With the Affordable Care Act’s individual and family open enrollment period and no health underwriting for pre-existing conditions, health insurance companies are finding themselves receiving fraudulent and abusive enrollments. Health insurance companies are deploying a variety of measures to reduce fraud and abuse such as only accepting paper applications or requiring proof of residency and identity. While most of the tactics to filter out the fraudulent applications is occurring with off-exchange enrollments, some companies are starting to scrutinize enrollments through the federally facilitated market place exchanges run by Healthcare.gov.
New verifications to prevent fraud and abuse
Back in 2014 several of the health plans encourage Covered California to enact better verification of qualifying events that trigger a Special Enrollment Period (SEP). SEPs allow individuals and families who have a qualifying event to enroll outside of open enrollment. Typical qualifying events include moving to a new region or into the state, getting a divorce, marriage, and loss of employer based health insurance or Medi-Cal. Unfortunately, people were claiming qualifying events that they could not document.
As reported by Kaiser Health News, people will enroll under SEP, get the health care they need and then drop the insurance.
Last year Anthem Blue Cross and Blue Shield of California started accepting only paper application for the SEP.
Attached to the SEP had to be proof of the qualifying life event. Where once we had underwriting departments reviewing applications for pre-existing conditions, they are now combing through documents looking for fraudulent declarations. Undoubtedly the paper applications screen some those folks who are looking to take advantage of the system. But it is an unfair hurdle and one I tripped over for a client after the gentleman had a legitimate qualifying event of loss of Minimum Essential Coverage.
For off-exchange plans where the individual or family enrolls directly with the health plan, the insurance companies have modified their applications to reflect the variety of qualifying events that might trigger the SEP. Of course, during open enrollment any one can purchase a health plan. While completely legal, I had one gentleman who wanted to know if he could enroll his wife during open enrollment then drop the health insurance after a couple of months. The couple was already involved in a Christian health sharing ministry but it wouldn’t pick up the cost of the surgery for the wife’s pre-existing carpel tunnel syndrome.
Other forms of fraud and abuse revolve around identity, residency, and oddly enough, who is actually paying the health insurance premium. Health Net announced at the beginning of January that all applications for their PPO plans must be submitted on paper an accompanied by proof of residency.
Because Health Net plans are not available in all counties of California, I suspect they were receiving applications from individuals who really did not live in one of the designated counties of service. There are many people who wanted the Health Net PPO because the larger than average provider network being offered.
Cigna has gone one step further than most carriers and will be requesting proof of premium payment.
This might sound like an odd request until you realize the ways in which organizations can twist the system for their own benefit. The specter of fraudulent or abusive health insurance enrollment was brought to my attention when I was contacted by a substance abuse and addiction recovery facility. A nonprofit organization had offered to cover the cost of individual health insurance plans for their residents and had many of their clients enrolled in a health plan. The recovery facility contacted me because the nonprofit was threatening to cancel the clients’ health insurance if they didn’t receive services from the nonprofit’s sister company.
How providers game the new health insurance system
Upon further inquiry I learned many of the recovery facility’s residents had been enrolled outside of open enrollment, but there was no obvious qualifying event for these folks to be eligible for a health insurance outside of open enrollment. In addition, I learned that clients had only filled out part of the application and the nonprofit was retaining the member ID cards. In short, the nonprofit was dangling the continued enrollment in health insurance that was provided at no cost to the facility or residents on the condition that they received specific services from providers in cahoots with the nonprofit. This was classic fraud and abuse of the system.
The health insurance company was obviously reimbursing the provider connected with the nonprofit at rates for the health care services rendered at a high enough level to justify the expense of the health insurance premiums to the nonprofit. In other words, someone was making money for this seemingly altruistic act of covering the cost of the health insurance.
Third party premium payments are suspect
There was no indication that I heard that the services provided to the recovery house residents were not appropriate and therapeutic. Individuals in a fragile state of recovery from drug addiction are entitled and benefit tremendously from appropriate mental health services. However, whenever a third party, unrelated to the individual health plan member, pays for the health insurance red flags of possible abuse are raised. Only an audit of the provider would determine if there was over billing or fraudulent billing for services not rendered.
The overall result of such abusive practices by providers who are willing to pay health insurance premiums for patients for whom they are reimbursed services from the health plan is to have the insurance companies require proof of who is actually making the health insurance premium. While this may be an extreme measure on the part of some carriers, they need to protect themselves from possible fraudulent, abusive or wasteful claims. The reduction of fraud, waste, abuse helps the health insurance premiums remain stable for all the rest of the legitimate plan members.