the changing face of insurance fraud… nicb’s century of ... · insurance accounting and systems...

Insurance Accounting and Systems Association

Los Colinas Country Club Meeting

The Changing Face of Insurance Fraud…

NICB’s Century of Experience

Fred Lohmann

Director – Southwest Region

November 21, 2014

© 2013 National Insurance Crime Bureau

A Century of Service


Leadership


Mission and Vision

Mission: To lead a united effort of insurers, law

enforcement agencies and representatives of the

public to prevent and combat insurance fraud and

crime through Data Analytics, Investigations, Training,

Legislative Advocacy and Public Awareness.

Vision: To be the preeminent organization fighting

insurance fraud and crime.


NICB Key Facts

1,100 P&C insurance companies, rental car

companies, and self-insureds

100-year history of established cooperation and

partnerships with federal, state, and local law

enforcement agencies

Not-for-profit organization

Corporate Headquarters – Des Plaines, Illinois

$42M Revenue – ROI 8:1


NICB Constituents

NICB Member Companies

Law Enforcement Partners

The American Public

We work for “You”…

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Significant Historical Events


Insurance Fraud – Motive

Low Risk – High Reward


Facts

The insurance industry consists of more than 7,000

companies that collect over $1 trillion in premiums

each year.

The massive size of the industry contributes

significantly to the cost of insurance fraud by providing

more opportunities and bigger incentive$ for

committing illegal activities.


How much fraud?

Industry estimates that fraud against property and casualty insurers cost Americans $30 billion per year…or in other words:

• $82.2 million a day

• $3.4 million an hour

• $57 thousand a minute

• $951 a second

• If you think this figure is high, cut it in half

• If you think this figure is low, double it

• We really don’t know for certain

• Estimated to be 10% of claims


NICB Business Model

Current State


NICB Disciplines

Data Analytics

Investigations

Training

Legislative Advocacy

Public Awareness


NICB Regional Offices


Southwest Region

23 Special Agents located in Texas

• Austin Forth Worth

• Corpus Christi Houston

• Dallas Rio Grande Valley

• El Paso San Antonio

• Intelligence Analysts & Support Personnel

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Priorities

Medical Fraud

Commercial Fraud

Vehicle Crime


Key Issues-Texas

Medical Provider Fraud

Staged Accidents

Vehicle Theft

Border Insurance Crimes

Cargo & Heavy Equipment Theft

Fraudulent Hail / Roof Claims

Towing – Body Shop Fraud


Why Property Casualty Insurers Care About

Medical Fraud

Auto insurers pay out billions of dollars a year in medical bills

When someone is injured in a car accident, the liability coverage of the

auto policy, or the at-fault party’s policy, provides compensation for

medical fees, lost wages and other out of pocket expenses.

In 2011, less than 1 percent of Americans with private auto liability

insurance had a bodily injury claim. Average claim was about $15,000.

By comparison, the average claim for damage to vehicles involved in

crashes was about $2,900.

Translated a different way, auto insurers paid out more than $64 billion in

liability claims, versus about $40 billion for physical damage to the

vehicles. And it’s likely that an unhealthy percentage of those claims were

fraudulent.



Medical Fraud

Much of the P&C fraud centers around the auto liability system.

No-fault and Personal Injury Protection (PIP).

Created as an alternative to reduce the burden on the legal system

PIP requires insurers to pay medical costs associated with a car accident

up to a pre-set amount in return, regardless of who is at fault.

PIP is a breeding ground for those looking to cash in.

In Florida, the automatic limit is $10,000 per person in the vehicle. In New

York its $50,000 and in Michigan, there’s no limit.



Medical Fraud

Crooks cause or stage accidents to generate claims.

Clinics nothing but systems to generate medical bills for alleged victims of

“accidents” until they reach the payout limit.

“Victims” may be paid to participate as are medical providers, attorneys

and others.

$ Billions of dollars in phony claims each year.

Costs are ultimately borne by the honest policyholders in the form of

higher premiums.

Same crooks are scamming Medicare, Medicaid and the private

healthcare insurers.


