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California Advances Bill to Beef Up Anti-Fraud Efforts

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The California Assembly has passed AB 2138, a bill sponsored by California Insurance Commissioner Dave Jones and the California Department of Insurance (CDI) involving doubling assessments to health and disability insurers so there would be more money to fight fraud, which is very costly for insurers–more than $100 billion a year, according to one report. 

Specifically, it would increase the current annual assessment of 10 cents per insured person paid by health and disability insurers to up to 20 cents. 

The proceeds would help increase funding to local district attorneys so that they can investigate and prosecute health and disability insurance fraud throughout the state. District Attorneys often don’t have enough money to investigate all cases they could, especially when local governments are cash-strapped. 

From 2007 to 2010, the CDI received more than 6,000 health and disability suspected fraudulent claims statewide, but only a fraction of those claims were referred to the local district attorneys, the CDI said. The local district attorneys were only able to conduct 656 investigations from these suspected fraudulent claims, resulting in 221 arrests and 184 convictions with an annual average of $223 million in chargeable fraud.

The legislation has been a long time coming. 

Back in May 2008, CDI’s Advisory Task Force on Insurance Fraud, which included law enforcement officials, insurance industry representatives, and consumer advocates, completed a comprehensive report of the anti-fraud insurance programs in California. 

The report found that the health and disability insurance lines had insufficient policy assessments to support a statewide anti-fraud effort. This led to the recommendation to increase funding that is called for in AB 2138.

“Health and disability insurance fraud seriously hurts policyholders, providers, insurers, and ultimately California’s economy,” said Jones. 

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“Unfortunately, this type of fraud is increasing in sophistication, complexity, and volume. This higher assessment will provide much needed resources to fight this growing problem, especially in light of federal health care reform,” Jones stated.

Indeed, fraud is a nationwide problem. The Patient Protection and Affordable Care Act (PPACA), is foremost on many state insurance regulators’ minds now that a Supreme Court decision is coming soon.  Some states, like California, are gearing up with help from the NAIC, while others are rejecting any efforts to conform.

The Senate Finance Committee held a hearing on Tuesday, April 24, 2012 titled “Anatomy of a Fraud Bust: From Investigation to Conviction,” sponsored by Committee Chairman Senator Max Baucus, D-MT.

“Highlighted for discussion was a recent nationwide health care fraud case involving 91 defendants and nearly $300 million in fraudulent billing. The development of this case, made public in September 2011, was offered as a successful example of collaborative work among government agencies responsible for combating health care fraud including, the Centers for Medicare & Medicaid Services (CMS), the U.S. Department of Health and Human Services, the Office of Inspector General (HHS-OIG), and the U.S. Justice Department (DOJ),” said the National Health Care Anti-Fraud Association (NHCAA).

NHCAA counts among its members an overwhelming majority of the nation’s health insurers and frontline government agencies committed to combating health care fraud.

In his opening comments, Baucus noted the advances that have been made in identifying and fighting fraud in the Medicare program, highlighting the tools and resources enabled by the PPACA, NHCAA noted.  

 Now, back in California, AB 2138 now moves to the state Senate for consideration.