ITIJ Cost Containment Review 2019

June 2019 Issue

COST CONTAINMENT

International Travel & Health Insurance Journal

R E V I E W

Medical Bills - P04

Removing the ‘surprise’ element

Mexico & The Caribbean - P20 Cost control efforts

Industry Voice - P10

A Joint Effort - P14

prevention

containment tool

From loss compensation to loss

Fraud detection as a cost

Contents

EDITORIAL COMMENT

COST CONTAINMENT REVIEW

Cost containment is key to many businesses in the global travel and health insurance industry, whether related services are their core offering or simply part of their processes. Without cost containment measures and structures in place, travel and medical insurance products wouldn’t be able to exist as they do. In this issue, we look at some of the ways in which approaches to cost containment have changed in recent years and we assess current thinking on hot topics related to cost containment efforts in different parts of the industry and different parts of the world.

Our feature on ‘surprise’ medical bills (p. 04) takes an in-depth look at some of the hidden extras being billed for in the US at high costs and how the determination to reduce or eliminate such costs is being taken up by senators, legislators and even President Trump in the run-up to next year’s presidential election.

Elsewhere, we focus on some of the issues still being seen in Mexico and the Caribbean around inflated billing and even fraudulent medical practices (p. 20). Sharing knowledge of their

CONTENTS

Taking the ‘surprise’ out of medical bills - p.04 Uncovering hidden extras and looking to the legislators

Industry Voice: The big shift p.10 From loss compensation to loss prevention

Editor-in-Chief: Ian Cameron Editor: Sarah Watson Copy Editors: Mandy Langfield, Stefan Mohamed, Lauren Haigh & Robyn Bainbridge Contributors: Christian Northwood & Milan Korcok Designers: Robbie Gray, Tommy Baker, Will McClelland Advertising sales: James Miller, Kathryn Zerboni Contact: Editorial: +44 (0)117 922 6600 ext. 3 Advertising: +44 (0)117 922 6600 ext. 1 Email: mail@itij.com Web: www.itij.com

Published on behalf of: Voyageur Publishing & Events Ltd,

Voyageur Buildings, 19 Lower Park Row, Bristol, BS1 5BN, UK The information contained in this publication has been published in good faith and every effort has been made to ensure its accuracy. Neither the publisher nor Voyageur Publishing & Events Ltd can accept any responsibility for any error or misinterpretation. All liability for loss, disappointment, negligence or other damage caused by reliance on the information contained in this publication, or in the event of bankruptcy or liquidation or cessation of the trade of any company, individual or firm mentioned is hereby excluded. The views expressed do not necessarily reflect those of the publisher.

experiences, we talk to industry experts about this ongoing situation and discuss how best to stay ahead of the game in the fight to contain costs in the region. Fraud is also the topic under discussion in our article on industrywide tactics being used to fight unscrupulous activities and keep claims costs manageable (p. 14) – as digital touchpoints become the norm, technology has adapted to tackle the many faces of fraud in encouraging ways.

And in our Industry Voice this issue (p. 10), we continue our tech talk, with insights from a digital transformation expert on how to equip yourself with the right tools and strategies to make the shift from loss compensation to loss prevention. Incentivisation and agility is key.

I hope you enjoy this issue!

Sarah Watson Editor

A joint effort - p.14 Adapting approaches to fraud detection to manage costs

Tackling fraud in Mexico and the Caribbean - p.20 The fight against inflated billing

Printed by Pensord Press Copyright © Voyageur Publishing 2019.

Materials in this publication may not be reproduced in any form without permission INTERNATIONAL TRAVEL & HEALTH INSURANCE JOURNAL ISSN 2055-1215

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COST CONTAINMENT REVIEW

Feature

TAKING THE ‘SURPRISE’ OUT OF MEDICAL BILLS Milan Korcok explores the treacherous world of unexpected, unaffordable medical bills, and looks at what can be done to tackle these problems

F

or cost containment entities working in America’s tumultuous healthcare marketplace, finding the true cost of specific medical goods or services can be likened to a shell game, or ‘thimblerig’, as it has been known for several centuries: keep your eyes on the moving cups, place your bets and hope for the best. Not the most scientific way of settling on a fair price for an emergency gall bladder removal or cardiac catheterisation – but in the arcane machinations of managed care, ‘fair’ is in the eye of the beholder.

How else can one explain a surgeon billing US$48,983 for a total hip replacement in New Jersey for which the federal Medicare programme would have paid $1,543; or an outpatient office visit valued by Medicare at $152 being billed in Massachusetts at $6,205?

(Data from Americans’ Health Insurance Plans (AHIP)).

Bizarre? Unexplainable? Certainly. But not uncommon, and especially treacherous for foreign patients who, though insured for travel to the US, are unaware that some horrendous surprise bill for services received in an emergency room full of unfamiliar faces may follow them home a couple of weeks or months later.

No benchmarks Most Americans covered by private insurance, or even government-administered plans such as Medicare, are aware that there are limitations to their benefits, that they are subject to deductibles and co-payments and that their choice of healthcare providers is also limited – some more than others. They understand that in the world 4 |

of managed care, going out-of-network may cost them more than what their insurer is prepared to pay. But do they know how much more?

