How To Fight Insurance Fraud In Minnesota

Transcription

1 Minnesota Insurance Fraud Summit Executive Summary October 16, 2012 Bloomington, Minnesota The National Insurance Crime Bureau (NICB) and the Insurance Federation of Minnesota (IFM) co-sponsored an Insurance Fraud Summit on October 16, 2012 at the Minneapolis Airport Marriott in Bloomington, Minnesota. The purpose of the Summit is to identify the scope of the fraud problems in Minnesota and its impact on consumers, as well as review potential solutions to these crimes. 200 people attended the summit representing the insurance industry, regulators, legislators and law enforcement. Minnesota has recently hit the reset button on tackling insurance scams, particularly medical fraud. New laws on the books that combat medical clinic runners and address contractor scams, a fresh coordinated approach from key agencies combined with renewed prosecutorial vigor provided a solid foundation for the summit to be the beginning of turning the Land of 10,000 Lakes into a harsh and dry environment for fraudsters. Members of the insurance industry, law enforcement and other fraud experts discussed the primary issues impacting the state and recommended measures to strengthen fraud control. Topics addressed included medical fraud schemes, bodily injury abuses, property issues, contractor fraud and concluded with insight from prosecutorial agencies. Minnesota Department of Commerce Commissioner Michael Rothman and Ramsey County (Minneapolis) Attorney John Choi spoke to the attendees about the role their offices play, in addition to highlighting successes and current challenges in fighting fraud. This report discusses the various recommendations outlined at the summit. It will be used to support legislative/regulatory issues as well as to raise public awareness of the insurance fraud problem. The National Insurance Crime Bureau (NICB) is a national, not-for-profit organization supported by 1,000 property/casualty insurance companies. The NICB partners with insurers and law enforcement agencies to facilitate the identification, detection and prosecution of insurance criminals. The Insurance Federation of Minnesota (IFM) is a not-for-profit state insurance trade organization that is the lead voice representing the property and casualty industry on legislative and regulatory matters.

2 Medical Fraud Charlie Worsham, Director of Field Operations, NICB Midwest Region Cheryl Spain, SIU Director, State Farm Insurance Christina Hartman, Field Investigation Manager / North Central Special Investigations, American Family Insurance Richard Stempel, Attorney, Stempel & Doty, PLC Minnesota is one of 12 states (9 compulsory, 3 optional) that utilize the no-fault insurance system. No-fault insurance is a type of state-mandated insurance contract under which insureds are covered for medical losses by their own insurance company, regardless of fault. The basic aim of no-fault is to limit the expenses of litigation, not flood the courts with frivolous lawsuits and aid in speeding up claim payments. Personal Injury Protection (PIP) coverage is the primary aspect of the no-fault system in Minnesota, as it mandates $40,000 ($20,000 medical payment, $20,000 wage losses) of minimum PIP coverage for every person carrying auto insurance coverage. Unfortunately, Minnesota s no-fault system has been hijacked by dishonest medical providers, paid intermediaries and unscrupulous attorneys who have turned the system into their own personal treasury. Questionable insurance claim data analyzed by NICB indicates an increase in medical fraud schemes in Minnesota, namely billing for services not rendered, overzealous solicitation of patients, and exaggerated injury leading to grossly inflated billings. Additional problem areas include staged auto accidents and collusion between fraudulent medical providers, lawyers and runners hired to funnel unsuspecting claimants. Medical fraud submissions to the NICB from Minnesota have risen by 30% over the past 3 years, with significant upticks in bodily injury and PIP claims. Minnesota ranks #5 nationally in the average amount of a no-fault claim, trailing only Michigan, Florida, New Jersey and New York. Notable abuses in chiropractic overbilling are being seen in Minnesota as well. Although occurring statewide, the majority of no-fault fraud occurs within the Minneapolis-St. Paul metropolitan area. The challenges being faced by the industry and law enforcement in combating these crimes lie in their sheer size, complexity and volume. There is a need for better fraud detection structures, modernized technology, predictive analytics and data-driven investigations. Criminal enterprises in Minnesota have clear ties to organized crime with ties to Eastern Europe and Russian-related cells. There is also migration of clinic owners from the east coast, including Florida. The financial dealings of the fraud enterprises was discussed and their frequent pattern of transferring monies to off-shore accounts and other overseas tax havens. Specific examples of inflating soft-tissue injuries was discussed and how members of these criminal groups will school their victims in exactly what to say and how to feel during their post-accident medical evaluations and treatment visits. Injured people are unwittingly steered to various medical clinics and put on a conveyor belt of treatment that bill insurance companies for excessive care. 2

