case study on health insurance frauds in india

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60 percent Indian insurers see a rapid rise in fraud: Deloitte survey

National, 16 February 2023 : Insurance companies in India have experienced a rise in fraud instances, within the life and health insurance categories, according to Deloitte’s Insurance Fraud Survey 2023 . About 60 percent of survey respondents believe that there has been a significant rise in fraud, while further 10 percent experienced a marginal increase . Insurers consider mitigating fraud as a priority. Only 60 percent of respondents plan to increase their budgets marginally and the remaining investments would remain at the same level as the past year. Some key factors contributing to frauds include increased digitisation (34 percent), remote working (22 percent) post pandemic and weakened controls (22 percent). Technology-led innovation in the insurance sector has brought agility, speed, superior customer experience, and ease of use. However, it has led to vulnerabilities and risks in the overall ecosystem. New fraud trends, such as data theft emerge in the insurance segment, and traditional frauds, such as collusion between third parties and mis-selling of insurance products continue to prevail and are still a concern for the sector. Data related sensitivities have amplified within the sector. Seventy percent respondents indicate data-quality issues as a common challenge amongst life and health insurance frauds. Sixty percent respondents faced challenges related to data protection and privacy. In addition, 40 percent of respondents across life and health insurance segments indicated fraud mitigation as one of the most important priorities for the Board and management, while the remaining highlighted it as one of the several key priorities. Sanjoy Datta, Partner and Financial Services leader, Deloitte India said, “Globally, insurance companies have acknowledged that fraudulent activities lead to both financial and reputational loss. Mitigating fraud needs strategic intervention and an appropriate tone at the top; decision makers must relook into the insurer’s operations model and introduce ways to monitor it periodically. The Indian insurance sector is at the cusp of a digital revolution and like any other sector it is compelled to re-invent itself to introduce faster business operations, customer acquisition, and experience with the power of technology. As risks lurk, there is an immediate need for Indian insurers to consider a proactive fraud risk management framework. This is needed as strategic direction, culture, collaboration, coupled with board-level oversight can set the right direction for organisations to fight the challenges consequent to increased use of technology and digitalisation”.

K V Karthik, Partner, Forensics, Financial Advisory, Deloitte India said, “An interesting insight from the survey pointed to the weakness in controls to prevent/detect frauds as one of the reasons for increased fraud incidents.

Introduction of new technology, changes in ways of working, especially in light of the pandemic, may have resulted in the weakening of controls over time which provides an opportunity to the fraudsters to exploit the loopholes in the system.

With frauds becoming a board-level agenda and digital boundaries constantly blurring, there is a clear need for insurers to relook at their operating model that integrates a larger agenda, which will work across business, compliance, legal, underwriting, and operations departments.”

Other key highlights from the survey The top five challenges faced by insurers include the following: 1) Issues with data protection and privacy All respondents believed, one of the biggest challenges they face to optimally mitigate the risk of fraud is with respect to data protection and privacy.

2) Information sharing amongst insurers The absence of a formal industry-level fraud database and the propensity of fraudsters to exploit (due to this loophole) leads to increased fraud.

3) Problems with data quality Data quality and data architecture are key for insurers in their fight against fraud. More than 19 percent of respondents indicated this as one of the key challenges they faced.

4) Limited use of analytical tools In case of fraud detection, it is important to be proactive, accurate, and timely. Fifty percent of life insurance respondents believed this was a significant challenge.

5) Keeping up with the modern fraudster modus operandi We live in a dynamic world where technology is empowering fraudsters to think of new and innovative ways to commit fraud. As 50 percent of both life and health insurance respondents consider this to be a challenge, it has become imperative for the sector to be ahead of the curve and pre-empt fraudulent incidents.  

About the survey

The survey, conducted in the second quarter of FY2023, was based on qualitative interviews with key C-suite stakeholders/senior management responsible for compliance and FRM across leading private insurers. The views were obtained through detailed discussions on the current and future fraud landscape.