According to research published in the Journal of the American Medical Association in 2017, anaesthesiologists, emergency physicians, pathologists and radiologists (hospital-based specialists) charge more than four times, on average, what Medicare – the federally administered programme for the elderly and disabled – pays for similar services. This often leaves privately insured consumers stuck with ‘surprise’ medical bills that are much higher than they anticipated. Private insurers often use the rates Medicare pays hospitals and physicians only as benchmarks – usually supplementing them by 25 per cent or more – or a lot more – when negotiating reimbursements with hospitals and other provider networks, although providers have traditionally claimed that Medicare does not cover their costs, just as Medicare beneficiaries may have substantial deficits to cover if they count only on that unadorned programme for their healthcare.

What comes as an even bigger surprise is that this can happen even to patients attending hospitals in their own network. And it’s happening more and more often. A 2018 survey by the University of Chicago’s National Opinion Research Center (NORC) revealed that 57 per cent of American adults have been surprised by medical bills they thought were covered by their insurance. And in 2017, the Federal Trade Commission reported that onefifth of emergency room admissions triggered ‘surprise’ bills.

Feature

COST CONTAINMENT REVIEW

For cost containment entities working in America’s tumultuous healthcare marketplace, finding the true cost of specific medical goods or services can be likened to a shell game Hidden extras Emergency rooms are busy places, with a lot of white coats rushing by, many of them worn by physicians who are neither hospital employees nor participants in the patient’s insurance plan.

And it’s happening also beyond emergency rooms – in operating suites and non-emergency areas of the hospital. It seems that many physicians listed on invoices never come face-to-face with their patients. And for insurers and the cost containment specialists interceding on their behalf, this is where the mystery of those mega-bills gets really murky.

In one case reported by the New York Times, an insured patient undergoing herniated disc surgery was unaware that one of his assisting surgeons, whom he didn’t recognise and had never met, billed him $117,000 for his work as an ‘assistant’ to the in-network surgeon who did the actual surgery. There was no problem with the patient’s primary surgeon who was ‘in-network’ and who did accept the negotiated fee that he was contracted for ($6,000). But his professional colleague would not relent. Fortunately for the patient, his insurer, Anthem Blue Cross Blue Shield, ultimately paid out, even though they said it was not their responsibility. The patient ended up paying only his $3,000 deductible.

The Kaiser Family Foundation, a politically non-aligned think-tank covering health affairs, noted in 2016 that charges from out-of-network providers impacted one-third of non-elderly adults struggling with medical bills, and seven out of 10 individuals with unaffordable outof-network medical bills didn’t know that the healthcare provider who treated them was not in their plan’s network. It revealed further, that not only were most of these surprise bills from anesthesiologists, radiologists, pathologists, and surgical assistants, but in some cases from entire departments in hospitals operated by subcontractors who didn’t participate in the same network as the hospital, such as emergency room staff and laboratory workers.

»

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COST CONTAINMENT REVIEW

Feature

Legislators looking for their own niche Inevitably, the scope and frequency of these mysterious billings caught the attention of legislators, first at the state level, and more recently federal politicians angling for pole position in the 2020 presidential election year healthcare debate, which has already started out to be acrimonious.

In 2015, New York state enacted its Emergency Medical Services and Surprise Bills law to address growing complaints about out-of-network billing abuses. Several states had already enacted some provisions to protect their residents from unknown or unauthorised medical billing circumstances, but not as comprehensively as New York, which limits patients’ costs for unexpected bills to what they would normally owe in-network. And to fortify their muscle in enforcing the law, they went to America’s national pastime – baseball arbitration – to find the mechanism to do it. More on this later.

In the run-up to the law, New York’s Department of Financial Services (DFS) reported that of 2,000 complaints involving surprise medical bills, the average out-of-network emergency bill was $7,006 – of which insurers paid an average of $4,228, leaving consumers on the hook for ‘$3,778 for an emergency in which they had no choice’.

The DFS also reported that out-of-network assisting surgeons called in without the patients’ knowledge billed $13,914 on average – of which insurers paid an average of $1,794; and surprise bills by out-of-network radiologists averaged $5,406, of which insurers paid an average of $2,497.

To date, about one-quarter of all states have

6 |

enacted some form of surprise medical bill law – some more, some less muscular than New York’s, but it’s noteworthy that these state laws only apply to plans that are state-regulated and that still leaves out the pool of large employersponsored self-insured plans that cover most working American adults and their families. They come under federal regulation.

According to Kaiser Family Foundation, 94 per cent of employers with 5,000 or more workers self-insure, and 156 million people are covered by employer-sponsored plans. This makes employersponsored insurance by far the single largest form of health coverage in the country, followed by Medicaid, with 74 million.

Cut out insurers?

This may explain why when Senator Kamala Harris of California, a front runner so far in the growing gaggle of 2020 presidential candidates, blurted out that she would eliminate all private insurance from America’s healthcare system in favour of full-bore government financed cover, other Democrats rushed to explain that she didn’t really mean what she said, and within hours of issuing that pronouncement, Senator Harris herself explained that her thoughts were misconstrued.

It turns out that health insurers are among the biggest contributors to Democratic candidates – and election season is here.

Nonetheless, the issue of erratic medical billing has caught fire with federal-level legislators and with President Trump who announced in January his intention to stop ‘surprise’ medical billing.

