Tackling health insurance fraud

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.