Give health insurers a break from loss ratios

Move will help fight healthcare fraud — and help put downward pressure on premiums

A columnist for the Los Angeles Times recently skewered UnitedHealth for what he says was aiding and abetting a $43-million medical scam involving bogus weight-loss surgeries.

The health plan failed to scrutinize bad claims, the columnist says, until long after money was out the door.

Whether or not the harsh criticism is justified, we’ll leave to others to debate. But if UnitedHealth and others are not investing in expanded anti-fraud efforts, there’s likely a good reason:

Federal law discourages it.

One of the least publicized provisions of the Affordable Care Act is intended to make health insurance more affordable. Health reform governs the percentage of premiums health plans can dedicate to non-claims business expenses, such as marketing, salaries, administration, profit and yes — anti-fraud activities.

The so-called Medical Loss Ratio requires health plans to spend 80 to 85 percent of premiums they collect on claims.

In essence, anti-fraud expenses must be paid out of profit. That’s enough to discourage most health-insurance companies from growing their anti-fraud programs.

In some instances where insurer expenses are out of balance, paying suspect claims could boost profits — or at least not affect them. Now most health insurers wouldn’t intentionally pay suspect claims, but bad claims can be harder to detect when the anti-fraud efforts haven’t grown commensurate with the growth in policies and claims.

And thanks to Obamacare, policies and claims are growing. But anti-fraud efforts are not.

The Medical Loss Ratio is a good idea in theory. It prevents insurers from spending all the new-found premium money on frivolous expenses, such as corporate bonuses.

But good legislation also has unintended consequences — such as discouraging investment in fraud.

If fraud is allowed to increase — such as the $43 million that reportedly was spent on unnecessary and phantom stomach lap-band surgery — then upward pressure will continue on premiums, and everyone loses — except the fraudsters.

The time has come to rethink how the MLR is calculated.

Medical marijuana as a strategy to reduce prescription drug deaths

New study contains strong evidence that painkiller alternatives can save lives and insurers money

After visiting a medical marijuana outlet in Colorado in May, I wrote about the possibility of medical marijuana replacing addictive opoids to help chronic pain sufferers.

A new study says that states that allow medical marijuana consistently had fewer overdoses than other states.

Medical marijuana states reported an overdose death rate of nearly 25 percent less than states without the laws, according to an analysis of data from the John Hopkins Bloomberg School and the Philadelphia Veterans Affairs Medical Center. The correlation between death rates and the availability of marijuana for medical purposes seems very strong.

Hopefully, this new evidence will spur Congress to allow researchers to test of efficacy of marijuana as pain medication. Good studies are lacking because of current law outlawing the possession of pot makes it nearly impossible for researchers to conducted this needed study.

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

Ridesharing: Old laws, regs collide with new technology

Explosive industry raises concerns about fraud, and who’s covered when

The issue of ridesharing has exploded in recent months. Concerns about whether the drivers have proper insurance are just one of the questions raised by regulators, insurers and consumer groups. Insurance fraud is a side concern for now, but is growing with the rideshare industry.

News coverage has mostly focused on state and local oversight of ridesharing, and complaints by local taxi drivers and companies about their new competitors. In the past several weeks taxi drivers here in Washington D.C. demonstrated against the ridesharing firm Uber’s growing presence in the nation’s capital.

Cabbies are worried that the largely unregulated rideshares will cripple the mainstream taxi industry. Ridesharing firms should meet the same regulatory standards as taxis and other for-hire vehicles, the cabbies argue.

State insurance regulators, state attorneys general, consumer groups and local taxi commissions increasingly are vocal about insurance and oversight issues. The California insurance commissioner has actively voiced insurance concerns. A big question is for rideshare drivers to manage auto coverage so a private vehicle is covered when it’s operating both privately and as a commercial rideshare.

I have a friend who owns a livery service. He’s affiliated with Uber. He has an app on his smartphone that when turned on tells Uber he’s available to pick up passengers.

We talked while he drove me to the airport recently. He has a proper state license and insurance for livery use of his vehicle. Still, he’s unsure when Uber’s auto policy protects him when driving an Uber passenger, and whether Uber’s insurance covers him while driving to or from picking up a passenger.

This raises questions about insurance fraud. At least one insurer has been reported to denying several damage claims by San Francisco rideshare vehicles the insurer says were personal vehicles used commercially. Several fraud-related issues thus arise from this new industry:

  • Do ridesharing drivers and cars have adequate insurance to act as a commercial driver and vehicle?
  • Does a rideshare driver’s personal-auto insurer know that the vehicle also is being used commercially?
  • Is the driver lying to his or her personal auto insurer that the vehicle is used commercially for part of the time?
  • Is the driver filing a fraudulent personal auto claim for a loss that occurs when driving commercially?
  • What protections do injured passengers have if the personal auto insurer denies claims because the vehicle was used as a rideshare outside the scope of the policy?