Already, several ‘surprise’ bills have been launched in the Senate, some of them bipartisan – true rarities in this fractious Congress. The ‘No More Surprise Medical Bills Act of 2018’ gained national attention at President Trump’s State of the Union address in February when its sponsor, Senator Maggie Hansen, brought along guest Donna Beckman, who had recently received a ‘surprise bill’ for $1,648 from an out-of-network doctor who visited her for five minutes to see how she was doing after a quick visit to the Emergency Room.

Hassan’s bill would prohibit hospitals and

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COST CONTAINMENT REVIEW

doctors from charging out-of-network fees and would require hospitals and doctors to give patients verbal and written consent at least 24 hours ahead of time if any services were to be

… it would, for the first time, give cost containment entities real, tangible figures to work with in negotiating fees with hospitals and doctors in any given geographic area at any given time

out-of-network. And if timely consent was not obtained, the provider could charge no more than for similar services performed by an innetwork hospital or doctor.

Take me out to the ball game The bill also requires that if the final tab remains contended, it’s time to go out to the ballpark and settle the difference the way millionaire baseball players settle their salary demands with their billionaire team owners. It’s called Baseball Arbitration and it has become a staple in America’s business world.

In the simplest explanation possible, each party in the dispute (it could be a physician vs a patient, or an insurer vs a hospital, or some variant) submits a final monetary offer to an arbitrator with knowledge about ‘the game’ –

In or Out of Network This is how one insurer describes the difference to its members.

Let’s look at a $825 charge for a certain type of doctor’s visit:

In Network

Out of Network

The doctor’s bill is $825 for doctors

Doctor’s bill is $825. Our out of

in our network for this type of visit.

network allowance for this service is

We’ve contracted a price of $500 so you

$400. The doctor looks to you for the

get a discount of $325 to start

rest - $425.

This is called balance billing.

Your cost so far: $0 Your cost to far: $425 You pay your deductible for network care: $50.

You pay your deductible for out-ofnetwork care: $100. Our deductibles for

$500-$50 leaves $450.

out-of-network care are higher.

Your cost so far: $50.

Your cost so far: $525 ($425 + $100)

Now that you’ve met your

Now that you’ve met your deductible

deductible, we pay 80% of the

your plan pays 60% of the remaining

of the rest. In this case that’

$300. That’s $180.

$450. Plan pays $360

(80% of $450).

You pay the other 40% of $300 or $120.

You pay 20%, or $90.

This is co-insurance. We pay a smaller

This is co-insurance

percentage for out of network. So your coinsurance is higher.

Your total: $140 ($0 + $50 + $90)

Your total: $645 ($425 + $100 + $120)

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the presumption being that each is incentivised to make a reasonable offer as the arbitrator is unlikely to choose an unrealistic one. The arbitrator considers all the variables in the argument and makes a binding decision on the monetary issue alone – final, no modifications, no conciliations, negotiations or appeals.

And most importantly, no lengthy and costly court cases.

Significantly, under Hassan’s bill, the arbitrator would be instructed to be guided by actual Medicare, as well as negotiated network rates, and disregard the inflated hospital retail ‘chargemaster’ fees when determining their final decisions. All hospitals have confidential chargemasters hidden away that list the retail price for every item and service in their inventory of goods and services (like the $7 Tylenol tablets), which they use as ‘starting points’ in their negotiations with insurers and other payers. But even then, nobody but the

To date, about onequarter of all states have enacted some form of surprise medical bill most innocent novice pays retail.

Furthermore, a companion bill also introduced in the Senate would allow states to restrict their arbitrator to choose between only three options in their rate setting – 125 per cent of the Medicare fee-for-service rates set by CMMS (supplemented by some rural area add-ons), 80 per cent of the usual and customary rates (UCR), based on community area charges, or the insurer’s in-network contracted rates. This takes a lot of wiggle room out of negotiators’ options when hammering out contracts or negotiating settlements of charges already submitted – for both parties.

If this were actually enacted (and that’s a longhaul view) it would, for the first time, give cost containment entities real, tangible figures to work with in negotiating fees with hospitals and doctors in any given geographic area at any given time: a golden chalice for cost containment professionals (in the US and abroad) who have been thimblerigged in America’s healthcare arena for many years.

It would also give Medicare rate setters big leverage in setting fees that are actually applicable to the ‘real world’ of America’s unreal healthcare cost structure. But then, this is only the beginning of the 2020 election marathon. n

Contents

COST CONTAINMENT REVIEW

‘’THE SCIENCE OF ASSISTANCE’’ ‘’THE SCIENCE OF ASSISTANCE’’

Lorem Ipsum Lorem Ipsum

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Industry Voice

THE BIG SHIFT: FROM LOSS COMPENSATION TO LOSS PREVENTION Being able to take tasks, which resulted in limited ability to utilise data collected to drive improvements in the quality of risks underwritten. However, to avoid costly claims, mitigate risk, Vlad Nanu advises on how to equip and meet the growing expectations yourself with the right tools and strategies of customers and shareholders, to make the shift to loss prevention – an insurers are now looking to new technologies to drive their loss essential part of staying ahead of the game prevention activities.

