey. Those numbers were set to increase nearly 20 percent in 2013.

Medical ID cyber thieves can:

  • steal Medicare and Medicaid benefits;
  • order prescription drugs and medical equipment;
  • make false treatment claims; and
  • modify a victim’s health records.

To steal a senior’s online Medicare info, a thief first must break into the senior’s cyber home. Facebook is one of the easiest ways. The tricks intend to catch seniors unaware.

After all, you’re comfortable on Facebook. You’re among friends and using it becomes routine. Then you click to a “friend’s” photo album, only the album actually is malware. And it just unleashed a keystroke-logger program that tracks every word and every password you type, including your Medicare account.

If you remember only one thing, remember that no one out there —including Facebook — is protecting you from identity theft. You’re on your own.

To see the latest Facebook scams, go to hoax-slayer.com. And to view what a hacker may see after compromising a Facebook account, check out this simulation: www.protectyourprofile.org. It’s alarming.

A dose of protective medicine can help keep cyber medical ID scammers away:

  • Never give your Medicare account number or password to anyone online requesting it for a health service, medical equipment or otherwise;
  • Adjust your Facebook privacy settings. For help, this security blog has postings here and here;
  • Don’t click on ads, promos or requests that pop up;
  • Don’t open emails seemingly from a federal agency such as Medicare, the FBI and Social Security;
  • Make your Facebook password unique from your other online passwords;
  • Use Mozilla as your Internet browser. It’s more secure than Explorer;
  • Install good antivirus/anti-spyware and update it regularly; and
  • Be a little paranoid while on Facebook. ID thieves succeed most when your guard is down.

If you remember only one thing, remember that no one out there —including Facebook — is protecting you from identity theft. You’re on your own.

About the author: Chris Hawkins has written extensively on senior issues for Seniorliving.org. He’s also business development manager at Sproutcontent.com.

Top fraud fighter may leave post in Florida

CFO Jeff Atwater in line for university presidency

People in public service come and go as a routine, but it was still a surprise to learn that Florida CFO Jeff Atwater may soon be departing to take a job as president of Florida Atlantic University.

As CFO, Jeff is the state’s top fraud fighter. The Florida Department of Insurance Fraud reports to him and he’s been a strong supporter of a wide range of anti-fraud efforts over the years.

As a former legislative leader, he wielded a good deal of influence during legislative battles in 2011 and 2012 to get fraud provisions included in PIP reform bills.

And under his command, the state saw record numbers of insurance fraud arrests and convictions. He’s also fought to give state investigators more tools to combat fraud.

His surprise announcement comes while he was planning his re-election campaign and amid speculation that he likely will be a candidate for governor some day.

It’s not certain whether he’ll get the university job. But whether he stays or goes, we wish him the best. He’s earned it.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

One way ACA may aid p/c insurers

New entity to validate efficacy of medical procedures may reduce costs

Why do property/casualty insurers sometimes pay for questionable medical procedures that Medicare and health plans routinely deny?

In part, auto, workers comp and liability carriers are subject to state laws that require them to reimburse medical providers for sketchy procedures. And in other cases, insurers don’t have enough evidence that such procedures are more for enriching doctors, clinics, hospitals and labs than for the health of the patient.

But thanks to the Affordable Care Act (ACA), insurers may have more evidence to deny costly and unnecessary treatment in the future.

The ACA helps fund an entity called the Patient-Centered Outcomes Research Institute (PCORI), whose mission is to find out what really works and what doesn’t in healthcare. With access to electronic medical records, PCORI will be able to analyze mountains of data and pinpoint ineffective procedures that do not lead to the best health outcomes.

As a Washington Post editorial Sunday asks, “Should you get surgery for your back pain or stick with physical therapy? When is heart surgery preferable to drug treatment? And which drugs should you take?”

Unneeded treatment, tests and drugs cost the healthcare system billions of dollars each year. PCORI has potential to bend the cost curve and reduce medical costs — for government, health plans and, yes, even property/casualty insurers. Carriers should follow PCORI’s work closely and see how it can potentially reduce loss costs, lower fraud and help keep property/casualty insurance affordable.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Will Medical expansion expand acts of fraud?

. . . and will state anti-fraud efforts keep up with growing opportunity to commit fraud?

While the launch of the Affordable Care Act has been rocky, one potential bright spot is the number of people signing up for Medicaid expansion. This is the new program aimed at the working poor — people who make too much money to qualify for existing Medicaid benefits, but too little to afford coverage in the private market. More than 21 million Americans fall into this category.

In Kentucky, for example, eight of 10 healthcare enrollees qualify for this program so far.

It’s anybody’s guess how many people will sign up for expanded Medicaid, but it’s likely to be millions over the next few years. And for crooked Medicaid providers, that’s millions of new opportunities to commit fraud.

Medicaid continues to have significant exposure to fraud in many states. Crooked medical providers reap billions of dollars each year from a variety of scams. The schemer could be a nurse in Georgia billing Medicaid to treat dead people, or a dietician also in Georgia stealing IDs of children or a cardiologist in New Jersey lying to patients that they have serious heart disease. And these are cases just from the last few days.

Medicaid is especially vulnerable to scams. Good laws, adequate resources and the determination to resist fraud are lacking in many states.

Medicaid recipients are especially susceptible. They tend to know less about how insurance works, are less likely to question a doctor’s diagnosis and may be more willing to overlook cheating by Medicaid providers. Crooks take advantage by offering recipients a few dollars to hand over their Medicaid policy numbers. Other medical providers have bribed parents to let them “treat” their kids.

The money the federal government sends to states to expand Medicare provides few new fraud-fighting dollars.

Before their rolls swell, Medicaid programs should gear up for what’s likely to be alarge rise in suspect claims. More enrollees equals more claims — and more opportunities for savvy fraudsters to ply their trade under the radar of fraud fighters.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.