Ridesharing reveals how 21st technology is outstripping laws and regulations that have been mainstays for at least a century. Consumers can use a smartphone to arrange a ride without hailing a taxi from a street corner.

Clearly we are heading into a new era. Taxis are heavily regulated. Laws and regulations must be updated and adapted to ridesharing — it is here to stay. Fraud fighters must ensure that ridesharing companies do an honest business with their insurers — and the consumers entrusted to their care.

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

Statehouses already shuttering for 2014

Summer slowdown buys time to pivot to 2015

June 1 is the start of meteorological summer and hurricane season. It’s also when government affairs folks start pivoting from the current legislative sessions to planning for 2015.

Most state legislatures open only briefly, and that’s during the first half of the year. We’re still nearing the 2014 midpoint yet few legislatures remain in session. Nearly all will be shuttered for the year by the end of June.

Let’s step back and review this year’s legislative results to date, then talk about pivoting in more detail.

We predicted a robust year for anti-fraud bills and laws in 2014. The stronger economy freed up more time for legislators to deal with issues like fraud, instead of single-mindedly balancing cash-strapped state budgets. To a large degree, we were right. Dozens of bills were introduced, and many became law.

In a large respect, the year has been a healthy success. Our bill tally is down from last year’s record totals. The downtick points to a phenomenon that affects statehouses every state election cycle …

This is an election year. Many states will elect governors and state legislators this fall. The rule of thumb is “Do no harm.” Make as few ripples or controversy with voters as possible — quietly slide through and get reelected. Many politicians in both parties thus backed away from serious lawmaking this year.

Still, the year has produced numerous useful fraud laws. Among them: Three states enacted counterfeit airbag laws, and seven states considered stronger contractor laws.

Colorado enacted a felony insurance-fraud law. Maryland booked a venue law helping define where to best try fraud prosecutions. Louisiana expanded its insurance-fraud law: Impersonating an insurer to steer crash victims to crooked medical providers or repair shops became a crime of insurance fraud. Minnesota enacted a wider immunity law allowing more exchange of valuable case leads and other information.

With a healthy year on record, the 2015 pivot already is underway. The Coalition’s government affairs committee soon will look at at potential target states for much of the summer. Then we’ll create a roadmap of fraud bills to pursue in key states next year.

We encourage your insights. You may have grassroots knowledge of fraud issues in certain states. Send us your ideas for issues and states the Coalition might target for 2015. Contact me at

You know the Coalition’s lengthy background, and you know the Coalition can help move and anti-fraud initiative in your state. So don’t hesitate to reach out.

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

Enforcement can have unintended consequences

Do better fraud-busting reveal uncontrolled crime or solid enforcement?

Social scientists call it the “Law of Unintended Consequences.” That’s when an action creates results that aren’t expected when the action was contemplated.

Strengthening insurance fraud laws or increasing enforcement of existing laws can have its own unintended consequence: Fraud might appear to be spiking. Yet that could be an illusion. Better enforcement may simply be uncovering crime that already exists.

The Coalition worked with legislators and the insurance department to enact a strong anti-fraud law in a Great Plains state several years ago. A year or so later, I ran into one of the legislators we worked on the bill and asked him how it was going. “We didn’t have any fraud until you guys showed up,” he kidded me.

Fraud wasn’t being investigated or reported to law enforcement before the law took effect. Insurers began investigating and reporting the crime to law enforcement after the measure took effect.

Fraud seemed to be spiking. But maybe the opposite was taking place: Stepped-up enforcement could’ve started diminishing this crime.

Oregon is the only state without a specific insurance-fraud law or fraud bureau. That means few investigations or prosecutions happen. It creates a false sense of security, that insurance fraud barely exists in the state. Yet, we in the anti-fraud community know otherwise.

If Oregon enacts a needed fraud law, the welcome boost in enforcement could suggest a seeming crime spike. The populace would need to be carefully educated that fraud isn’t necessarily running out of control. Instead, fraud fighters may be just doing a really good job.

Incidence of suspected fraud spike and fade for all kinds of reasons. A state may start to enforce its mandatory fraud reporting requirement and all of a sudden, the number of cases skyrocket. Or as we’ve seen during the 2009/10 recession, fraud bureau budgets can cut, and the number of cases dwindle.

I was reminded of unintended consequences last week when the Social Security Administration released a video last week that noted “Social Security’s zero-tolerance approach has resulted in a fraud incidence rate that is a fraction of one percent.”

Just goes to show that you don’t really have a fraud problem if you don’t bother looking for it.

