Health insurance is a loss-making business for several general insurance companies in India. The incurred claims ratio (ICR) in the health insurance sector – defined as claims paid as a percentage of total premiums – is above 80%. The average ICR for general insurance companies’ health business in financial year 2015 was 79%, though down from 87% a year ago.
This means 79% of the total health insurance premium of Rs 4,615 crore (over US$677 million) collected by general insurance companies in financial year 2015 was spent on settlement of claims.
The performance of standalone health insurance companies stands in contrast with that of the health insurance business of general insurance companies. The incurred claims ratio of standalone health insurers in the same year was 62%, down from 66%.
So the ICR has fallen overall for the health insurance sector but the sharpest fall has been for those other than the stand-alone health insurance companies. Public sector companies continue to suffer from a high claims ratio.
The health insurance industry is plagued by fraud, waste and abuse of the service. As the figures show, the standalone health insurers have a better performance when it comes to tracking or preventing claims which would have otherwise been paid. Experts suggest the solutions lie in the substantial investments in technology by the specialized health insurers, enabling them to manage more critical processes in-house, rather than relying on third-party administrators (TPAs).
According to a recent report, about 15% of all health insurance claims in India are estimated to be fraudulent including internal fraud and intermediary fraud as well as claims or policyholder fraud.
The amount estimated to be lost in fraudulent claims ranges between Rs 600 crore to Rs 800 crore (US$89-117 million) annually.
A common technique of fraudsters is medical ID theft, where the claim funds are paid into the bank account of a fraudster, through identity theft. The insurer’s procedures can allow the policyholder to send a scanned image of his/her cheque, with bank account details for ID purposes, which can be manipulated by the fraudster.
Other than forged documents, other common sources of fraud are from the healthcare providers themselves with cases of ‘upgrading’ (billing for more expensive treatments than those provided), ‘phantom billing’ and ‘ganging’ (billing for services provided to family members or other individuals accompanying the patient, but not delivered).
Claims fraud is a threat to the viability of the health insurance business. Health insurers regularly crack down on unscrupulous healthcare providers. But the fraudsters continually react to exploit any new loophole with forged documents purporting to be from leading hospitals.
Fraud can happen in many forms, from identity theft (with or without the approval of the insured), to unethical healthcare service providers billing for services not rendered, to operations of sophisticated criminal gangs.
The challenge for health insurers is to detect and prevent fraud and abuse without causing inconvenience for honest claimants. The way forward for health insurers is to move away from abuse and fraud detection, towards prevention, taking action before a claim is paid and putting an end to the ‘pay-and-chase’ approach.
As a provider of products and services that address evolving client needs in the risk sector, LexisNexis® Risk Solutions believes this objective for the health sector rests on real-time access to vast and diverse information sources. This approach combines ID verification and linking technology to identify patterns of likely fraud before they arise.
According to our recent fraud mitigation white paper, fraud and abuse prevention can be accomplished by focusing on five key factors to build a complete and comprehensive solution.
Make the best use of information. Health insurers’ processes must be data-driven. Databases must be as accurate and up-to-date as possible, and the depth and breadth of information available must be sufficient to help them make the best decisions.
When claims data is juxtaposed with other information, including external data such as public records, a more complete and accurate picture of an individual or organisation is revealed. This enables insurers to conduct fact-finding research, due diligence and fraud investigations more efficiently and cost effectively.
Identity management means using knowing who you are dealing with, using sophisticated control systems to manage access to critical information.
Medical identity theft continues to rise and the consequences for honest victims are deep and wide, from loss of benefits to erroneous information making its way into the victim’s medical records. Medical identity theft can also arise internally in the health system, with employees channeling information to individuals for personal use and to organised gangs. Information management enables individuals and employees of healthcare service providers to be tracked and verified.
Insurers have traditionally relied on post-payment claims solutions, making payments and then attempting to recover funds found to have been paid in error or tied to fraud or abuse.
Forward-thinking insurers will increasingly take a multi-layered approach that uses predictive analytics and sophisticated modeling capabilities to identify fraud and abuse patterns and risk indicators as they emerge – and before a claim is paid.
Social media analytics
People are connected through complex, intersecting clusters of relationships. In the context of fraud and abuse, finding those clusters and dissecting them with social network analytics can yield valuable information for insurers. This dissection is becoming easier with the advent of highly-sophisticated social networking analytics processes, essentially machine reading of images and text from social media websites. The best applications of social network analytics put intelligence gathering in a relationship context that highlights associated risk, displaying the degree of association and confidence in each linkage and other information that could prove valuable to research and investigations.
Even if insurers have the right amount of accurate data – and the appropriate data – a secure and optimized identity management process, and both predictive and social networking analytics, they still need a way to make them function as integrated parts of a whole rather than individual solutions that are independent of one another.
Today’s advanced linking technology utilises a unique and persistent identifier that guards against false positives, providing more precise, relevant information in less time. It is capable of intelligently analysing billions of records to identify, analyse, link and organise information quickly and accurately for optimal results.
Fraud, waste and abuse has a crippling effect the health insurance industry. Big data offers some promising opportunities. By analysing all of the disparate data spread across the healthcare system, big data analytics helps organizations root out fraud before it happens.
A contributory database is an excellent stepping stone in the fight against FWA. A contributory database allows insurers to check for misrepresentations, existing policies, previous claims, lifestyle and other indicators at the point of underwriting or claims. Insurers are unable to do so at this time. A policy and claims database will leverage the power of pooled data and provide insurers with actionable insights.
LexisNexis® provides big data analytics that leverages public records and thousands of legal, business and news sources. This information is critical to answering the question at the centre of the health care system: can I trust this healthcare provider? By bringing tens of thousands of disparate sources together through big data, we help healthcare providers resolve, verify and authenticate identity with an extremely high degree of confidence.
Follow the link to the LexisNexis Risk Solutions India website to find out more about how we support insurers.