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.

Minnesota takes transparent approach to fraud reforms

Panel looks to plug leaks across all lines of insurance

Given the polarized politics in Washington and some statehouses, it’s encouraging to see Minnesota’s legislature take a long, thoughtful and bipartisan look at digging into the state’s varied fraud concerns.

The legislature has created a working group to examine insurance fraud issues in the state and recommend needed reforms to the 2014 legislature. We have heard for some time that the state needs to deal with auto- insurance cons. Organized staged-crash rings, for example, are setting up shop in some urban centers.

Yet the working group’s mandate is larger. It has an ambitious schedule for examining fraud concerns in workers comp, life, health, and property thievery such as contractor scams. The panel has sought insights from the Coalition and other anti-fraud groups.

Among our recommendations:

  • Tighten license review for crooked medical providers, contractors and others who are granted licenses from the state;
  • Increase funding for prosecutors so more fraud cases can be undertaken;
  • Allow the state department of commerce to bring civil actions rather than wait for the often lengthy criminal process;
  • Target drivers who illicitly lower their auto premiums by lying where they garage their vehicles; and
  • Expand information exchange among insurers, law enforcement and NICB.

Civil actions could be especially strong deterrents against drivers who lie about garaging their vehicles, the Coalition also told the working group.

What is most encouraging is the working group’s transparency in announcing its agenda and timetable. Clearly the co-chairs are committed to completing work in time for the 2014 legislature to consider the recommendations.

That the working group is reviewing several lines of insurance also shows it’s taking an expansive and public-spirited approach to cleaning up a broad spectrum of fraud problem areas.

The political deadlocks in Washington may be hard to break open. But so far there appears to be no such thing as a deadlock or sequester where the working group is concerned. The odds appear optimistic that the panel will hand lawmakers in St. Paul a package of useful ideas for anti-fraud reforms. If enacted into law, the measures could benefit Minnesota residents for years to come.

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

Investigators key to enacting strong fraud laws

Letters, credibility can convince lawmakers to vote for fraud bills

I had the pleasure of taking part in one of the dozens of workshops and panels held at last week’s annual meeting of IASIU — the organization of insurance fraud investigators. This was the second year I spoke on legislative issues to these alert investigators.

The main message: Investigators can play a lead role in helping enact strong state fraud laws. Lobbying for fraud laws is both a top-down and a bottom-up project.

National groups such as the Coalition provide top-down value by helping identify fraud trends, drafting bills and providing advice as bills wind through the legislature.

Investigators give lawmakers a vital grassroots “bottom-up” view from their towns and communities in a state. Investigators are credible content experts with a deep understanding of local fraud issues and their impact on consumers. Succinct letters or phone calls by investigators to lawmakers can help make the difference in whether those legislators support a fraud bill (or oppose a bad one).

And to prove my point, one attendee related a conversation with his legislator on an fraud issue. The lawmaker said he voted for a fraud bill because 100% of his constituents supported it. When asked why he thought so, he simply said no one contacted him to opposed the bill.

This fits my Rule of Five. A single constituent letter on an issue doesn’t raise eyebrows in a legislative office. Five letters make a legislator think about the issue, and 25 means there is a groundswell of support. That may be a small sample of a state legislative district, but can convince a legislator to support the issue.

That is the key role investigators can play. They live in the districts and can give legislators grassroots “hometown” views on the issues.

Another aspect of my presentation: Legislative agendas have four goals. 1) Help create an infrastructure for insurers to investigate fraud and report the scams to law enforcement; 2) Give fraud fighters laws and regulations that are pillars for chasing down swindlers; 3) Create defensive tools to oppose ill-considered legislation that would undermine a good anti-fraud agenda; and 4) Educate lawmakers and regulators about the need for strong state fraud laws.

Investigators teaming with allied groups strengthens legislative efforts in a state. Together, we can educate lawmakers, the media and consumers about why strong fraud laws are good public policy — and benefit all insurance consumers throughout a state.

So maybe we now have a fifth goal of legislative advocacy: Empower consumers and insurers to avoid becoming victims of insurance fraud.

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

Fla. no-fault reforms need chance to succeed

New law can keep crooked providers out of system

For years stakeholders in Florida’s auto-insurance system unanimously said the state’s no-fault system needs fixing and the fraud laws need strengthening.