One approach is the use of data tracking Prevention is better than cure. For centuries technology by health and car insurers. Smart we have tried to not just cure illnesses, but devices allow customers to lower their health stop them from occurring in the first place. insurance premiums through fitness tracking, The insurance sector is looking to emulate and telematics technology enables drivers to this approach and is shifting focus from secure better premiums for car insurance by loss compensation to loss prevention, where driving more carefully. However, the impact technological innovation is underpinning this of this type of technology will be much farther shift and transforming the value proposition. reaching. Insurance is a data-driven industry Historically, the activities surrounding loss and the ability to collect a substantial amount prevention were manual, time-consuming

10 |

advantage of all this data and proactively engaging policyholders in loss prevention will be essential to staying ahead

of information and process trends quickly will greatly impact the future of the sector.

Traditionally, assumptions have been made based on demographics and geography; however, incentivising behaviour has driven changes. In the health insurance industry, providers have offered fitness tech alongside an incentive to drive users to a healthier lifestyle, reducing the risk they will claim on their policy.

Industry Voice

The potential for this type of incentivised loss prevention is huge. Key technology that insurers will need to be aware of includes: •

Wearable or personal technology – ‘fit tech’ allows monitoring of heart rate, steps walked and a variety of healthrelated metrics.

•

Vehicle monitoring – ‘black boxes’ are no longer confined to aircraft. Commercial and personal vehicles can now monitor braking, speed and distances travelled, meaning cars, ships and other methods of transport can be tracked and assessed.

•

•

Property sensors – such as those in factories, warehouses or offices and in-home sensors, including ‘smart thermostats’, security technologies, such as alarms and cameras, and industrial control systems.

Geographical Information Systems – geophysical, topographical, climatological and hydrological data combined with information about utility grids and flight paths, which could include drone and satellite imagery.

COST CONTAINMENT REVIEW

From shipping companies installing breathalysers to ensure crew are sober, to an oil rig using virtual reality to train employees in a danger-free way, there are so many ways that tech will undoubtedly impact the way we calculate risk and, therefore, insurance. The only limit will be the limits of insurers’ imagination.

With the internet being integrated into more and more consumer tech, it’s not inconceivable to envision a future in which our bed logs how much time we are sleeping, our freezer is aware of the amount of ice cream we consume and our fitness app monitors how much we exercise.

For the insurance sector, embracing new technological advancements will need software developed to handle the vast amount of data

and make premium adjustments based on the information gathered. This technology also allows for: •

•

•

•

A more valuable and transparent relationship between insurers and their customers, and a reduction in the frequency and severity of losses through data analytics.

Faster, more accurate pricing and underwriting through real-time access to online surveys and reports.

Integrated access to business risk information and surveys, which provide valuable insights into common denominators and allow the creation of targeted loss prevention activities.

The integration of compliance management to ensure processes and individual roles meet not only legal and regulatory requirements, but also those pertaining to the insurer.

Being able to take advantage of all this data and proactively engaging policyholders in loss prevention will be essential to staying ahead.

The more agile, forward-thinking insurance brokers and underwriters will have a huge advantage over those stuck in the traditional mindset of loss compensation. n

BIO Vlad Nanu is Co-CEO of Amdaris.

Vlad directs daily operations and oversees short-term and long-term business strategies for Amdaris, which specialises in project management for software development and integration, collaborating with clients to provide solutions that deliver against each unique requirement.

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Feature

A JOINT EFFORT The ever-prevalent threat of insurance fraud drives the industry’s continuous development of tools

designed to counter such unscrupulous activities, but this can be an expensive business. Robyn Bainbridge investigates how the travel insurance industry is adapting its approach to effectively manage cost containment through fraud detection

T

ravel insurance is eternally adapting to meet the growing needs of a mobile, demanding population. But with increased market potential, there inevitably comes a heightened opportunity for fraud and double-dealing, and this can lead to inflated costs for insurers and hiked-up premiums for customers, amongst myriad other problems.

For those that have already forked out for an expensive getaway, the benefits of coverage are often overlooked, and it’s clear that many feel a general level of demur towards buying travel insurance in the first place – hardly a helpful factor in the industry’s fight against fraud.

As if anyone needed convincing, let’s take a look at some unsettling figures: in 2017, members of the Association of British Insurers (ABI) detected £1.3 billion of general insurance fraud, and although, as Manager of Fraud & Financial Crime at the ABI Mark Allen highlighted, travel insurance is one of the smaller lines within general insurance, in 2017, the value of detected travel fraud was just under £3.5 million.

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In addition, Louis Brun, Marketing Manager at Global Excel in Canada, noted that, according to the National Insurance and Bonding Commission (Comisión Nacional de Seguros y Fianzas) in Mexico, based on figures reported by local insurance and assistance companies, Mexican insurers paid out more than US$2.5 billion in accident and health claims in 2016.

And in Central America, the Caribbean and South America, Brun added, reports on average state that 10 per cent of total claims can be considered as fraudulent – representing approximately $260 million in fraud claims annually. Very disconcerting indeed – and these figures only begin to scratch the surface of the global cost of fraud.

The many faces of fraud From pre-inception loss to fraudulent medical claims, Global Fraud Manager at AXA in the UK, George Paxton, remarked that ‘the types of fraud vary depending on the types of insurance’.