Each statistic used in this report indicates a consolidated number of responses for the respective question. For multiple-choice questions, the weighted average of responses for that question has been used to derive the statistics.

This press release has been issued by Deloitte Touche Tohmatsu India LLP. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.  

Media contact

Mou Chakravorty Deloitte India Tel: +91 8454042392 Email: chakravortym@deloitte.com

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Healthcare Fraud and Abuse - A Grave Problem that Needs Attention

Trillions of dollars are spent on health insurance claims with billions of them being processed every year. A small part of these include fraudulent claims, which account for a high value. An estimation from the National Health Care Anti-Fraud Association (NHCAA) states that there are financial losses of several billion dollars due to healthcare fraud and abuse every year. With all these estimations, one question that strikes our mind is ‘what is medicare abuse and fraud?' Anything right from treatments which were never administered to false diagnosis done to avail higher insurance amounts, falls under medicare fraud and abuse.

Over the years, the frauds committed by healthcare facilities, institutions and providers are becoming extremely challenging. Every year, insurance companies in the US lose several thousand dollars to medical fraud. According to the assessment done by the Affordable Care Act (ACA), between 2015 and 2021 healthcare spending is expected to grow at a rate of 6.2% per annum.

What Makes Healthcare Fraud So Alluring?

Just like any other industry, fraudulent claims have their significant share even in the healthcare sector. Fraudsters are busy finding means and opportunities to make some undue profit. However, the huge, inviting, easy pile of cash sets healthcare apart from the rest of the industries when it comes to fraud. Some of the major factors that make medical frauds so alluring include -

• The ease in filing fraudulent healthcare claims
• Billing for higher medical codes and incorrect diagnoses which easily go unnoticed
• Lucrative kickbacks for member referrals
• Difficult-to-detect prescription of unnecessary or additional treatments
• The ease of forging and selling prescription drugs

With insurance and other policies becoming increasingly popular, healthcare crooks can be anyone, including the patients, suppliers, vendors, providers as well as pharmacists. In addition, computer hackers and organized crime rings also add up to this list of fraudsters.

Common Types of Medicare Frauds to Look Out for

Right from the wrong diagnosis to services which were never rendered, medical frauds can be of several types. Genuine patient information obtained through identity thefts will generally be used to fabricate false claims. Here are some of the predominant types of medicare fraud and abuse -

Upcoding - A Major Medical Fraud

The process involves billing for a higher-priced treatment, which was not actually provided. Here, an inflation of the affected individual's diagnosis code will be used. This code will be matched to a serious condition and then coupled with a false procedure code.

Misrepresentation of Non-Covered Treatments

This type of medical fraud is frequently associated with cosmetic surgeries. Here, non-covered, medically unnecessary treatments will be represented as covered, medically necessary treatments to obtain the payments from insurance claims. For instance, a cosmetic procedure, such as a nose job, will be billed as a deviated septum repair.

At times, healthcare providers bill every step of a treatment administered as separate treatments or procedures. This type of fraudulent billing is known as unbundling and will cost a lot to the patient's insurer.

Performing Unnecessary Procedures

The instances of performing medically unnecessary procedures for the sole purpose of claiming insurance payments are on a constant rise. Such medicare frauds are predominant in nerve conduction and other similar diagnostic-testing schemes.

Medical Identity Thefts

On an average, 250,000 to 500,000 individuals become victims of this crime globally every year. So, it is important to be aware of identity thefts associated with medical fraud. In a medical identity theft a person's name or other personal information will be used without the consent or knowledge of that person to obtain medical goods or services. In addition, the stolen identity can also be used for submitting false insurance claims. Therefore, identity thefts can have devastating financial impacts on the insurer as well as the insured.

