Health Insurance Articles

How Fraud Can Affect Health Insurance Costs

2011-05-31

Fraudulent health insurance claims are a drain on the industry that affects the cost of premiums and adversely affect the delivery of effective healthcare. The more an insurance company pays for claims that do not benefit their covered beneficiaries, the fewer dollars available to treat illnesses and deliver treatment to patients who need legitimate care. While rising health insurance costs cannot only be attributed to cases of fraud, health insurance fraud is a serious legal concern that drains needed money from the delivery of care to the administrative costs associated with policing claims and detecting when some providers may be involved in criminal activity.

There are many ways to defraud insurance companies and there are many strategies employed by those who seek improper reimbursement. Healthcare services are translated into industry-standard code and submitted to insurers for reimbursement. Many of these transactions are conducted electronically, with computers running through the codes and paying claims automatically, based on the information provided. While this has increased efficiency in the business of paying justifiable claims, it has also presented an opportunity for abuse for unethical providers who use the system for their benefit.

Upcoding is the term that describes using a code that offers higher reimbursement for a service that would pay a lesser amount if the proper code was used to describe the provided service. Procedural codes have a set criterion that is meant to ensure accuracy to report the services provided. Procedures have codes assigned that are required to contain specific elements for the codes to be meaningfully employed. A procedure that does not contain all these elements is assigned a different code that will be reimbursed at a lesser rate. Office visits are coded according to the extensiveness of the patient's history, the thoroughness of an examination, the seriousness of the presenting condition, and the complexity of the medical decision-making needed to render a diagnosis and treatment plan. All of this is documented in the patient's record. If the documentation does not support the code used to describe the service, a code that often offers a lesser reimbursement most accurately describes what took place during the patient encounter. When codes are submitted for payment that is not supported by the medical record, upcoding has taken place, sometimes accidentally, often fraudulently.

Patients need to be aware of the medical reimbursement system in order to play an active role in combating health insurance fraud and keeping health insurance costs under control. When a claim is paid, insurers issue an explanation of benefits to the healthcare provider and to the patient. Patients should make sure the services charged match what they received.