He said that more ‘regular’ types of fraud saw

people ‘using insurance for something they know is going to happen, rather than that they hope doesn’t happen’.

Indeed, Julie Remmington, Director of J.A.R Consultancy in the UK, detailed that the most common travel insurance fraud committed by an insured is related to the baggage section of the policy, with exaggerated claims at one end of the scale and using fabricated documents for claims at the other. In terms of fraud within the medical system, she explained: “These are committed by both insureds and medical facilities and are usually of much higher value due to the nature of the policy coverage.”

Claire Byrne, Manager of Operations, Risk and Fraud Unit at Allianz Care in Ireland, told ITIJ that, with regards to medical insurance, fraud can be classified into one of two main categories: ‘soft or opportunistic fraud and organised or systematic fraud’. She noted that common examples of the former included exaggerated invoices, application fraud and replication of genuine invoices to reflect services that never took

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COST CONTAINMENT REVIEW

and preventing fraud over the years. Cost containment is a key consideration within this process and, as it stands, different techniques prompt different results.

Paxton argues that the amount saved – which is often in the millions – all depends upon three key factors: firstly, how quickly the fraud is detected; secondly, the type of fraud being committed; and thirdly, the area of the world where the treatment is happening (if the claim is medical).

Indeed, time is of the essence when money is at stake. Going back to Paxton’s first factor, there are several techniques that insurers can employ to speed up the detection of fraud.

Firstly, both Allen and Remmington emphasise the importance of sufficiently training the claims department staff so that they can, as Remmington highlighted, ‘identify suspicious claims and launch an enquiry into it without prejudicing the insurers position’. A level head is integral to the fraud detection process, as unnecessary mistakes can cost the insurer – sufficient training in identifying trends and red-flagging fraud indicators is a long-term investment for insurers and will make fraud detection increasingly effortless (and costeffective) as time goes on.

Paxton further emphasised this point. He noted

place, and even sometimes include membership card sharing to obtain treatment for non-insured persons. Meanwhile, examples of systematic fraud include the creation of false policies and/or providers, medical providers overusing benefits, billing for medical services not performed and co-ordinated medical referrals, as well as invoice re-direct fraud.

An example of systematic fraud pointed out

by Remmington is an insured trying to obtain treatment that is not of an emergency nature (for example, cosmetic). She continued: “In cahoots with the medical facility, [they] will submit an invoice for the cost of treatment, but try and claim that it was for an accident/injury.”

Without a doubt, identifying types of fraud that present the biggest cost burden to insurers is integral to developing prevention and detection technologies and techniques that can help in curtailing these costs. Take, for example, a recent trend that Allen highlighted, involving travel sickness claims in the UK: 35,000 claims were made via hotel or travel firms’ business

insurance rather than travel insurance in 2016 (an increase of 500 per cent on 2013), and these were often fuelled by claimant lawyers and claims management companies. Thanks to detection strategies already in place, the ABI is able to identify and flag potential fraudulent claims such as these.

Lastly, let’s not forget that, on occasion, fraud can occur unintentionally – sometimes an oversight, such as forgetting to update a policy, can lead people to unwittingly commit fraud, and in such instances the onus may well be on the insurer to more clearly define the terms of the coverage.

Nonetheless, there’s nothing worse than dishing out thousands of [insert currency here], in addition to the plummeting reputation amongst customers that rising premiums inevitably lead to.

So, what’s the answer?

Keeping costs low You probably won’t be surprised to discover that the insurance industry has implemented a number of different methods of detecting

Sharing the cost of fraud detection may well be the industry’s most effective option that AXA works hard to ensure an anti-fraud culture within the business; putting emphasis on the role each employee plays in stopping fraud ensures that fraud detection is always a priority.

“From training and specific referral triggers (into a team of specially-trained investigators) to using auditing and proactive claims reviews (based on region, condition and cost), we have several ways in which our teams are able to help us detect fraud,” he explained.

Another important part of the process of cost containment is ensuring that a control framework is put into place. “Fraud control assessment should always begin by ensuring that key fraud risks and the risk appetite threshold are identified,” Byrne said, adding that this should also be reviewed on a regular basis. Further to this, Remmington noted that most claims departments use a fraud checklist or fraud indicator to help identify fraud – if a

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claim is highlighted through this method, then it usually goes to a specific fraud team or more senior claims staff for further investigation.

Another effective method of cost containment is managing the risk of exposure to fraud, whenever possible. Brun explained: “At Global Excel we provide medical triage on the phone, which is key to starting cost containment – or rather – cost avoidance. In the initial stage we can, if necessary, steer a member to the network that has fully certified providers. This preventative measure ensures we can deliver the best experience to the member while managing any fraudulent activities.” And Paxton added that Global Excel maintains and updates a ‘blacklist’, ensuring that members are sent to the best facilities available – ones that the insurer can be sure won’t overcharge.

Byrne emphasised the importance of having subject matter expertise, such as medical and insurance experts, as well as national expertise, including access to market practice in many countries. And Allen illustrated the importance of being aware of travel fraud hotspots, saying: “[Insurers] might employ overseas agents to carry out local investigations. This might involve use of cognitive interview techniques with local medical practitioners. This work is vital, but it should never come at the expense of paying genuine claims quickly and efficiently.”