NICB / HHS / DOJ Partnership

Health Care Fraud is a sophisticated enterprise

Criminal conspiracies do not discriminate – they’ll take

money from both public and private

Effort led by NICB to share information between

P&C, Health Care Industry, Medicare / Medicaid and

DOJ

Result: Healthcare Fraud Prevention Partnership


Health Care Fraud Prevention Partnership

Initial meeting of all participants

• Executive Board

• Data Analysis & Review Committee

• Information Sharing Committee

• NICB represented

Formal Announcement of Fraud Prevention Partnership by AG Holder and HHS Secretary Sebelius / National Council on Health Care FraudJuly 26, 2012– White House


General Wehrle


Health Care Fraud Prevention Partnership

Key Recommendations• Create an atmosphere of trust

• Partnership must be flexible to address future fraud schemes

• Break down silos – Information – Intelligence Sharing

• Litigation protection vital (Immunity for reporting fraud)

• Metrics to measure success

• Address health care fraud and crossover to property /casualty industry


Major Medical Fraud Task Force Case


Are These Your Doctors?


Hints

Husband and wife both Medical Doctors -

Houston, Texas (Dr. Arun Sharma and Dr. Kiran Sharma)

Owned multiple medical clinics operating under

the name of “Allergy, Asthma, Arthritis Pain

Center”

Successful practice…50% of patients came to

the clinic through word of mouth…as far away as

Tennessee!


How Successful?

1998: 50-60 patients per day

2003: 100 patients per day

Jan 6, 2005: 279 patients per day!

Patients would arrive at 6:30 AM and line up to

see the Doctor who arrived around 10 AM

By 2009, they had 99 bank and investment

accounts…and $43M in assets


Over a 10-Year Period

Billed Medicare, Medicaid, Health Care Industry and

Property & Casualty over $200M

• Total Paid: Over $62M

What did they bill for?

• The “Houston Cocktail” (Hydrocodone, Soma and

Xanax)…over 126,000 prescriptions; 700,000 pills

• Facet point injections and blocks…actually trigger

point injections like Novocain or steroids


Findings

Who were the patients?

• “Pain management patients” to include drug dealers, drug users, eBay sellers.

• Confirmed deaths due to drug overdoses

Who was billed?

• Medicare, Medicaid

• 9 health care companies

• 8 P&C companies

Who investigated?

• DOJ, FBI, HHS/OIG, DEA, Texas AG,NICB, SIUs


The Results

10-month turnaround from search warrants to

trial…normally 2 years

Trial projected to last 8 weeks

Drs. Sharma requested a plea deal the night before the

trial.

• Dr. Arun Sharma: 15 years confinement

• Dr. Karim Sharma: 8 years confinement

• Forfeit $44M in assets


Asset Seizure


Aggregated Medical Database

Aggregate medical bill data from NICB members to apply fraud analytics in order to develop actionable information on suspect providers

Post adjudicated billing of medical providers

Data scrub

No patient information

Identify billing anomalies

Disseminate MedAWARESM Alerts to members companies & law enforcement partners

Intelligence driven investigations


MedAWARESM Alerts


Texas

Strong and Effective State Fraud Bureau

• Law enforcement powers

• Autonomy to conduct investigations

Dedicated insurance fraud prosecutors (Dallas, Houston,

San Antonio)

Strong anti-fraud law and criminal penalties

Immunity Protection

Partnership & cooperation (TDI, LE, SIU’s, NICB)

Team effort


Cargo & Heavy Equipment


Foreign Operations


NICB Bait Operations


Public Awareness


Legislative Advocacy

Government Affairs Department

NICB’s legislative advocacy team leads the property/casualty industry’s anti-fraud and vehicle theft legislative and regulatory agenda. NICB promotes statutes, regulations and policies at all levels of government to help serve member interests in preventing, detecting and defeating insurance fraud and vehicle theft. We work with NICB member companies, property/casualty insurance trade groups and other anti-fraud organizations to:

Influence legislation and regulations that affect insurance fraud and vehicle theft

Track fraud and theft legislation

Promote a strong anti-fraud environment nationwide

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In Closing

WE HAVE A SHARED RESPONSIBILITY

TO WIN THIS CONFLICT

NICB, member companies, law enforcement,

and anti-fraud organizations must present a

united front to protect the American people

and insurer investment.

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