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Health Care Insurance Fraud & Abuse

As defined by the Iowa Insurance Division, health insurance fraud is when a party knowingly submits false information to a health insurance company, such as a fictitious claim, so as to receive a payout that is undeserved. People who engage in health insurance fraud generally do so for financial gain, costing insurance companies billions of dollars each year.

  1. Types

    • There are a number of different types of fraudulent health insurance schemes. These include billing for services or supplies that weren't provided; billing too much for procedures; and ordering unnecessary procedures. Common forms of this abuse include having a patient undergo unnecessary tests to make a diagnosis, charging an insurance company multiple times for a single procedure, and "miscoding"--misrepresenting the nature of a procedure to an insurance company to receive more compensation.

    Size

    • According to statistics issued in 2008 by the National Health Care Anti-Fraud Association, at least three percent of all U.S. health care spending, equivalent to approximately $68 billion, goes to health care fraud. Financial reporting company Thomson Reuters places this number even higher, saying that between $125 billion and $175 billion are wasted on fraud annually in the U.S. health care system.

    Fake Health Insurance

    • A wider definition of health insurance fraud would also include the sale of fake health insurance policies. When patients who purchase these policies submit claims to the insurance companies, the companies do not respond or refuse to cover them. The U.S. General Accounting Office reports that, between 2000 and 2002, 144 companies not authorized to provide insurance enrolled more than 200,000 policyholders, forcing the so-called policyholders to cover over $200 million in unpaid medical claims.

    Effects

    • Health insurance fraud cost insurance companies, including government-run programs such as Medicaid and Medicare, billions of dollars per year in additional costs. According to the U.S. General Accounting Office, more than 10 percent of the annual expenditure on health care is eaten up by fraud. To compensate, health insurance companies raise premiums on other patients. The Iowa Insurance Division states that, for every one percent rise in the cost of insurance premiums, approximately 400,000 fewer U.S. residents are able to afford health care.

    Solution

    • Health insurance fraud is combated by both private insurers and the U.S. government. In the 2009 fiscal year, according to USA Today, the federal government charged 803 people with health-insurance-related fraud. In addition, as reported by the National Health Care Anti-Fraud Association, the average health insurance company has an anti-fraud unit with annual funding of almost $2 million and 19 employees.

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