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Insurance companies have identified fraudulent practices and united themselves to develop systems that will detect suspicious billing patterns. The National Health Care Anti-Fraud Association was formed for this purpose. A public advocacy and educational organization – Coalition Against Insurance Fraud - was formed in 1993 to increase public awareness and track these deceptive companies.
The Health Insurance Portability and Accountability Act of 1996 gave the U.S. Inspector General the jurisdiction overall insurance plans. It organized Operation Restor Trust which targeted fraud, waste and abuse in Medicare and Medicard, particularly fraudulent activities in home health agencies, nursing homes and durable medical equipment suppliers.
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The Coalition Against Insurance Fraud provides these warning to help you avoid signing up with illegal, fake insurance companies:
- very cheap premium for a wide variety of benefits
- accepts people with medical conditions that are usually rejected by other plans
- has few or no underwriting guidelines
- insurance agent approaches individuals directly, and not through an employer
- insurance company is not licensed in your state and assures you that it is exempted from securing a license
- the insurance representative uses the term “benefit” rather than “insurance”
- insurance rep does not provide clear, straight forward answers to your questions
- you’ve never heard of the insurance company
(source)
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Other fraudulent procedures include:
- charging for services that were not performed
- unbundling of claims: where a series of procedures that may be covered by a single fee is charged separately for higher fees
- double billing: where a service is charged twice
- upcoding: where a more complex procedure is declared and billed for a simple procedure actually done
- miscoding: where a wrong code is used for a procedure
- kickbacks: where payment is received for making a referral, usually the payment for such referral is sourced from an overcharged procedure, and is “kept hidden” by declaring these as mere rental payments.
(Source)
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Fraud in the health insurance industry is described as an intentional act of deceiving, concealing or misrepresenting information that results in health care benefits paid to an individual or group. (source)
Members and providers may commit fraud. Members may provide false or incomplete information to become eligible, omit pre existing conditions or file excessive claims for simple procedures. Sometimes doctors and patients collude and come up with false claims that maximize the insurance coverage. Providers may submit claims signed by fake physicians, bill for services not rendered and provide services without a license.
The Health Insurance Portability and Accountability Act of 1996 has established that health care fraud is a federal criminal offense with monetary penalties and punishment of up to 10 years in prison.