Top priority: insurance fraud

AlabamaA former insurance industry exec has been appointed insurance commissioner in Alabama. In an interview published today, Jim Ridling said one of his top priorities will be to focus on insurance fraud.

That could be an awkward task in that Alabama (along with Virginia and Oregon) doesn’t have an insurance fraud law. From the interview:

“I’d like to see a fraud bill pass in the state of Alabama,” Ridling says. “The NAIC has a model bill, and it protects both consumers and the industry, but every time we work on a fraud bill here, it seems like a different cast of characters comes out against it.”

How true. The coalition has worked with the insurance department, insurers and others in the state for several years to move a bill. Perhaps Commissioner Ridling can help to shake thing up. We wish him luck.

A judge sends a stern message

Judge MorenoShockwaves likely are still reverberating through South Florida’s medical community after a federal judge sentenced a local physician to 30 years in prison yesterday for fraud.

With this sentence, U.S. District Judge Federico Moreno probably has put more of a chill down the spines of bad docs than anything else possibly could. No arrest, no investigation, no civil penalty will ever have the lasting impact of removing a peer from society for a long, long time.

Dr. Ana Alvarez-Jacinto will be 84 years old before she’s out of prison.

At her Miami clinic, she filed more than $11 million in phony claims for treatment of HIV patients. Hers wasn’t the most severe or egregious insurance crime in recent years. But clearly Judge Moreno was fed up with the rampant levels of fraud in the Miami-Dade area and he meant to send a clear message to other medical professionals that might be so unlucky as to come before his court. He even went beyond the 22-year sentence recommended by the prosecutor.

Alvarez-Jacinto launched a high-profile campaign to beg for leniency. She took out full-page ads in local newspapers and had more than 40 people — mostly others in the medical community — write letters to the court on her behalf. At her sentencing hearing, she even had her ex-husband — also a physician — speak of the good things she had done for her community. To which Moreno reportedly replied:

“I’m not sentencing her for the good things; I’m sentencing her for the bad things. And they’re really, really bad. If a doctor prescribes something that is medically unnecessary, it goes to the heart of healthcare.”

She was hoping to get probation.

Miami-Dade is a mecca for medical fraud. It’s one of the top income-producing industries in the region. A recent series in the Miami Herald, which earned an award last month by the National Health Care Anti-Fraud Association, profiled the almost unbelievable extent of medical fraud in the area and how it has become ingrained in the local culture.

Good fraud laws and high-profile public awareness can have impact. Just ask Dr. Alvarez-Jacinto.

At a time when our nation is about to take on the challenging task of reforming health care, it’s not a bad idea to embrace the idea that if there were more judges like Federico Moreno, that task might be less challenging.

Let’s hope this sentence also sends a message to other judges to take fraud more seriously and create stronger deterrents to help ethically challenged docs remain honest.

Dumping cars for insurance money

Car giveupsCar theft has plateaued or is declining across the country, according to experts speaking at a vehicle theft summit held in Washington, D.C. yesterday. Thanks to insurers, technology and the work of state auto theft prevention authorities, stealing cars is less of a pastime and avocation in the country than it has been in recent years.

It’s still a huge problem, but overall it appears to be not getting any worse.

Except in one area: people who are intentionally dumping their cars for insurance money. There is a growing consensus among auto theft experts that vehicle giveups are rising across the country. One executive was spot on in lamenting that in desperate times, decent people sometimes do desperate things.

Burning a car or dumping it in a lake certainly is a desperate act. And also a dumb one. More people are getting caught. They not only face jail, but they still will be left with a car loan to pay off and now they don’t have a car!

Several state auto theft authorities say they have beefed up training programs to teach local police how to spot phony auto theft reports. And a couple of states are gearing up to create public awareness programs on the issue. That’s a good start. But there’s great concern with the uncertainty of this economy that the problem of auto giveups likely will get a lot worse before it gets better.

A local TV news show did a nice segment on the topic yesterday:

Another anti-fraud hero

Rosin ClinicDuring the coalition’s annual meeting last week, a recent TV news video was shown about the scams of Dr. Michael Rosin, a Sarasota dermatologist who will spend the next 20 years in a federal prison. This is a compelling case about a doctor who fraudulently told patients they had skin cancer so he could perform multiple unneeded surgeries and then collect a bundle from insurers, including Medicare.

What the news program didn’t convey was how Rosin got busted. A longtime worker in Rosin’s clinic caught on to his scheme and blew the whistle. That brave action immediately put office manager Carolyn Ferrara out of a job. Her false-claims lawsuit against Rosin discouraged other clinics from hiring her. She went without a job for months, nearly lost her car and home to foreclosure and sometimes had to rely on the charity of others for food.

