Page 244 - Ebook health insurance IC27

The Insurance Times

It is not only creating a hole in the insurance companies pocket but affects all the
stakeholders and our healthcare system. It not only invites higher premiums but leads to
restricted benefits, higher insurance co-payments, potential of denial for future coverage,
higher service taxes and also impact the quality of care.

Classification of Frauds

Healthcare claim fraud has both financial and medical aspects. It has been observed
that the growth rate of fraud claims is higher than the advances in healthcare delivery
system. Fraud claims are wide-ranging, from misrepresented services, services not
rendered and services rendered to "rented" patients, to a broad spectrum of revenue-
enhancement mechanisms.

A) Internal and External
Internal frauds are those perpetrated against an insurance company or its policyholders
by agents, managers, executives, or other employees.

External fraud schemes, on the other hand, are directed against a company by individuals
or entities as diverse as medical service providers, policyholders, beneficiaries, medical
consumable vendors, etc.

B) Hard and Soft Fraud
Hard fraud is a deliberate attempt either to stage an event or an accident, which requires
hospitalization or other type of loss that would be covered under a medical insurance
policy.

Soft fraud, which is sometimes called opportunity fraud, occurs when a policyholder or
claimant exaggerates a legitimate claim. Soft fraud may also occurwhen people purposely
provide false information in regard to the pre-existing illness or other relevant information
to influence the underwriting process in the favor of the applicant.

248 Guide for Health Insurance