Sometimes, however, we find ourselves in unchartered territory – and it’s at times like these that it’s good to have technology to fall back on ...

The difficulty with data Brun explained that once Global Excel receives medical bills, some bills are then selected and are sent for further review by one of the company’s licensed doctors and administrative staff, and that the use of analytics tools helps to find suspicious patterns and proof of payment. “As the fraudsters and the scams evolve, so do the investigation teams,” observed Paxton. “The use of data analysis and AI is something we see regularly touted as being imperative for fraud detection in the current age. By being able to review millions of lines of data in a matter of milliseconds, and cross compare that against historical, external and ‘known fraudulent’ data, technology makes those jobs that a human being could not do a reality. Automating much of the process certainly helps and frees up time for investigators to really shine in what they do,” Paxton told ITIJ. 16 |

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However, despite the increasing use of data analytics tools in fraud detection, Brun stressed that this is not always the best practice in some emergent countries where ‘data is not coded under appropriate standards’.

And Remmington argued that investment in fraud systems and controls within travel insurance can be a low priority due to the relatively low premiums associated with travel insurance – which means that, more often than not, detection strategies are very much at individual company level rather than industry.

Fortunately, Allen offered a solution, using the example of the UK: he highlighted that, in line with a recommendation from the country’s Insurance Fraud Taskforce, an independent body set up by the UK Government, in 2017 the Claims and Underwriting Exchange (CAE), a huge database of incidents reported to insurers that is managed by a not-for-profit company on behalf of its members, was expanded to include travel claims, making it the first central database to have visibility of personal travel insurance claims and notified incidents.

Remmington also pointed out that, although industry figures for 2018 are yet to be released, the ABI reported that, in 2017, over £3.5 million was saved on travel insurance fraud, thanks to fraud prevention and detection strategies already in place.

A collaborative approach For some, however, measuring the extent of costings that fraud accounts for can be difficult.

Paxton explained that different countries put a different percentage figure of claims spend on what is lost to fraud every year: “And as our customers could be living or receiving treatment anywhere in the world, it’s more difficult to narrow down a specific amount,” he said.

Byrne also noted that ‘the savings achieved from fraud detection and prevention vary from region to region’: “This is because it is dependent on the fraud risk, which is often linked closely to the treatment country, as well as the volume of business experienced in that country. In lowrisk countries, which are often well developed and highly regulated, fraud will occur on a much lesser scale and can range from less than one per cent to five per cent of claims spend.

The more high-risk regions can experience medical insurance fraud of up to 11-per-cent of claims spend.”

Clearly, measuring the cost of fraud is not as easy as we’d like to imagine, and what’s more, it seems that technology can also be a burden – Byrne suggested that technology has become ‘both an ally and an enemy for insurance companies in terms of fraud management’. She reasoned that customers now demand quick and easy access to services, which can often cause a weakening in controls, and in addition, those

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A combination of preventative and detective controls must be implemented to ensure the right balance between customer experience and cost containment committing fraud can now be more mobile and anonymous. Allen also remarked upon this: “We know that insurance fraudsters, as well as enablers who aid and abet fraud, are increasingly sophisticated and highly mobile.

They will look for chinks in the industry’s armour and look to exploit weak links.”

And yet, there is still light at the end of the tunnel. Sure, fraudsters can adapt to take advantage of the advancements in the market, but so can insurers. Byrne extrapolates that, so long as fraud detection strategies are developing at the same speed as the risks that technology brings to the insurance industry, these strategies can help to identify real-time fraud trends, as well as help to predict future trends as quickly as possible.

Paxton goes on to reflect upon the wellhammered subject of maintaining the balance between technology and the ‘human touch’: “Technology working alongside humans is the key to success. While there are systems and AI that can determine proven fraud, there are other things to consider when applying sanctions, reporting and investigating before a decision can be made.” It is, after all, humans that willingly commit fraud – keeping sentient beings within the claims process may well still be the best bet for identifying and deterring fraud.

Besides, insurers need not solely rely on their own resources; the travel insurance industry has plenty of allies when it comes to fighting fraud.

Allen touches upon the 2012 implementation of the Insurance Fraud Enforcement Department (IFED) in the UK – a police unit within the City of London Police that is dedicated wholly to fighting insurance fraud. He noted that, since inception, the IFED has secured more than 420 convictions and issued around 480 cautions.

And, moreover, there are numerous other bodies that help instate the seriousness of committing fraud in the UK, including the Insurance Fraud Register, Insurance Fraud Bureau and the Consumer Insurance Act. 18 |

Honesty is the best policy Still, if only fraud could be deterred right from the start, that would save a whole lot of money and time for everybody involved and we could all get on and enjoy our lives without the prospect of fraud keeping us all awake at night. Alas, expecting people to do the honest thing appears to be an eternal struggle, especially with the temptation of a big pay-off loitering on the horizon. But encouraging customer honesty is integral to deterring fraud at the early stages, so how is this possible when so many individuals begrudgingly take out travel insurance in the first place?

Aside from the plethora of technologies and insights that detect and obstruct fraud once it’s in motion, Allen explained: “[The industry] is increasingly looking at the role that behavioural economics techniques can play in swaying the behaviour of opportunist fraudsters, nudging them towards greater honesty during the customer journey.”

