Do Health Insurance Companies Care About Fraud?

We Asked Prosecutors if Health Insurance Companies Care About Fraud. They Laughed at Us.

To protect their networks and bottom lines, health insurers don’t aggressively pursue widespread fraud, making it easy for scammers. Then they pass the costs off to you.

Like most of us, William Murphy dreads calling health insurance companies. They route him onto a rollercoaster of irrelevant voice menus, and when he finally reaches a human, it’s a customer service rep who has no idea what he’s talking about. Then it can take days to hear back, if anyone responds at all.

The thing is, Murphy isn’t a disgruntled patient. He prosecutes medical fraud cases for the Alameda County District Attorney’s Office in Oakland, California. And when he calls insurers, he’s in pursuit of criminals stealing from them and their clients. But, he said, they typically respond with something akin to a shrug. “There’s no sense of urgency, even though this is their company that’s getting ripped off.”

It’s not just Murphy. I called health care fraud prosecutors across California to ask what insurers were doing to help bring cases against those plundering health care dollars. More than one simply burst out laughing. “Not much,” one prosecutor said.

It seems counterintuitive. Escalating health care costs are one of the greatest financial concerns in the United States. And an estimated 10% of those costs are likely eaten up by fraud, experts say. Yet private health insurers, who preside over some $1.2 trillion in spending each year, exhibit a puzzling lack of ambition when it comes to bringing fraudsters to justice.

Like much of what happens behind the scenes in the health insurance industry, the insurers’ tepid response to fraud typically goes unexamined. But this year, I dove into the crazy tale of a Texas personal trainer who didn’t have a medical license but was easily able to claim he was a doctor and bill some of the nation’s most prominent health insurers for four years — walking away with $4 million. David Williams, who was also a convicted felon, discovered stunning weaknesses in the system: that when he applied for a National Provider Identifier, the number required to bill health insurance plans, no one would verify whether he was a doctor; and that when he billed insurers as an out-of-network “doctor,” they wouldn’t check either and would keep paying him even long after they learned of his fraud. He was later convicted of health care fraud and is now in federal prison.

Williams’ scam raised the eyebrows of even my most jaded health care sources. It prompted a half-dozen Democratic senators to write to the federal agency that administers the NPIs and ask what it was doing to plug the “loopholes.”

But it also got me thinking: As journalists, we are peppered with press releases touting the fraud enforcement successes in Medicare and Medicaid, the government health plans. The federal Department of Justice and state Medicaid Fraud Control Units file thousands of criminal and civil cases a year (and still are accused of not being as aggressive as they could be). Clearly, their goal is to let folks know they will be prosecuted.

But we rarely hear about the fraud enforcement efforts of private health insurers. These companies manage the plans of about 150 million Americans who get their health benefits through their employers. They’re sitting on a massive trove of claims data that can help identify scammers, and problems are routinely flagged by their members. And experts, including investigators who once worked for the insurers, tell me there’s rampant fraud against the private plans.

The bottom line is significant: If a con artist, or a corrupt medical professional, makes off with health care dollars, those losses are not necessarily the insurers’. They will be passed on to people covered by the plans in the form of higher monthly premiums and out-of-pocket costs as well as reduced benefits.

So, what’s up?

I wasn’t going to find out from the insurers. Aetna, Cigna, UnitedHealthcare and others ignored or refused my many requests to interview their fraud investigators or responded with assurances about their fraud-fighting efforts, with few specifics.

A United spokesperson said I couldn’t speak to a fraud investigator because “we do not want to make information public that would make it easier for those intent on engaging in fraud to commit these crimes.” She said the insurer uses analytics to flag potentially fraudulent billing and, in some cases, physically verifies that medical offices exist.

With that scant response, I plunged into the daunting thicket of agencies that are supposed to oversee the fight against health care fraud, each divided by region and responsibility. I contacted insurance regulators in every state and interviewed more than 50 other experts, including prosecutors, claims analysts and a dozen former investigators for the internal fraud units of private insurers.

What I found has troubling implications, especially for employers and workers who get their health plans through the big insurers. Far from being fierce guardians of your health care dollars, experts told me, the big-name insurers — who sell their own plans or are paid to manage employers’ — pick and choose their battles. And, for a variety of reasons, fraud is not a top priority.


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