What To Do When …
Claims
She
Three Perspectives On Spotting Fraud
And Keeping It Off Your Books
Karen Smyth
Patrick Reeder
Michael Rafalko
LTCIF 2009
LTCIF 2009
GOALS
• Understand what
constitutes fraud and
why LTCI is an easy
target
• Develop an awareness
of who commonly
commits LTCI fraud
• Discuss case studies
and identify red flags
• Review basic strategies
for fighting fraud
LTCIF 2009
“Deceit or trickery;
the intentional
perversion of
truth in order to
induce another
to part with
something of
value”
LTCIF 2009
Four Elements of Fraud
1.
MISREPRESENTATION
2.
KNOWLEDGE
3.
INTENT TO DEFRAUD
4.
RELIANCE
LTCIF 2009
• Hard Fraud - Deliberate attempts to stage
losses
• Soft Fraud - Exaggeration of otherwise
legitimate claims
LTCIF 2009
In the long term care insurance context, soft fraud
is committed far more frequently than hard fraud.
LTCIF 2009
Statistics
LTCIF 2009
• Insurance Fraud
costs Insurance
Industry between
$80 to $120 billion
annually.
• 24% of Americans
say it is ok to
defraud insurance
companies.
LTCIF 2009
40% of Americans are “not very likely” or
“not likely at all” to report someone who
defrauded an insurance company.
LTCIF 2009
Every dollar spent on antifraud training
and investigations yields at least six
dollars in recovered funds.
LTCIF 2009
Why Is Fraud Difficult to Detect in
the Long Term Care Context?
LTCIF 2009
Are these people
really capable of
defrauding me?
LTCIF 2009
Insureds may
be vulnerable
to deceit and
manipulation.
LTCIF 2009
Insured’s vulnerable state generates fear
of not providing adequate care.
LTCIF 2009
Incrementalism
LTCIF 2009
Long Term Care
Insurance depends
upon standards
which can be
manipulated.
LTCIF 2009
Other Reasons That Fraud Can
Be Difficult to Detect
• Is it fraud, mistake, forgetfulness or
negligence?
• Conflict of interest - the home health care
provider, the assisted living facility, the
insured and the insured’s family all have an
interest in insured obtaining benefits.
• Fly by night home health care providers.
LTCIF 2009
Who Commits Fraud?
• Insureds
• Family/Friends
• Care Providers
• Agents
LTCIF 2009
LTCI Insureds
• Overreimbursement
• Alterations to Bills
and Applications
• Misuse of
caregivers
LTCIF 2009
Case Study #1 – Fraud By The Insured
• Insured called to access benefits; self-reported she fell
and hurt her back. Insured would not provide current
address; wanted assessment done at her doctor’s office.
• We (and our Assessment vendor) have trouble reaching
claimant by phone; always leave message
• Inconsistencies between medical records, self-reported
symptoms, ability to perform ADL’s, statements by her
physicians – necessitates consults with Medical Director
• Claim filed for cash benefit (services provided by an
unlicensed caregiver)
• Claimant frequently changes physicians; “non-compliant”
• At reassessment times, claimant has asked for same
assessor and has complained about others LTCIF 2009
Case Study #1 – Fraud By The Insured
(Continued)
• Difficulty scheduling and keeping assessment
appointments; claimant demands reassessment take
place at vacation home; claimant frequently moves;
claimant doesn’t know when she will be available
• Benefit eligibility is appealed; claimant retains counsel
• Attorney requests copy of claim file; before it can be
sent, we are advised that the attorney is no longer
representing the claimant; changes counsel
LTCIF 2009
Case Study #1 – Fraud By The Insured
(Continued)
• We order multiple rounds of surveillance and
background research
• We go directly to her physicians to sort out
inconsistencies and allow them to view surveillance
videos - ask for their opinion whether she needs
substantial assistance with at least 2 ADLs
• We exercise our right to request an Independent Medical
Exam; questionable IME results versus medical records;
(disability mentality versus long term care mentality)
• We consult with internal and outside counsel
• We refer case to Fraud Bureau in her state of residence
LTCIF 2009
Learned Through Surveillance & SIU
• Claimant has used aliases
• Claimant’s address is a UPS store; we identify 10 prior
addresses
• Claimant’s history shows a pattern of lawsuits and
involvement in civil cases (21 are identified)
• She was evicted from at least 3 properties
• We find one location on VRBO (rental property);
claimant does NOT live there; owner knows claimant?