Byrne of Allianz Care pointed out that ‘robust

product benefits supported by clearly defined terms and conditions’ is another technique integral to fraud prevention at an early stage.

She noted: “I believe that a combination of preventative and detective controls must be implemented to ensure the right balance between customer experience and cost containment. Controls should be enhanced by technology where possible, but only in addition to the human touch.”

Indeed, as far as fraud committed by insureds goes, having customer incentives in place that shield consumers from the temptation of committing fraud in the first place can prove to be an extremely successful and economical alternative to developing a plethora of new technologies and detection techniques. And sometimes preventative techniques can be better than reactive ones.

Ultimately, as Allen argued: “[It is] vital that the industry adopts a collaborative and holistic approach to fighting fraud that embraces the core pillars of prevention, detection and enforcement.”

Keeping costs low through fraud detection is a difficult game, and it is not worth compromising on the quality of methods involved in order to reduce the costs involved with creating and maintaining these – nor is it worth jeopardising the customer experience. In the long run, sharing the cost of fraud detection may well be the industry’s most effective option when it comes to containing costs. As Allen framed it: “If the industry fails to work in partnership, fraud will simply shift around the market.” n

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TACKLING FRAUD IN MEXICO AND THE CARIBBEAN Both the Caribbean and Mexico are seeing steady increases in the

number of tourist arrivals, but for insurers and assistance companies, the regions still seem to have issues with medical-related fraud and

inflated billing. How best to combat these problems and keep costs at a

manageable level? Christian Northwood takes a look behind the curtain

T

ravel to both the Caribbean and Mexico has been steadily increasing over the last few decades, with the usual combination of more adventurous travellers and cheaper air travel meaning more are making the leap.

According to the Caribbean Tourism Organization (CTO), the region brought in over 30 million tourist visits for the first time in 2017, despite a series of devastating hurricanes – good news for the nearly 25 per cent of the economy that depends on the money tourism brings into the area, according to the World Travel and Tourism Council. Mexico is also enjoying increasing numbers of tourist arrivals. It became the sixth-most-visited destination in the world in 2017 and began 2018 strongly, drawing 10.6 million tourists – the highest it has ever welcomed in the first quarter of a year.

With both countries still very much developing economically and infrastructurally, medical care can vary, as can prices for treatment. So, what issues are insurers and assistance companies facing?

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To TPA or not to TPA? “The biggest challenge in this area as we all know is overtreatment and overcharging,” Federico Tarling, Chief Service Officer for international assistance company Assist Card, asserts. “Unless you are able to steer your clients to your contracted suppliers, you will always have doubts on whether the medical treatment supposedly received by your clients was necessary. Definitely, they will be more costly than what we would have spent with a contracted supplier.”

A lack of information on the ground can lead to inflated bills, and where companies can’t afford to carry out the due diligence themselves, third-party administrators (TPAs) often step in.

Soraia Arroyo Lynch, Vice-President Marketing and Networks at GMMI, points to TPAs as one of GMMI’s ‘special concerns’ in the region.

However, TPAs are useful for many, helping companies to overcome the challenges

associated witha lack of deep local knowledge. Global Excel, where Jorge Rodriguez works as Director of Healthcare Risk Management for Latin America, ‘has members on the ground that have intimate knowledge of local healthcare systems’ in the Mexican-Caribbean region – but problem solving on a local level throws up challenges, such as: “Obtaining accurate medical and financial information to evaluate the case properly in order to elaborate an authorisation letter request to our corporate clients; acceptance of our guarantee letters when the healthcare facility is an out ofnetwork facility; obtaining a fit-to-fly document when a patient needs to be evacuated; patient classification systems that can lead to international classification, driven by pricing considerations; and a lack of internationally and regionally certified medical facilities.”

Steering customers can be equally problematic, though. Pablo Castillo, CEO of MedBrick, says that, on top of the issues the company deals with when finding specific information and details on the case that it is handling, making sure injured customers go to reputable facilities in Mexico and the Caribbean can cause real problems. “Many times, unnecessary third parties get involved in the case prior to the initial notification of the emergency by the patient (or their family),” he said. “When this happens, regular and irregular costs start to accumulate and can easily turn into an overbilled admission.”

Indeed, TPAs have to be carefully chosen, as not

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all are reputable. Tarling says that his company never works with TPAs anymore, having encountered issues with them previously. “When we had a third party involved, we found out about some cases where medical conditions were exaggerated in order to refer clients to clinics and inflate costs,” he told ITIJ. “We paid a lot of money in case handling fees.” He explains that Assist Card previously experienced TPAs that were aligned with ‘not so honest suppliers’ who overcharged for medical services that were never administered, and even taxis that were never taken.

Lynch is also wary of some TPAs, explaining that GMMI has experience with companies that ‘inflate the price of care and re-bill on behalf of local entities’. Her company works to help ease the various issues experience in these regions, and is entrusted to deal with price negotiation, claims for services not rendered and ‘abusive collection agencies for international patients’. For assistance and insurance companies without the reach to properly deal with these issues, costs can spiral.

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So how can companies look for intermediaries to work with in the Mexican and Caribbean regions? “If you cannot access medical suppliers directly,” says Tarling, “try not to work with intermediaries who charge based on a percentage of discounts obtained. This model presents as an incentive to inflate costs and maximise profits.