This week the federal government announced that Carolyn will be awarded $350,000 for her courage to step forward. It’s not much money considering the egregiousness of Rosin’s crimes. And it pales in comparison with the multi-million-dollar awards given to other whistle-blowers. But it was never about the money, Carolyn told a local newspaper. It was about doing the right thing. It was about not standing by as patients sometimes went through painful surgeries that left life-long scars. She says she plans to donate a portion of her reward to local food banks.

Good for her. Let’s hope the publicity of this case gives other clinic workers the courage to put an end to the medical scams that are plaguing the healthcare system.

The coalition is working on a new section of its website to honor everyday people like Carolyn. We welcome your nominations.

You can read more about Dr. Rosin’s misdeeds in the Insurance Fraud Hall of Shame.

OMG! AARP profits from insurance!

AARP carI’m having a hard time getting worked up about the investigative stories out today that AARP is making money off its members who purchase insurance through the organization. From the Boston Globe:

Arthur Laupus joined AARP because he thought the nonprofit senior citizen advocacy group would make his retirement years easier. He signed up for an auto insurance policy endorsed by AARP, believing the advertising that said he would save money. He didn’t. When Laupus, 71, compared his car insurance rate with a dozen other companies, he found he was paying twice the average. Why? One reason, he learned, was because AARP was taking a cut out of his premium before sending the money to Hartford Financial Services Group, the provider of the coverage.

Now, how is this different from buying a policy from State Farm, Allstate or any independent agent where a sales commission is paid?

Mr. Laupus apparently handed over $1,400 to the AARP insurance program without comparison shopping. A savvy consumer he apparently is not.

Some AARP members likely are getting a good deal with AARP’s insurance. Others are not. It all depends on the rating criteria used in underwriting. That’s just the way auto insurance works.

If AARP is using misleading ads or deception to sell insurance, then the regulators should step in and right those wrongs.

But some of the reporting on this story — especially by Bloomberg — is thin on substance and long on hyperbole.

Allegations that there’s a conspiracy by AARP to steal from senior citizens just seems a bit over the top. AARP is a wonderful advocate for older Americans and sponsors many programs that do save people money.

With all the egregious financial crimes against the elderly today, I would think reporters might do better to focus their energies elsewhere.

Disclosure: Hartford Insurance is a member of the coalition, and I am a member of AARP.

Auto underwriting fraud rising

Auto insurance policyThe latest study by Quality Planning Corporation says premium “leakage” in auto insurance totaled a whopping $16 billion last year. Not all of this is fraud, of course. Mis-rating of policies and missed opportunities to collect the proper premium account for a large part.

Still, the report suggests a slight increase in the incidence of people lying about where their cars are garaged. Plus, up to two percent of all auto policies contained an unrated driver, according to the study. Some people apparently are coping with the economic downturn by failing to include teenage drivers on their policies.

“Some policyholders misrepresent facts, and others don’t report lifestyle changes. Others boldly commit fraud,” the study says.

Underwriting fraud remains the poor cousin to other forms of auto insurance crimes. Some insurers aren’t as aggressive as they should be, and most law enforcement treat premium fraud scams lightly. In a few states (New York comes to mind), legislators won’t even criminalize the practice of lying on policy applications.

So with the bad economy and few consequences to committing this fraud, it should surprise no one that underwriting fraud appears to be on the increase.

Fraud in our future

A new report on ethical standards of high school students was just released and the findings aren’t encouraging. A survey of nearly 30,000 revealed 30 percent admitted they had shoplifted in the past year. A total of 64 percent said they had cheated on a test.

According to the authors of the study at the Josephson Institute:

The results paint a troubling picture of our future politicians and parents, cops and corporate executives, and journalists and generals.

. . . and may I add, insurance consumers.

teens cheatingIn the survey, students were asked if they sometimes lie to save money. Forty-two percent of them said yes. If they carry that ethic into adulthood, the incidence of insurance fraud could mushroom out of control.

So what’s the answer? For starters, how about a national dialogue on “doing the right things for the right reasons” and on living ethical lives. Adults need to set better examples, and that includes parents, teachers, politicians and business executives.

Kids today are exposed to mountains of unethical behavior — thanks to television, movies, video games and the Internet. Programs in schools and communities need to be developed to counter those influences and they need to start at a young age.

Insurers have a lot to lose with falling ethical standards. I encourage executives to get a copy of the report and discuss how they might contribute to programs that will influence the next generation of insurance consumers in a positive way.