Health insurance provides us the much-needed cover during financial crisis that may arise due to medical emergencies. However, there is something that is ailing the health insurance sector and insurance industry at an overall level - fraudulence.
The insurance fraud, especially in the health insurance sector has witnessed a steep rise in the recent years. An idea about this trend could be derived from the results of a study conducted by consultancy organisation, Ernst & Young in 2018. According to the report, 56% of life insurers stated an increase of 30% of increase in fraud over the last two years. Whereas 7% of the insurers reported a 50% increase. However, the story is no different for health insurance.
Health insurance fraud can be explained as a situation where an insured or medical service provider furnishes fraud, false or misleading information to the insurer with the intention to attain unfair benefits from a policy for the policy holder or service providing source.
Such fraud leads to serious losses for the insurance service providers but it could also result in impacting the health insurance advantage for genuine customers. Also, “semi-urban and rural areas” have witnessed more cases of health insurance as compared to metro cities.
“Typically, insurance fraud is more common in semi-urban and rural areas where insurers might not have adequate infrastructure for through inspection. The impact of fraud in Health Insurance is not merely limited to loss for the insurer but is more perilous since it might prevent a genuine customer from accessing their rightful claim,” said Manish Dodeja, Head of claims and underwriting for Religare Health Insurance.
It is a difficult task to explain the types of health insurance frauds as the nature of deceit keeps changing over the years. The most common types of frauds are listed below;
Filing a claim for treatments or services that were never administered. This is often done by forging genuine patient information and manufacturing admission in connivance with service providers.
Increasing overall cost of hospitalisation by including treatments that were not necessary basis the medical problem.
Misrepresenting treatments that are not covered as medically necessary.
Non-disclosure of Pre-Existing Diseases and manufacturing diagnosis reports to justify tests, examinations and surgeries to prove claim worthiness.
In any industry, the occurrence of a fraudulent practice only highlights gaps that exist in the current processes and operational framework. Thereby warranting an immediate assessment and rectification of the process and stakeholders. Health insurers are constantly on the lookout for all possible methods to tackle the menace of frauds. Some of the ways in which insurers try to control frauds are:
Strict regulations and norms with regards to network hospitals and specifically treatments of pre-existing ailments.
Creation of centralised database of all fraudulent cases recorded to arrive at predictive trend lines with respect to service provider and claimant.
A dedicated ‘fraud prevention unit’ that engages in field-investigations to verify suspected cases.
Better due diligence in underwriting policies.
Rating of hospital service providers
One of the biggest fallout of any insurance fraud is the cost that that other customers would have to pay. Due to the concept of pooling risks in the sector, the increase in incidences of frauds could lead to the rise of cost of services. Also, a stricter scrutiny of claims would result in the delay in settlements. And lastly, but not the least, this fraudulence menace could raise unnecessary suspicion over any of the claims and unintended harassment to the customers.
Insurers are doing all they can to beat the ill effects of fraud and advancement in technology could help to go a long way in this fight. Legal assistance with proper penal code to punish such criminal activity from the side of government will also help the companies to reduce the number of frauds.
Timely usage of technology, law and proper procedure could help cut down fraud to its roots, which would be highly beneficial for all the stakeholders in long term.