Which Strategies Should the Health and Travel Insurance Market Employ to Effectively Prevent Fraud, Waste, and Abuse?

In this iPMI Global in Focus article we dive deep into how the health and travel insurance market can work together to avoid fraud, waste and abuse. Whilst Intelligence sharing among insurers and partners is critical, there is still a lot of work to be done. According to an iPMI Global round table discussion, scandals resulting from FWA can severely tarnish an organisation’s reputation. The importance of having a Fraud, Waste, and Abuse (FWA) Prevention Plan is highlighted as a way to maintain public trust and demonstrate a commitment to ethical business practices. This suggests that reputation damage is a potential consequence that organizations actively seek to avoid through preventative measures.

Q1. How significant is the problem of fraud and abuse in the global healthcare and travel insurance industries? Fraud, waste, and abuse (FWA) represent a substantial challenge in the global healthcare and travel insurance sectors, resulting in tens of billions of dollars in losses annually. This issue affects individuals through potentially higher insurance premiums and increased taxes and can expose patients to unnecessary medical procedures. While the pervasiveness might vary across different market sectors and geographical locations, it is a serious concern requiring proactive and continuous attention from insurers and their partners. The economic climate can also heighten awareness of fraud, making robust prevention and detection strategies essential.

Q2. What are the different categories of fraud and abuse that occur in this industry? The issue encompasses several categories, including insurance claims fraud (where insured individuals or service providers collude to submit false or exaggerated claims), provider fraud (such as medical facilities creating fictitious claims or overcharging insurers), and premium diversion. Beyond these, the broader term FWA includes:

• Fraud: Intentional deception or misrepresentation for financial gain, such as billing for services not provided, using another person's insurance, falsifying records, or misrepresenting services to receive higher payments.
• Waste: Overutilization of services or inefficiencies leading to unnecessary costs, like ordering excessive tests, redundant procedures, using brand-name drugs when generics are suitable, and administrative inefficiencies.
• Abuse: Practices inconsistent with sound fiscal, business, or medical practices that result in unnecessary costs or reimbursement for services not medically necessary or meeting professional standards, potentially without criminal intent. Examples include billing for unnecessary services, overcharging, and misusing billing codes.

Q3. Beyond claims and provider fraud, what other forms of fraudulent and abusive activities are seen in the market? Numerous other types of FWA can occur, involving various stakeholders. These include:

• Identity theft and phantom policies.
• Organized insurance fraud rings.
• Medical billing fraud, including misrepresenting service settings or dates, falsifying records, forging prescriptions, and billing by fictitious providers.
• Payer fraud, where insurers may fail to honour letters of guarantee without transparent reasons, harming providers and potentially leading to protective billing practices.
• Fraudulent activities involving employees, insurers/health plans, medical device manufacturers, pharmacies, and Pharmacy Benefit Managers (PBMs).
• Inappropriate prescribing of drugs (pill mills).

Q4. What strategies should the market employ to effectively prevent fraud, waste, and abuse? A multi-faceted approach is crucial for FWA prevention, including:

• AI-driven claims screening to identify standard fraud patterns and anomalies, complemented by manual scrutiny for unique cases.
• Intelligence sharing among insurers and partners.
• Constantly updating fraud risk indicators and fraud controls.
• Training front-line claims staff to recognize fraud.
• Celebrating fraud successes and publicizing trends.
• Robust underwriting and pre-risk assessments.
• Suspicious claims investigations and utilizing key information indicators (KIIs).
• Anti-fraud technology and collaboration between insurance companies, regulatory bodies, and law enforcement.
• Robust customer verification processes.
• Collaboration with certification bodies and law enforcement to stay informed about fraudulent providers.
• Educating policyholders and providers about the consequences of fraud.
• Implementing robust internal controls and stringent audits.
• Utilizing technological tools to detect unusual claim patterns.
• Employing advanced tools like InterQual and Milliman, enhanced by AI, to establish criteria for identifying issues like over-utilization and coding errors.
• Careful design and structure of insurance policies and contracts.
• Effective administrative management and careful selection of dedicated human resources.