Look for an intermediary that needs to contain costs as much as you.”

Fighting fraud Exactly how major is the issue of fraud in the Mexican and Caribbean regions, and where in the supply chain is it coming from?

“Currently, we are seeing fraudulent activities from non-network facilities and collection agencies,” explains Rodriguez. “In general, small facilities do not have billing departments and do not have experience with international insurance/assistance companies. Therefore, they use collection agencies, which act as factoring companies purchasing bills which are inflated in order to yield high profit. For example, we have

seen bills with 250-per-cent mark-up in some cases and having a local expert does provide an advantage in a region with such conditions.”

Castillo agrees, stating that they are also seeing an increase in fraud across the regions, adding: “What used to work for most payers in the past may now be an obsolete alternative to avoid overbilling, overutilisation and ultimately fraud.

Specialised companies are more necessary than ever to tackle new challenges and issues involving rising problems which cannot be overlooked.”

Both Tarling and Lynch say that they have not necessarily seen an increase in fraud in these regions, and their already existing relationships in the regions help them to avoid overbilling.

Either way, for those without a deep level of local knowledge, a trusted TPA can save time and money with its already constructed and vetted networks.

Look for an intermediary that needs to contain costs as much as you Castillo says that one main way his company attempts to prevent fraud in Mexico and the Caribbean is by constantly educating its clients on the latest developments in the region. MedBrick has also used its experience handling cases in the region to develop its own cost database, which includes local rates in areas where fraud and overbilling is taking place. “We also have local partnerships with contacts (eyes and boots on the ground),” says Castillo, “which allows us to be very informed on questionable trends and up-to-date on how the business is changing. By being very much aware of the difference between ‘what is billed’ and ‘what should be paid’ (usual and customary), we manage to obtain important savings for our clients.”

Global Excel, Rodriguez explains, has a ‘fourpillar’ process that it utilises to help mitigate fraud in these regions. The first, he says, is a ‘robust credentialing providers process’, in which it looks for: • Local health licence (valid and current).

• Certification of local health body (for example, the Mexican General Health Council).

• International certifications.

• Professional medical certificate.

• Certification by specialty medical board.

• The professional ethics and reputation of the health provider.

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“In some cases, an inspection visit of a facility is performed by a local co-ordinator, if they do not meet the credentialing process key factors,” he continues. “Also, in a few cases, we have seen doctors outsourcing medical procedures to other facilities that might have not been credentialed. The second ‘pillar’ utilises telemedicine, a service that Rodriguez says is key to beginning the process of cost containment. Phone consultations can lead to customers being steered to correct medical facilities, or transferred from the facility they are currently in.

The third pillar is a proactive review and is part of the wider case management strategy.

The first defence against fraud is getting ahead of the customer As well as making a review of the itemised medical bill and the level of care given, the team assigned to a case also weighs up International Classification of Disease (ICD) versus medical procedures description, and medical protocols versus Milliman Care Guidelines.

The fourth and final stage is a bill review and audit. “Bill reviews are customised to each client’s needs and performance standards,” explains Rodriguez. “Once we have reviewed bills, some are identified and are sent for further review from one our licensed doctors 22 |

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and administrative staff. The following are some of the points that are covered: standard billing format; coding in general (no CPTs, no ICD10); fiscal invoices to validate the legitimacy of the doctor; charges versus local costs; use of analytic tools to find suspicious patterns; and proof of payment if applicable.”

Keeping tabs Clearly, knowledge is king when dealing in these areas, and with the flow of visitors not looking likely to dip to these destinations any time soon, companies need to find a way to gain as much information as they can. But it’s not just the insurers or cost containment customers that need to be in the know – it is, of course, their customers as well.

“It’s key to make your clients get in touch with their assistance companies always, when their medical conditions allow them to do so,” says Tarling. “In that way, even if you are hospitalised in a ‘not so honest’ facility, you will have someone looking out for you.”

Castillo agrees: “Consumers should collaborate with their insurer to prevent fraud from happening.

One good example of this collaboration is to contact the insurer or assistance company as soon as they are ready to seek medical services for any reason. By doing so, the insurer can act proactively to take control of the case in order to minimise negative situations such as the intervention of third-party billers, which often leads to overbilling, overutilisation, and possibly fraud.”

Lynch also puts forward that the first defence against fraud is getting ahead of the customer. By giving the customer an incentive to contact their insurer before they enter a facility, GMMI is able to negate extra costs: “When GMMI is aware of an imminent admission, it can proactively manage costs; it can anticipate discharge and consider repatriation out of the region both to ensure higher level of care to members, as well to manage costs.”

Tarling predicts, however, that the market is only going to get worse before it gets better: “More and more, we see medical facilities behaving as a ‘restaurant’ where patients are seen as clients and, therefore, revenues are to be maximised at every available opportunity.”

Castillo believes, though, that the issues in the region can be tackled, and that collaboration in key: “Going forward, insurance associations should act together (not each company individually) to tackle issues that currently seem to get worse every year.”

Lynch is also positive about dealing with problems in the area, reconfirming that ‘the vast majority of providers are honest and collaborative with insurance, assistance or TPA companies.’ n

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