Government is putting tremendous pressure on health insurance companies to lower down the cost of insurance. Health insurance companies lose a huge amount of money in dealing with the case of frauds, which gets reflected in higher cost of insurance. It has been estimated that this loss is about 3% of their total spending on health care, which is proving to be a great financial burden to insurance companies.
Historically, the insurance companies have followed the pay and chase method while dealing with insurance claims, in which the company reviewed the insurance claims after reimbursement to detect any fraud in the claim. If they later found that certain false papers have been submitted or some other fraud has been done by the claimant, they then tried to recover the money. This was not an easy task as it proved to be expensive, lengthy and less effective. Many a times, the company had to incur huge costs in getting the amount back through court proceedings.
To deal with the fraud case in insurance claims, insurance companies are now switching over to a new method of detecting and combating fraud which they argue is less expensive but more cost effective. In the new method, health insurance companies are following the procedure adopted by companies in financial services, such as credit card companies, who first try to detect the risk involved in a particular case before issuing the credit card to a customer.
To assess the risk profile of a particular individual, the credit card companies analyze information stored in a huge database and then generate a score for each applicant. The higher the score, the greater is the risk for any fraud or some other abuse of the card. The health insurers are also scanning huge volume of data on claims and putting a red flag on claims before they are reimbursed. For example, if a particular claim has charges for procedures that are believed to be expensive based on certain records in the database of the insured, the claim will be red flagged with a high score requiring further investigation by the insurer.
Such a move by some insurance companies has also invited a lot of criticism. It is argued that scoring system is good for financial services sector but is not applicable to the healthcare industry. Billing fraud is difficult to establish and is a subjective matter, as a claims for an expensive procedure may be the result of fraud, but it can also be due to an unusually good medical care. This argument is countered by the advocates of the new method on the grounds that the new method only helps them identify potential frauds and they are not jumping to any conclusion based on the this data alone.
There are also issues of privacy of medical data if the investigation is carried out by an investigating firm that is a third party. The companies do claim that they keep the identity of the claimant undisclosed in such process, but it is difficult to say what kind of checks and security systems are put in place by the company to ensure that the privacy of medical data is not violated.
Whatever the argument between the developers of health insurance modules and experts from different fields may be, but the fact remains that this procedure can delay claims made by insurers and even expose their medical records for examination by others, though at reduced cost of insurance. Hence, if your claim is delayed or your medical report is exposed, blame it to the new score system of detecting fraud adopted by health insurance companies.