Industry News

Fighting Insurance Fraud in California

Insurance fraud nationwide is estimated at costing the insurance industry over $100 billion per year, and the state of California is trying to support efforts to lessen that burden on the industry. 

Assembly Bill 2138, sponsored by California Insurance Commissioner, Dave Jones, and the California Department of Insurance (CDI), involves doubling the assessments to health and disability insurers so there would be more money to fight fraud, Specifically, it would increase the current annual assessment of 10 cents per insured person paid by health and disability insurers to up to 20 cents. 

The proceeds would help increase funding to local district attorneys so that they can investigate and prosecute health and disability insurance fraud throughout the state. District Attorneys often don’t have enough money to investigate all cases they could, especially when local governments are cash-strapped. 

From 2007 to 2010, the CDI received more than 6,000 health and disability suspected fraudulent claims statewide, but only a fraction of those claims were referred to the local district attorneys, the CDI said. The local district attorneys were only able to conduct 656 investigations from these suspected fraudulent claims, resulting in 221 arrests and 184 convictions with an annual average of $223 million in chargeable fraud.

The report found that the health and disability insurance lines had insufficient policy assessments to support a statewide anti-fraud effort. This led to the recommendation to increase funding that is called for in AB 2138.

Health and disability insurance fraud seriously hurts policyholders, providers, insurers, and ultimately California’s economy.  Unfortunately, health and disability insurance  fraud is increasing in sophistication, complexity, and volume. This higher assessment will provide much needed resources to fight this growing problem, especially in light of the new health care program.

Underscoring the national problem, a recent nationwide health care fraud case involving 91 defendants and nearly $300 million in fraudulent billing was successfully concluded. The development of this case, made public in September 2011, was offered as an example of collaborative work among government agencies responsible for combating health care fraud .

 Now, back in California, AB 2138 now moves to the state Senate for consideration.

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