Q5. How is technology, particularly AI, being utilized in the prevention of fraud, waste, and abuse? Technology plays a vital role in bolstering FWA prevention efforts.

• AI is indispensable for efficiently processing large volumes of claims and identifying standard fraud patterns and anomalies.
• Machine learning algorithms can analyse vast amounts of data to detect subtle patterns indicative of fraud and adapt over time to new fraud schemes.
• Automated fraud detection software and trend reporting are integral.
• Tools like Bill Editing Platforms identify coding errors, while platforms using various factors assign a risk score to each bill.
• AI-based tools can work at a detailed level to identify potential fraud or abuse.
• Digital investigation tools can efficiently search open source and social media for intelligence related to claims.
• Other technologies like biometrics for identity verification, geospatial analysis, and potentially blockchain for secure transactions are also being explored.
• However, it's important to note that AI and ML often function best as support tools for human judgment, handling volume and analysing details, while human experts address more complex and nuanced cases.

Q6. Could you provide some recent examples of cases that involved insurance fraud and abuse? Recent cases highlight the diverse nature of FWA:

• An insured member submitting claims for treatment at a clinic that had been closed for two years.
• A doctor abroad stealing patient details to create and claim on false insurance policies.
• Sophisticated travel cancellation scams using false names and documents.
• A medical billing fraud scheme involving a hospital in the Dominican Republic and US residents submitting fraudulent treatment claims.
• A hospital billing excessively for unnecessary medical devices and procedures for a patient in Washington State.
• A "house call doctor" in a tourist destination overcharging a patient and essentially holding them until payment was made.
• An orthopaedic surgeon attempting to bill excessively for a follow-up surgery framed as a common complication.

Q7. What role does Human Resources (HR) play in fraud prevention, and how does technology complement their efforts? HR plays a crucial role in fostering an ethical environment and preventing fraud through:

• Rigorous hiring and screening processes, including background checks.
• Developing and implementing ethics and compliance training programs.
• Establishing whistleblower programs for confidential reporting.
• Promoting a culture of transparency, accountability, and ethics.
• Gathering feedback through exit interviews to identify potential issues.
• Ensuring employees are educated about fraud prevention and company policies.

Technology complements these human efforts by:

• Automating routine tasks and analysing big data, freeing HR to focus on judgment, empathy, and decision-making.
• Providing tools for background checks and skill assessments.
• Facilitating the delivery and tracking of online training modules.

The combination of human insight and technological capabilities creates a more robust and effective fraud prevention framework.

Q8. How did the COVID-19 pandemic impact the landscape of fraud and abuse in the insurance industry?

COVID-19 had a significant impact on the FWA landscape:

• While overall claim volumes decreased due to travel restrictions, the proportion of fraud cases remained consistent.
• There was a surge in travel cancellation claims, some of which were fraudulent.
• The pandemic created challenges for international fraud investigations due to lockdowns and changing regulations.
• Difficulties arose in differentiating between supplier-inflated and fraudulent costs for extended accommodations.
• Economic uncertainty increased individuals' and businesses' susceptibility to fraudulent schemes and scams.
• Phishing attacks and cybercrime related to COVID-19 surged.
• There was an increase in healthcare fraud, including fake testing sites and fraudulent treatments.
• Unemployment fraud saw a rise due to false claims.
• Charity scams exploiting pandemic relief efforts emerged.
• Supply chain and procurement fraud increased due to disruptions.
• Instances of insurance fraud related to COVID-19, such as false disability and business interruption claims, occurred.
• The shift to remote work increased vulnerabilities to fraud.
• The increased use of telemedicine opened new avenues for fraud.
• Scams related to COVID-19 vaccines also emerged.
• Some regulatory authorities engaged in less scrutiny of healthcare program enrolment, potentially creating opportunities for fraud.

Related Reading: Insurance Fraud, Waste and Abuse Strategies Round Table