Fraud Detection

A collision is staged, a police report is purchased, injuries are faked and a charade is performed by a therapy clinic to boost revenue. The fakers claim for disability income and other cash benefits. This is one of the worst forms of the insurance fraud, well-organized and increasingly common in Ontario.

So insurers were relieved when the province’s finance minister vowed recently to help insurers step up fraud detection. Just how far the government is prepared to go remains uncertain. Yet insurers are optimistic, and hopeful concrete action will come in short order. They want the government to better arm fraud investigators and help insurers turn off the flow of money to suspected fraudsters and other opportunists.

Ontario Finance Minister Dwight Duncan’s March 2011 budget pointed specifically to the potential role of a central processing service called Health Claims for Auto Insurance or HCAI.

HCAI is operated by HCAI Processing, a not-for-profit corporation. It was developed with financing from members of Insurance Bureau of Canada, initially for use in Ontario. After several months of adding insurers and treatment clinics, regulators made the system the mandatory clearing house for treatment claim forms starting Feb. 1, 2011.

Duncan’s budget provided no details of how HCAI could be made more useful to fight fraud. Those details are to be worked out later. The government proposes to appoint an anti-fraud task force and working groups of various stakeholders.

“While we didn’t get anything tangible to fight fraud, the fact that we now have an awareness at Queen’s Park is brilliant…a massive opportunity,” says Maurice Tulloch, president and CEO of Aviva Canada. “We want this task force to make strong recommendations, and quite frankly, get the findings in before the election, on the basis that with any election there is the possibility of a change of government.”

Tulloch says the fight against fraud is essential to consumers who are finding the cost of coverage is becoming unbearable. He and others base their optimism for a speedy outcome on three factors. Duncan’s policy advisers have been receptive to proposals regarding fraud. The Official Opposition has focused on fraud in statements about auto insurance. The Superintendent of Financial Services has shown a determination to get insurance issues resolved. “Phil Howell has done more on auto insurance in the past 15 months than has been done in the past 15 years,” says Tulloch.

Darcy McNeill, a spokesperson for Duncan, says elements of Ontario’s changes to auto insurance last September were directed at combating fraud and abuse in the field of medical assessments and treatment of minor injury.

“We know more can be done to fight fraud in the auto insurance system,” he adds. “To that end, HCAI is a great tool that can be used to detect fraudulent activity.”

McNeill said the province would work with the insurance industry and an array of stakeholders, including the justice sector and the fraud task force, “to develop HCAI further so fraud can be detected, then to ensure we have the right mechanisms in place to follow up and investigate based on the data generated.”

Already a few insurers have obtained health claims data related to their own policyholders. More than 6,500 health care facilities registered to use the billing service had submitted more than 2.2 million claims forms by the end of April 2011.

Larger insurers expect their share of the data will be sufficient to help identify clinics with abnormal treatment and billing practices that might warrant increased scrutiny by adjusters and in-house investigators.

“If you are asking me, ‘Is HCAI useful to help fight fraud?’ the answer is: ‘Oh yeah!,'” says Steve Whitelaw, vice-president of underwriting and claims at The Dominion. “It’s got everything in there that we need. We’ve got some hurdles, but it’s got everything we need.”

Randy Bundus, IBC’s chief counsel and vice president of operations, foresees other potential uses for data from the system. Some relate to combating fraud; other relate to the impact of fraud on the cost and sustainability of the Ontario auto insurance product. The first hurdle will be to obtain industry support for proposals to enhance the way HCAI manages health claims data:

Identity theft

The data could be useful to regulatory colleges. They could confirm whether the names and identification numbers of medical professionals have been misused by clinics to fabricate medical treatment claims. Three insurance groups have sued several Ontario clinics since last November, alleging the names of 17 medical doctors, chiropractors and other professionals have been misused to support fraudulent treatment claims forms. Their allegations have yet to be proven in court. But a mechanism for addressing identity theft would be like shining a flashlight in a basement, says Bundus. “The cockroaches would tend to run away.”

Billing patterns

HCAI could deliver monthly reports to insurers on how much each clinic has billed them.

Integration with insurers

An automatic process for integrating treatment claims submitted via HCAI with insurer claims management systems could improve claims processing efficiency and free up adjudicators’ time.

Reducing the need for written comments

HCAI could offer descriptive treatment diagnoses and recommendations via drop-down menus. This would provide clinic staff and medical professionals with tools that clarify individual patient needs while speeding up the treatment form completion process.

“We are going to make sure we build this new HCAI system so that it has enough flexibility to accommodate all of these new features, not necessarily on Day 1,” says Bundus. “There will be a timetable. We want to make sure we build the foundation big enough that we can be sure we can fit in all of the information that we want. It’s more cost-effective to make the foundation large enough to begin with than to be constantly tearing down walls for additions.”

HCAI and the data bank were designed at the outset to ensure the privacy and security of individuals’ identity, health status and financial information, as required by law. So detection of dishonest claimants may be more difficult than in the case of individuals conspiring with medical facilities to commit fraud.

Meanwhile, lawyers Adam Kardash and Ruth Belcher of Heenan Blaikie LLP have reassured their corporate clients that privacy laws do permit corporations to erect a “strong and effective defense against fraud, identity theft and other illegal activity.”

Bundus says it was important to have Duncan highlight the value of a common electronic platform to track the treatment services for motor vehicle injuries. “We are pleased the government understands HCAI and realizes it does have the potential to combat fraud, while streamlining the claims management process.”