Threats Posed by Organized Healthcare Criminal Groups

The list of healthcare offenders has evolved and grown beyond dishonest healthcare providers and other fraudsters. In the recent years, health insurers and law enforcement agencies have witnessed criminals migrating from illegal drug trafficking into lucrative and safer options of rolling out fraud schemes against private health insurance companies.

Private insurers and government programs have lost several dollars to such criminal rings. Surprisingly some of these criminal rings are based in South and Central America. These groups are known to make use of provider-billing information and genuine patient data to fabricate false claims from non-existent clinics.

Role of Private-Public Establishments against Fraud

Private-public, non-profit organizations, such as the National Health Care Anti-Fraud Association, solely focus on equipping healthcare institutions and private insurers to prevent fraud. They enable public and private sectors to identify, examine, implement medicare fraud and abuse penalties and eventually prevent fraud against health insurance systems. These establishments represent combined efforts of anti-fraud units of private health insurance payers as well as law enforcement agencies having jurisdiction over the crime.

Besides, they foster private-public cooperation against fraud at policy making levels, thereby creating strong medicare fraud and abuse laws. Furthermore, information on healthcare fraud investigations will also be shared among health enforcement agencies, medical insurers or anybody who is interested. Such information on medical fraud investigation will provide organizations with a better and broader picture of healthcare fraud.

How can you Prevent Healthcare Fraud?

Medical fraud is an expensive reality, which we cannot afford to overlook. Taking some simple precautionary measures will help you prevent medical frauds and keep medical costs down. This can be achieved by appropriately educating your clients about the following -

• Being a responsible insurer, you can educate your clients about safeguarding their social security number and medical insurance cards
• All the benefits and the exact procedure to submit the claims should be clearly explained
• Clients should be explained about the processes, which can be billed by the insurer; this prevents the concerned medical authorities from unbundling
• The way in which the availed health insurance plan works should also be clearly explained

Following these simple steps can help you minimize the instances of medical fraud and abuse. This helps you save huge dollars and prevents the insured individuals from undergoing any sort of medical abuse, while the fraudsters make money out of false claims.

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Like any other fraud, healthcare fraud is also not a victimless crime. Unfortunately, financial losses are only a part of the big picture. There is a human face too. Medical fraud victims are the people who are subjected to unsafe or unnecessary medical procedures. While medical records of some of the victims will be compromised, legitimate insurance information of the patients will be used to make falsified claims in other cases. Sadly, such exploited individuals are easy to find.

Today, there is unsustainable growth and high federal budget deficits in healthcare costs. For this reason, businesses should keep a check on unnecessary expenses associated with healthcare claims. Fraud and abuse top the list of factors that actually contribute to these unnecessary expenses. Healthcare fraud is a mounting problem for both - the industry as well as the state and federal governments. Despite the ongoing effort, making meaningful inroads has been daunting.

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Being an experienced player in the domain, we are aware of the probable areas where medical frauds are predominant and have appropriate processes in place to prevent them from occurring. In addition, we are compliant with HIPAA , CPT coding , and ICD 10 as well as HL7 . This makes us one of the most reliable medical back-office service support providers.

Our specialized healthcare teams will successfully navigate complexities associated with the modern-day health insurance systems. You can now partner with us to make a positive impact on your revenue stream and augment your customer satisfaction ratio. Contact us now to discover how you can prevent healthcare fraud and become a trusted medical insurer.

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Tackling health insurance fraud

Tribune Web Desk

Vijay C Roy

It’s a double whammy for the health insurance sector. Faced with a sluggish pace of growth, it is grappling with a steady rise in instances of fraud as well. According to Deloitte’s Insurance Fraud Survey 2023, about 60 per cent of Indian insurance companies are seeing a rapid increase in fraud, especially in the life and health insurance space. The survey, conducted in the second quarter of 2023 fiscal year, is based on qualitative interviews with key stakeholders and senior management across leading private insurers. These fraudulent activities lead to financial losses for insurers, resulting in higher premiums for the policyholders and diminished trust.