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

Creating venues for venue laws

Mobile devices muddy where scam legally committed

Few states clearly define the venues where prosecutors can try insurance-fraud cases, according to Coalition research. Maryland is only the 4th state to do so.

That law takes effect later this year. The need and specific wording are strikingly similar to a 2013 New Hampshire law.

Both states needed to clarify cross-border issues with insurance cases. Mobile devices such as cellphones, iPads and laptops make it hard to prove in which state a suspicious claim was filed. This is equally true for proving in which county a suspect filed the claim.

A separate legal question: Was the crime committed where the claim document was mail or where the insurer received it?

A venue law could help clarify all.

The solution was fairly clearcut: Define all variables that make the suspected crime fall under the state’s jurisdiction. Maryland and New Hampshire now give prosecutors venue for fraud cases if the:

  • insurance loss occurred;
  • insurance policy provides coverage;
  • insurer or its agent received the false statement;
  • defendant lives in the state; or
  • stolen insurance money was received.

I testified in Annapolis when the bill’s outcome was still up in the air. The Coalition joined the Maryland Insurance Administration in arguing that cross-border issues confuse where the suspected fraud happens, leaving the possibility that a fraudster could get off on a technicality. Prosecutors also are less likely to take such cases if they don’t know for sure that they have jurisdiction to prosecute.

A specific venue law solve those problems.

Fraud prosecutors would have one less headache in dealing with a potentially messy procedural issue that detracts from the heart of the matter — proving if the suspect is guilty or innocent.

Virginia enacted a similar venue law several years ago, mainly to help local prosecutors determine if their jurisdiction is the right venue for a given fraud case.

Whether a state needs a fraud-specific venue law is an individual decision. But with mobile devices increasingly muddying the waters, the anti-fraud community may be wise to push for fraud-centric venue laws. The Maryland and New Hampshire laws are well-suited models.

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

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.

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.

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.

It’s already time to work on 2014 legislation

Fraud fighters have chance to get an inside track on new bills

Thanksgiving is just a couple of weeks away and bright Christmas trinkets already are flooding store shelves. The year 2013 still has several weeks left before the 2014 state legislative sessions start opening up.

But despite the oncoming holiday season, legislative committees already are preparing priority bills for 2014. Initial horse trading and bargaining on provisions … committee agenda-building … hearings … and other elements already are shaping what 2014 will look like.

Fraud fighters should be part the action.

Watching how laws are made is often compared to making sausage. We may like the outcome, but the complex insider ball that creates bills can be less than appetizing. We are now making legislative sausage for anti-fraud bills in several states.

The Florida legislature is scheduled to open its 2014 session next March. Yet influential committees already are meeting to fashion their agendas. There’s a growing hue and cry, for instance, about replacing Florida’s troubled no-fault system. The Senate Banking and Insurance Committee last week held a panel session on the topic. Experts reviewed a discussion draft of a bill replacing no-fault with a fault-based system requiring bodily-injury coverage.

The meeting was intended to start a dialogue over keeping or yanking no-fault, a key committee staffer told me. The discussion proposal was simply an informal tool get the discussions going. It isn’t necessarily the outline of a bill that will be pushed next year.

The anti-fraud provisions of Florida’s no-fault system would remain intact even if no-fault is repealed, the staff member added. Stronger anti-fraud provisions, however, may be needed if no-fault is repealed. A fault-based system might generate new scams that require tougher anti-fraud laws.

Minnesota, as I earlier wrote, has a legislative working group looking at the state’s insurance-fraud laws. The goal is to offer legislation toughening up the current laws in 2014. The working group plans to have bills ready for the February opening of the 2014 session.

Airbags could loom large next year as well. The Coalition has long studied the issue. The most recent boost came when a Chinese national was handed 37 months in federal prison for trying to flood the U.S. market with cheap knockoff bags cleverly counterfeiting models by major U.S. carmakers.

Connecticut and New York already have criminalized the manufacturing and knowing installation of phony airbags. The Ohio legislature is verging on passing a similar measure in the waning weeks of this session.

A Maryland legislative committee also held a hearing this week on counterfeit airbags. The committee is considering pushing a bill next year that ran out of steam in the 2013 session.

The lesson: Use the months before your statehouse opens to find allies in the legislature, work with them to identify needed anti-fraud fixes, and have fraud bills ready when the gong chimes in early 2014.

Committees are crafting their 2014 agendas. They’re looking for workable ideas such as anti-fraud bills that protect consumers. Combating this crime should be a sought-after part of committee agendas. Meet and educate committees about the needed laws. Recruit a lawmaker ally who’ll help you steer the bill through the statehouse maze.

The Coalition is ready for 2014. Will fraud fighters be ready in their states? The Coalition stands ready to assist your jumpstart.

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