Consumers, providers, insurers, regulators and law enforcement were in the same book, but not necessarily the same page.

A reform package was enacted last year and went live in January. Two key elements included stronger anti-fraud programs, and a shift in how claimants and medical providers are reimbursed.

The Coalition was a key player in crafting the anti-fraud provisions by co-founding the Sunshine Alliance to Erase Fraud. We worked effectively with partners in the state to educate legislators and consumers about the benefits of needed anti-fraud reforms. That effort was part of the larger PIP reform bill. The fraud provisions have great potential to put a dent in rampant scams, especially crooked medical providers.

But the ink was barely dry when legal challenges began. Chiropractors and physical therapists were restricted from doing no-fault business under the new law. They sued to quash the law in state and federal court. The providers argue that the fraud reforms unconstitutionally prevent them from conducting business. The case still is being litigated.

Then State Farm filed a federal suit in July, questioning the state’s entire no-fault system.

State Farm is going after one of the state’s largest legal and physician/chiro referral services. The insurer contends that the well-known “Ask Gary” 800 line refers consumers only to attorneys and medical providers closely aligned with Ask Gary. State Farm alleges that consumers thus are trapped by a closed system designed to maximize Ask Gary’s profits without regard to the important legal and medical needs of injured clients.

During the final debate over no-fault reform in 2012, voices of doubt questioned the reforms were tough enough to keep auto premiums affordable, and whether simply reforming the system can put the brakes on rampant fraud.

Repealing instead of reforming a broken system is the best course of action, these voices contended. The new law took effect January 1, but discussions about repeal already are gaining momentum. The drumbeat continues, while powerful courts also are involved in deciding whether reform will succeed.

But the law isn’t even a year old, and reforms need time to prove whether they’re effective. Legal challenges could weaken the reforms before they have a fighting chance. All the while, courts might reopen loopholes that permit illicit and rampant patient referrals that were large sources of fraud losses until reforms plugged them.

It seems clear that Florida drivers will face rough waters as they navigate the state’s revised no-fault system. The law was intended to help consumers avoid being victimized by crooks who earn their living by deviously exploiting drivers, insurers and the system itself.

The 2014 legislative session is fast approaching. The repeal drumbeat likely will grow louder next year. One of the major reasons for no-fault — that many low-income people lack health insurance to pay when they get hurt — will largely disappear when Obamacare goes into effect in January 2014.

But starting over with an entirely new auto-insurance system is easier said than done.

We have heard a call for a major study of state auto systems. The study would see what systems work best and why. The results could have a big impact on Florida’s debates over reform versus repeal. The study would provide an objective, academically credible basis for directing the debates.

But whether or not the study happens, the current anti-fraud effort and reforms must be preserved. Whatever the larger repeal-reform debates, the anti-fraud reforms are necessary, needed and effective if given a chance to succeed.

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

New Maryland law creates useful anti-fraud weapon

Civil fining authority used for the first time

Maryland map

One of the key missions to which the Coalition committed 20 years ago when it was launched was to create effective new tools for fraud fighters — whether insurers, consumers, law enforcement or state fraud bureaus. Since then, we helped enact 100 or so laws and regulations.

The latest new tool is a law in Maryland creating a civil penalty for insurance fraud and giving the fraud bureau the authority to fine perpetrators. The idea came from a member of the Coalition’s government affairs committee.

Committee members saw that the fraud bureau had difficulty getting prosecutors to take insurance fraud cases, so they supported the idea of creating civil penalties. While civil penalties shouldn’t replace criminal enforcement, they can supplement criminal action and have worked well in several states.

A bill was drafted, a legislative sponsor was found, and then the Coalition and its members went to work building support. Nationwide’s chief lobbyist in Annapolis was instrumental in shepherding the bill through the legislative process, while the Coalition provided important testimony in a legislative hearing. The Coalition’s Howard Goldblatt was on hand when the governor signed the bill into law.

This week saw the first results. The Maryland Insurance Administration earned a victory in its first civil action. The agency went after  two residents. One perpetrator filed an auto claim for false wage loss and another faked a disability claim. Both were ordered to pay insurers restitution, plus pay a $2,000 fine.

The restitution was relatively small, but the message was large: Fraud is a dead-end street in Maryland.

Congratulations to the Maryland fraud bureau for recognizing the value of this new tool and running with it. More states should consider civil fining authority for their fraud bureaus.

