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Why Health Insurers Aren’t Tougher on Fraud: They Can Pass the Costs Off on You

Yuval Rosenberg

Large health insurance companies are not aggressive in cracking down on fraud, ProPublica’s Marshall Allen reports:

“Escalating health care costs are one of the greatest financial concerns in the United States. And an estimated 10% of those costs are likely eaten up by fraud, experts say. Yet private health insurers, who preside over some $1.2 trillion in spending each year, exhibit a puzzling lack of ambition when it comes to bringing fraudsters to justice.”

Fraud “is not a top priority” for insurers because they can pass the costs off to their customers in the form of reduced benefits and higher premiums and out-of-pocket expenses. And pursuing fraud cases more aggressively would be costly, hurting the insurers’ bottom lines — and potentially threatening their relationships with some providers they might need to keep in their networks to ensure their plans are attractive to employers. “So apparently, I learned, there’s a calculation that goes on: If, for instance, you’re the only neurologist in town, your fraud may be forgiven,” Allen writes.

One veteran insurance fraud investigator told Allen that investigators ignored suspect claims worth less than $300 because the companies had determined that pursuing those cases would cost more than they could recover. But fraudsters can easily figure out where to draw the line. One scam artist from Texas billed insurers in increments of $300 or less for more than four years, Allen reports, “and it added up to about $25 million.”

Read the full report at ProPublica.

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