Enrollment fraud is a lesser known type of insurance fraud that carries serious implications for health plans. SmartBrief spoke with LexisNexis® Risk Solutions Director Richard Morino to learn more about the issue and how health insurance leaders can protect their companies.
How common and costly is enrollment fraud?
Claims-based fraud is perceived as an industry problem, which has resulted in collaborative efforts and a feeling that we are all in this together. Enrollment fraud, conversely, is often seen incorrectly as a systemic failure. For this reason, there isn’t the same broad consensus on the impact.
Anecdotal information suggests enrollment fraud happens relatively infrequently, but the financial impact is much larger than for other types of fraud. This is because these schemes are typically organized with the intention of committing fraud over and over again. Some feedback indicates up to 10% of claims spending comes from new enrollees, so it is critical that these new enrollees be verified.
What should health insurance professionals ask when looking for enrollment fraud?
Just like claim-based fraud is found by observing the codes submitted, enrollment fraud is found by examining the identities being enrolled. Initial questions include:
- Is this a real person?
- Has this Social Security number been associated with other individuals?
- Does this individual live in the state where they have applied for benefits?
These questions often lead to discoveries around fake identities being used to bill for services never rendered at such facilities as rehab or drug testing centers. Other examples include extended relatives being added.
When you look at enrollment data, what specific items are potential red flags that signal possible fraud?
Things our clients have focused on include:
- Does this identity exist, or was it fabricated for the purpose of committing fraud?
- Is the person associated with the identity deceased?
- Does the enrollee actually live in the state where they are applying for coverage?
- Special enrollment periods.
- How recently did the qualifying event occur?
- IP address.
- What was the location of the device used to apply for coverage? Was it domestic or abroad?
What does an effective enrollment verification reference database look like, and how should health plans be using them?
Effective enrollment verification requires health plans to look at identity data that is typically not found in claims or enrollment data. This means evaluating outside data sources that can supply:
- Updated contact information for members, as well as information on relatives.
- Fields in a database to flag individuals with known risks.
- A data model that supports both scores and text for risk data.
How does LexisNexis support a systematic approach to fighting health insurance enrollment fraud?
LexisNexis identity solutions for health insurance enrollment fraud consist of three components:
- An overall risk score that indicates how much of the submitted information was verified.
- Risk indicators that spell out why submitted data may carry risk.
- Demographic updates such as new or additional phone numbers, alternate or prior addresses and alternate last names associated with the identity.
Our clients typically start using the score and risk indicators for retrospective lead generation. Once comfortable with the results, our clients often deploy solutions prospectively. An example of such a case might involve a low verification score and a risk indicator of “deceased.” In the case of a new enrollee with these indicators, a client might choose to stop all claims prior to payment and route the case for review.
Richard Morino is director of LexisNexis® Risk Solutions, where he works with strategic health plan and system clients to identify and manage risk.