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

Best practices aim to best drug diversion

Lawmakers gaining tool to review state efforts

State legislators now have a useful best-practices blueprint to help close gaps in dealing with the scourge of prescription abuse. This national epidemic wrecks lives and costs insurers billions of dollars annually.

The National Conference of Insurance Legislators released a report on best practices  at its summer meeting this month in Philadelphia. The valuable document will reinforce how states deal with this national epidemic.

Legislators can compare their state’s actions to the Best Practices report to see where new laws might fill gaps in the state’s enforcement efforts. This also might uncover best practices to add to the NCOIL document. This was the Coalition’s message to the assembled legislators in working with legislators on a report that will be out in the fall.

Among the Coalition’s recommendations that NCOIL adopted:

  • Enhanced interstate data-sharing among state prescription drug monitoring programs (PDMP):
  • Greater access to authorized users of the PDMPs;
  • Mandated use of PDMPs by medical providers and pharmacies;
  • Real-time reporting of prescriptions;
  • Regulation of pill mills; and
  • Proper funding of state PDMPs.

Auto, workers compensation and health insurers are defrauded by illicit prescriptions for painkillers, muscle relaxers and other narcotic prescription meds. Drug diversion steals tens of billions of dollars a year through insurance scams. Insurance fraud thus is a major financier of this crime.

Addicted doctor shoppers ply pharmacies with false prescriptions. Shady pain clinics dole out thousands of pills to addicts, and pharmacies often are complicit in a thriving black market for the insurer-paid drugs.

Several insurers — including auto and workers comp carriers — also gave presentations about the need to combat drug diversion, and applauded NCOIL’s efforts.

The report clearly had the attention of one state legislator. The best practices create a prime opening to instruct states looking for thoughtful solutions to this complex and costly problem. The report is unique in its comprehensive approach. This was the message of Vermont state Rep. Bill Botzow during the workers compensation committee discussions at the meeting.

A prosecutor also also sees the report’s value. Prescription abuse is a critical issue in his suburban Philadelphia county, he said.

We’ve seen efforts to strengthen state laws and regulations targeting diversion of addictive prescription narcotics. But, this is the first time that legislators can weigh in with a sweeping review of their own state’s efforts. This new legislative weapon comes none too soon.

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

“Obamacare” scams: Who’s alerting consumers?

Exchanges can be focal points for informing public

Whether you call it the Affordable Care Act or Obamacare, healthcare reform is fast approaching. Open enrollment for the exchanges starts just a mere four months away in October, and coverage takes effect in January 2014.

These exchanges will bear the brunt of insuring many small businesses, families and individuals — some of whom aren’t now insured. States are creating their own exchanges, but the feds will create and run some exchanges if the host state begs off. We can also expect state-federal partnership exchanges, and regional ones.

The Coalition has noted several developments that raise concerns for anti-fraud efforts with the exchanges. Our main concern: How will anti-fraud efforts be managed amid this mishmash of diverse exchanges?

In discussions with state insurance regulators and health insurers, we expect that health insurers now supplying coverage in states also will be included in the exchanges. Yet it’s unclear if their anti-fraud efforts will remain the same once inside an exchange. We also need to determine what anti-fraud plans and other requirements exchanges will expect from insurers.

But more than anything, the Coalition will closely monitor how the states and exchanges protect consumers and small businesses from being solicited by shady operators who mask their scams under the aegis of a health exchange.

One possible scheme: Fake exchange recruiters with forged credentials go door to door, trying to steal consumers’ sensitive financial data under the guise of signing them up for an exchange.

Concern about schemes is widespread enough that they’ve caught the attention of key federal watchdog agencies.

CMS, the Senate Aging Committee and Federal Trade Commission already have sought the Coalition’s expertise. The Coalition has met with these agencies to share field intelligence and strategic insights about current and potential “Obamacare” schemes.

Suspicious websites lying that they’re exchanges already have sprung up. How many others are waiting to lure consumers and small businesses into thinking they’re buying real insurance from a legitimate exchange?

Exchanges can be focal points for educating consumers and small businesses about scams that may strike in the coming months. Public-interest groups such as the Coalition are interviewing reporters and sending consumer alerts around the U.S.

Equally important, Washington and state capitals should use their outreach resources and influence to help develop an alert consumer population that will simply close the door or hang up the phone when shysters come calling.

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