Insurance fraud is big business. Many view it as a victimless crime, a low-risk, high-reward harmless prank. In reality, we are all footing the bill and can all be a part of combating the problem.

Big target

The insurance industry consists of more than 7,000 companies that collect more than $1 trillion in premiums each year. The massive size of the industry contributes significantly to the cost of insurance fraud by providing more opportunities and bigger incentives for committing illegal activities. Fraud is the second most costly white-collar crime in America behind tax evasion.

While prescription drugs which are legitimately prescribed by doctors serve an important role in health care, when used incorrectly, they can become dangerous and addictive. Too high of a dose or interaction with other drugs or alcohol may prove deadly.

• Drugs kill one person every 14 minutes
• In recent years, more people died from the abuse of prescription drugs than died in traffic accidents
• Opioid painkillers cause more overdose deaths in the U.S. than overdoses from heroin and cocaine combined

Drug diversion is a medical and legal concept involving the transfer of any legally prescribed controlled substance from the individual for whom it was prescribed to another person for any illicit use. In short, drug diversion is any criminal act involving a prescription drug and it has a massive impact. More than 40 people die every day from misuse of painkillers and more than one million people a year are seen in ERs due to improper painkiller use.

Drug diversion drains health insurers of up to $72.5 billion a year, including up to $24.9 billion annually for private insurers. This includes insurance schemes and the expensive hidden costs of treating patients who develop serious medical problems from the abuse of narcotics obtained through diversion.

There are a number of schemes used to perpetuate drug diversion.

• Phantom patients and/or phantom injuries
• Doctor shopping
• Getting the same prescription too often or too soon
• Stolen prescription pads
• Signing or changing a prescription
• Stealing or buying medications from others

Case of Note

On May 6, 2019, the Department of Justice and the U. S. Attorney’s Office for the Northern District of Alabama issued a news release regarding 10 defendants charged in a 103-count indictment related to prescription drug fraud. The release said, in part,

“Health care fraud continues to impact the cost of health care in America and is amplified when trusted professionals abandon their ethical code in the name of greed. These unethical practices are damaging the lives of individuals and families throughout this country,” said Thomas J. Holloman, Special Agent in Charge for IRS Criminal Investigation. “IRS CI will continue to work closely with our law enforcement partners in an effort to prosecute those abusing our health care system for profit.”

The indictment describes a multi-faceted health care fraud and mail fraud conspiracy and scheme in which the defendants billed for medically unnecessary drugs. Aspects of the scheme included:

• paying prescribers to issue prescriptions;
• directing employees to get medically unnecessary drugs for themselves, family members and friends, to be filled and billed by Global Compounding Pharmacy and other related pharmacies;
• altering prescriptions to add non-prescribed drugs including controlled substances such as Tramadol and Ketamine;
• automatically refilling prescriptions—often as many as 12 times—regardless of patient need;
• routinely waiving and discounting co-pays to induce patients to obtain and retain medically unnecessary drugs;
• and billing for drugs without patients’ knowledge and hiding that conduct from patients by mailing the drugs to an employee’s home.

According to the indictment, when prescription drug administrators attempted to police this fraudulent conduct, the defendants evaded and obstructed those efforts by providing false information in response to audits and diverting their billing through affiliated pharmacies. In executing the scheme, the defendants billed health insurance plans and their prescription plan administrators over $200 million and were paid over $50 million.

Protective’s Special Investigations Unit

Within the Claims Department at Protective Insurance is a Special Investigations Unit. This group has received extensive training in identifying the red flags that may indicate fraud. Protective also employs in-house nurses who assist with reviewing claims. Fraud red flags can include:

• Medical treatment and prescriptions that continue for an unusually long period of time
• More than one provider is billing for the same medication
• Exam results do not indicate the need for prescription medications
• Over the course of the treatment plan, medications do not change
• Provider only prescribes highly addictive drugs
• The first dosage for the prescription is high compared to the recommended starting dose for the medication
• Injured worker isn’t offered any other options as an alternative to the medication

If you suspect some type of fraud is in play, contact your Protective Insurance adjuster who will refer the case to the Special Investigations Unit. They can review the file to make sure your employee is being treated properly.