Page 311 - Ebook health insurance IC27

Sashi Publications

However, these additional costs can be justified for several reasons. First, from the
insured's viewpoint, uncertainty concerning the payment of a covered loss is reduced
because of insurance. Second, the costs of doing business are not necessarily wasteful,
since insurers engage in a wide variety of loss prevention activities. Finally, the insurance
industry provides large number of jobs to large number of people.

Fraudulent Claims
A second cost of insurance is the submission of fraudulent claims. Moral hazard among
some of insured persons is substantially high. According to a study conducted by one of
the insurers in the region, the consumption of health care services among the insured
population is as follows:
n 10% of the insured persons use 50% of the costs
n another 10% use 20%
n and 50% use 30%
n while 30% use no health care

This shows that on average 20% of the population consume 70% of the medical insurance
costs. A portion of the losses incurred is expected to be illegitimate. A dishonest person
deliberately incurs aloss and then submits the claim to the insurerfor payment. Numerous
examples of fraudulent claims can be given. The following are some examples:
n Swapping membership cards with other family members or friends
n Frequent use of unnecessary medical services
n Exchange of drugs for other cosmetic items at the pharmacies
n Frequent use of unnecessary or excluded procedures. This is done by requesting

treating doctors to adjust diagnosis to justify these procedures

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