• Her checks are endorsed “for deposit only” and not
deposited in a bank
• She has recently had cosmetic surgery
• Attorney advertises on TV; has never met his client
LTCIF 2009
Fraud Bureau
• State initiated a fraud investigation against
this claimant
• Involved 4+ insurers
• Disability & long term care insurers allege
fraud
• Disability carrier has claims going back to
1986; another carrier going back to 1998
• This pre-dates her application for coverage
LTCIF 2009
Case Study #1 – Red Flags
• Insured has multiple cash
policies with no lifetime
maximum
• Insured’s policies cost and
pay more than appropriate for
her means and lifestyle
• Insured goes on claim shortly
after contestable period runs
• Insured’s alleged injury is
subjective and difficult to
verify medically
• Insured visits with a myriad of
doctors – doctor shopping
LTCIF 2009
Case Study #1 – Red Flags (continued)
• Insured refuses to provide
carrier with a home address
(all correspondence through
a UPS store)
• Insured refuses to have
mandatory assessment in the
home
• Insured delays in allowing
carrier to schedule
assessments and IME’s by
as much as 6 months
• Insured hires lawyer to
threaten litigation but has yet
to file suit
LTCIF 2009
Friends and Family Members
• Insureds drop their
guard around friends
and family
• May erode the formal
business relationship
between insured and
caregiver
• Insured less likely to
report suspicious activity
of a friend or family
member
LTCIF 2009
Case Study #2 –
Fraud By Friend/Caregiver
• Wealthy widow with rich LTC policy befriended by
her Handyman
• Widow gives Power of Attorney to Handyman
• Widow begins to suffer from dementia; POA calls
the carrier to file a claim for benefits
• POA convinces her to sell her million-dollar home,
and to buy a new home; he moves in to care for her
He buys a new car and land in the widow’s name
• The carrier starts an investigation
LTCIF 2009
Case Study #2
• The POA claims that the insured requires around
the clock home care, but refuses to provide the
carrier with the insured’s home phone number
• The POA instructs carrier to contact him directly on
his cell phone.
• The carrier’s SIU has turned up strong evidence that
that the insured did not require around the clock
care; the POA has received benefits well in excess
of what the insured requires and the POA has been
dipping into the insured’s benefits for his own
personal use.
LTCIF 2009
Case Study #2 – Red Flags
• Insured’s POA and caregiver
are the same person
• Insured’s caregiver is a
“friend” of the insured
• Caregiver moves into a new
house with the insured at the
time of claim
• Caregiver makes lavish
purchases in the insured’s
name shortly after claim
• Caregiver refuses to allow
Carrier to call the home
LTCIF 2009
LTC Providers
• Overbilling
• Upcoding
• “Strategic
Billing”
• Family as
Caregivers
LTCIF 2009
• Nearly one of
three
physicians
say it’s
necessary to
game the
health care
system to
provide
quality
medical care.
• One of 10 physicians has reported medical signs
or symptoms a patient didn’t have in order to
help the patient secure coverage for needed
treatment or services in the last year.
LTCIF 2009
Case Study #3 –
Fraud by Provider
• Caregiver statement included
dates after insured’s
hospitalization and death
• Caregiver statement
appeared to be a photocopy
• Son said that caregiver
completed the forms before
the insured’s death and
simply failed to cross out the
dates that caregiver did not
provide services.
LTCIF 2009
“It was a mistake”
Lack of Intent to Defraud
Fraud or Negligence?
LTCIF 2009
Case Study #3 – Red Flags
• Provider bills for
services when
policyholder is in the
hospital…or dead
• Dates or other
information on
documents appear to
be altered
• Provides photocopies
rather than original
documents
LTCIF 2009
What are ways that an
agent can commit fraud?
LTCIF 2009
• Conspiring with applicant
and/or home health care
provider to obtain
insurance for applicant
• High pressure tactics
• Misrepresentation on
application regarding
applicants health or
current need of long term
care
LTCIF 2009
• Use of unapproved or
misleading sales
materials
• Inappropriate
replacement of existing
policies
• Steal premium or
refund check
LTCIF 2009
Red Flags for Agent Fraud
• Answers on application
have been changed in
some way
• Questions on application
left blank
• High rate of applicants
were declined coverage
• High rate of applicants who were approved for
coverage filed claims during the first year their
policies were in effect
LTCIF 2009
Red Flags for Agent Fraud (continued)
• High rate of policies not
taken or returned during
free look period
• Repeatedly fail to deliver
applicant’s refund
promptly
• Discovery of major
medical impairments not
disclosed in application
LTCIF 2009
Tools For Defeating Fraud
LTCIF 2009
Have a
Healthy
Skepticism
“Trust but Verify”
LTCIF 2009
Case Study – Trust, but Verify
• Home health care provider claimed the
caregivers were not employees
• Owner of home health care provider
and insured are “good friends”
• Insured’s daughter “not sure” if home
caregivers were certified
LTCIF 2009
Red Flags – Trust, but Verify
• Unsure of
employment status
of caregivers
• Friendship
between insured
and provider
• Unsure if caregivers are certified
LTCIF 2009
It may sound obvious, but …
Pay Attention to Details
LTCIF 2009
What Is Wrong With This Claim Form?
LTCIF 2009
Lightening Strikes Twice. . .
LTCIF 2009
The “Smell Test”
LTCIF 2009
Case Study – The Smell Test
• Claims notices that work number for insured’s
care provider was the same as the number
listed for the insured’s niece
• Niece lives with the insured
• Niece is the insured’s home health care
provider
• The insured’s niece is the insured’s power of
attorney
• Niece signs insured’s initial premium check
LTCIF 2009
Red Flags – The Smell Test
• Family member
as caregiver
• Conflict of interest
• Not Licensed with
the State
• Sole
Proprietorship
LTCIF 2009
Questions?
LTCIF 2009