Fraud in the Indian health insurance industry encompasses various deceptive practices exploiting system vulnerabilities. These include false claims, where policyholders or providers submit invoices for non-existent services; upcoding (type of fraud where healthcare providers submit inaccurate billing codes to insurance companies in order to receive inflated reimbursements) and unbundling (billing for procedures separately that are normally covered by a single procedure); inflating charges for services rendered; and billing for medically unnecessary services.

According to Brij Sharma, founder and chairman, MDIndia Health Insurance, identity theft involves using stolen information for medical services, while policyholder fraud entails providing false information or concealing pre-existing conditions for better coverage. Further, collusion between policyholders and providers and use of fraudulent documentation also occur, as well as policy stacking, where individuals purchase multiple policies for double reimbursement.

Insurance fraud is reported globally due to various factors. In India, the complex healthcare system, lack of awareness, economic pressures and inadequate regulatory oversight contribute to instances of fraud. Comparing fraud rates between India and western countries is challenging due to differences in systems and reporting mechanisms. In the US, according to estimates from organisations like the National Health Care Anti-Fraud Association (NHCAA), healthcare fraud costs the United States tens of billions of dollars each year.

Fixing the problem

Identifying responsible parties for fraudulent practices in the Indian health insurance sector is complex as it involves various stakeholders at different levels of the healthcare system. For example, policyholders may knowingly give false information or collude with providers to submit false claims. Healthcare providers may engage in fraudulent billing practices or collude with patients. Also, insurance agents and brokers may facilitate fraud to increase commissions. Insurance companies are responsible for fraud prevention but may overlook red flags or prioritise profit.

Regulatory authorities oversee the industry but may face limitations in enforcement. The impact of healthcare fraud is significant and is ultimately borne by the insured population. It results in higher healthcare costs, compromised patient care and erosion of trust in the healthcare system. A strong regulatory environment, with strict enforcement by insurance companies and third party administrators (TPAs), will go a long way in preventing such frauds. In the end, the policyholders are the ones who end up paying for such frauds as the premium continues to go up. Insurance companies in India are combating fraud by implementing technologies like artificial intelligence for fraud detection, conducting thorough investigations, collaborating with stakeholders, promoting ethical culture and offering incentives for fraud reporting. This multi-pronged approach aims to strengthen defences against fraud, protect honest policyholders and deter fraudulent activities.

Insurers combat fraud with detection algorithms, investigations, audits and collaboration with law enforcement. “Raising awareness and promoting ethical behaviour are also crucial in deterring fraud and preserving the industry’s integrity. TPAs play an important role in fraud prevention. We use advanced software and algorithms to identify and prevent such claims. We have developed such capabilities based on millions of data points and years of experience,” says Brij Sharma, whose MDIndia Health Insurance is one of the leading TPAs in India.

Low numbers

Health insurance penetration in India is low due to limited reach and lack of awareness. In the fiscal year 2021-22, the number of persons covered under health insurance stood at 52.04 crore. Most are covered under the government-funded health insurance schemes. There are around four crore individual health insurance policies.

Things to keep in mind

Study and compare policies Do a thorough research and compare different health insurance options to find the policy that suits your needs and budget.

Read the fineprint Carefully review policy terms, including coverage limits, exclusions and claim procedures, to understand your rights and obligations.

Provide accurate information Disclose accurate medical history and information to avoid claim denials at a later stage.

Be cautious of unsolicited offers Beware of suspiciously low-cost insurance offers and verify the credibility of providers before making decisions.

Keep records Maintain detailed records of all interactions and expenses related to your insurance policy.

Review bills and statements Scrutinise medical bills and claim settlements for accuracy, reporting any discrepancies promptly.

Report suspicious activities Bring to the notice of your insurance company or regulatory authorities any suspected fraudulent activities, thus providing evidence for investigation.

Be informed and vigilant Stay updated on industry trends and fraud prevention measures to protect yourself from becoming a victim.

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