3 Also prevalent in Minnesota is the victimization of vulnerable citizens as well as minorities. Specific examples were shown where innocent people suffering legitimate injuries had already had their benefits exhausted by overbilling. Legislative and regulatory controls are needed in addition to improvements in fraud detection schemes. In 2012, the state legislature strengthened the current runner and capper law with the enactment of Senate Bill This new law prohibits direct contact with an auto accident victim in an effort to influence that person to receive treatment from a particular provider. It also contains more stringent requirements on advertisements and communication by medical providers with accident victims. Additional recommendations outlined were treatment parameters to determine medical necessity, fee schedules (such as those regulating the Minnesota workers compensation system), fair dispute resolution, a fair and neutral arbitration process for no-fault claims, tightened clinic oversight, decertifying fraudulent medical providers, restrictions on accident report disclosure and a civil remedy provision as part of the insurance fraud statute. Improved public awareness is also critically important. 3

4 Property Issues Elaine Love, Manager, Government and Industry Affairs, Farmers Insurance Thomas Page, Manager, Special Investigation Unit, Auto-Owners Insurance Charlie Durenburger, Manager, Licensing and Enforcement Services, Minnesota Department of Labor and Industry Minnesota suffers from acute problems surrounding property fraud issues, stemming mainly from contractor fraud and unscrupulous public adjusters offering waivers of deductibles and other inducements to those who may or may not have suffered property damage as a result of severe weather. According to the NICB, Minnesota ranks #3 nationally in questionable claims received related to suspected hail / property damage. Panelists described the most common schemes at play in Minnesota, with emphasis placed on how these criminal enterprises seize on innocent victims and vulnerable populations. In addition, there are also many forms of solicitation taking place ranging from promises to waive deductibles, solicitors claiming to represent insurers or posing as public adjusters and aggressive door-to-door solicitation, especially in the wake of severe storms. Visual photos were also shown of roof damage inflicted by shady contractors and adjusters, to con insureds into thinking the damage was actually the result of hail. Improved public awareness on this issue is needed to raise visibility among the public and encourage additional laws and regulations from policymakers. Educating the public is also important to advise people to obtain multiple bids, verify licensure and ensure work promised is completed. In 2010, Minnesota was among the first states nationally to pass legislation to crack down on these abuses. Senate Bill 1886 specifically forbids contractors from offering any inducements to use their services or waive deductibles. There was additional legislation in 2012 in the form of Senate Bill This law charged the Minnesota Department of Labor and Industry with enforcement as well as the professional oversight of contractors. Summit attendees heard from the primary enforcement official from that agency on the department s viewpoint on these issues, sharing both success stories as well as ongoing challenges. Panelists suggested a series of recommendations including improved surveillance, the use of bait houses, utilizing engineers to verify damage, strengthened underwriting guidelines on weather-related claims, industry and law enforcement collaboration and improved public awareness. Monitoring this issue in other states will also be critical, given the amount of legislation passed in other Midwestern states relating to contractor fraud. 4

5 Prosecutorial Resources John Choi, Ramsey County Attorney Luncheon Speaker Emery Adoradio, Senior Attorney, Hennepin County Attorney s Office Robert Hernz, Director, Insurance Fraud Division, Minnesota Department of Commerce Mary Galvin, Senior Corporate Counsel, Travelers Strong insurance fraud laws, an effective regulatory and enforcement structure and robust fraud investigation teams are all important components to a state having a solid anti-fraud environment. However, the focus on insurance fraud from key prosecutorial agencies is critical to bringing down these organized criminal conspiracies. John Choi, the newly-elected Ramsey County Attorney spoke to attendees. He discussed the role of his office in prosecuting insurance fraud crimes and his desire to keep the issue a priority, citing the financial toll of fraud on consumers. He also touched on emerging issues such as identity theft and possible linkages between those crimes and insurance fraud schemes. Panelists described the current criminal statutes in place that are applicable to insurance fraud, the increasing complexity of these crimes and various forms of criminal enterprises in which fraud is disguised. Central to this panel s message to the summit was the critical importance of case presentation with fraud investigations. The need for key facts, evidence, concise synopsis and the importance of intent and motive all come into play. The head of state s anti-fraud unit discussed the current case referrals their office is receiving, recent trends as well as success stories and ongoing challenges. He also discussed a 2012 indictment and subsequent charging of 10 individuals in a recent property case. Respect for the roles of the different individuals involved in fighting fraud was a key message to conclude the summit. Whether one is a prosecutor, fraud investigator for the state or an insurer, it s important that everyone has a role to play to bring about progress and ensuring a coordinated approach to fraud fighting that leads to successful outcomes. The NICB and IFM developed this White Paper for summit attendees, lawmakers, regulators, law enforcement and the general public. A list of recommendations is below. We will work with key parties to develop strategies to support these recommendations. Insurance Fraud Summit Recommendations Eliminate exploitation of No-Fault Law Treatment parameters Fair dispute resolution A Fair and Neutral Arbitration Process for No-Fault Claims 5

6 Tightened oversight of clinics Quality of Care / Patient Safety Decertification of corrupt providers Civil remedy provision Procurement of accident reports Modernized data analytic capabilities Strengthened underwriting guidelines Industry and law enforcement cooperation Public awareness and consumer education Monitoring legislative / enforcement impact Medical fraud training Prosecutorial support To help stay abreast of the latest news and updates regarding the summit, please visit our websites: NICB: IFM: 6