Insurance Fraud Weekly ePort

Below is the most recent edition of the Coalition Against Insurance Fraud’s weekly “ePort.”

Should you have any comments or questions, please do not hesitate to call this office.

 

 

 

 

LEGISLATION & REGULATION

* Michigan lawmakers have begun developing strategies for advancing auto-fraud bills this year. The coalition’s Howard Goldblatt met with legislative staff in Lansing this week to discuss proposals for an anti-runner bill, plus measures to make staging accidents a specific crime and to restrict access to police accident reports. Lawmakers also may try to require license review of any provider convicted of insurance fraud, and tighten deadlines for filing injury claims. A fall hearing likely will be held.

* A bill providing the California insurance department with more investigators has unanimously cleared the Assembly’s insurance committee. AB 1401 would hike the annual insurer assessment to $5,100, helping the department fill about 22 staff openings. California leads the U.S. in criminal convictions—generating more than a third of all convictions by state fraud bureaus, says the coalition’s recently released study of state fraud bureaus. The report is available at www.InsuranceFraud.org.

* The New Hampshire House passed a bill setting civil fines of up to $2,500, plus a $100 penalty for each day an employer knowingly fails to have workers comp insurance. HB 337 also would make the chief executive officer and chief financial officer personally liable for paying the penalties.

* Louisiana lawmakers will start debating letting health insurers delay paying claims while investigating fraud. HB 471 would give insurers a break from prompt-pay requirements if the delay is caused by investigating suspected fraud. The bill also allows health insurers to seek restitution after convictions. Louisiana’s legislature opens Monday, and is the last statehouse to open this year.

Note: Texts of anti-fraud bills are available on the coalition’s website here.

PUBLIC OUTREACH

* “Workers’ compensation fraud by employers appears to be up significantly in California, potentially cheating insurers out of millions and raising rates for businesses statewide,” according to an MSNBC online article covering the coalition’s recent study of state fraud bureaus. The number of suspected fraudulent claims by California employers increased to 2,056 in the fiscal year ending June 30, 2006. That’s almost five times as many as the 417 in fiscal year 2003, according to the insurance department. “When you add up car, life, long-term disability and workers comp insurance, it’s a significant amount of your budget in business and personal life. Insurance fraud is not a victimless crime. It increases costs for everybody,” Dale Banda, head of the fraud bureau, says in the article.

COURT DECISIONS

* A federal RICO suit against an insurer for allegedly engaging in a pattern of illegally denying disability claims doesn’t interfere with New Jersey’s oversight of insurance and thus won’t be barred, a circuit court has ruled. A policyholder sued First Unum after the insurer discontinued his longterm disability coverage. First Unum said the action was barred by the McCarran-Ferguson Act, which generally prohibits federal suits that impair state oversight of insurance. This suit interfered with the operation of New Jersey’s Insurance Trade Practices Act because that law doesn’t provide for a private right of action, First Unum said. But New Jersey’s Consumer Fraud Act provides the plaintiff a private remedy, and thus his RICO suit doesn’t interfere with the state’s oversight of insurance, the court ruled [Weiss v. First Unum Life Insurance Co. (Lawyers USA No. 9935523) U.S. Court of Appeals, 3rd Circuit No. 05-5428. April 3, 2007].

CRIMINAL CONVICTIONS

* A former California state Assemblyman lied to his insurer that his car was damaged in another accident when he’d actually hit a parked car while driving drunk the wrong way down a one-way street. Bruce Nestande, who has a prior DUI, had been drinking at a Newport Beach restaurant that night. Police began investigating after finding part of his car at the scene. Nestande finally admitted lying to avoid criminal prosecution. He received six months of house arrest Tuesday after pleading guilty. He faced up to five years in prison if he’d fought insurance-fraud, DUI and hit-and-run charges.

* Morristown, N.J. agent William Kloss stole more than $44,000 in premiums from a commercial client. Kloss took in liability premiums from home-repair firm Complete Roofing Systems, never bought the coverage and spent the premiums on himself. He lost his license and must perform 100 hours of community service after pleading guilty.

* The operator of a New Jersey residential healthcare facility received more than $88,000 in illegal kickbacks for steering residents to Belmar pharmacist Michael Stavitski to fill Medicaid prescriptions. Michael Fish sent residents to the Belmar Hometown Pharmacy. Fish was booted from the Medicaid program and received a year of probation. Stavitski also made about 7,000 claims worth $1.3 million to Medicaid and private insurers for prescriptions that never were given to patients. He received seven years in state prison for those crimes in 2003.

* Pharmacist Neil Norwood insisted he never bilked customers after he was busted, then apologized for ripping them off after he was sentenced Monday. The Tarrytown, N.J. man switched generic drugs for name-brand prescriptions, short-filled prescriptions and billed insurers for drugs he never dispensed. Norwood received two to six years in state prison, and already has repaid nearly all of the $3 million in court-ordered restitution. He was named best pharmacist in the county by Westchester Magazine in 2005.

* An Indiana funeral director forged signatures on two life policies for a deceased woman, designating his funeral home instead of her two sons as beneficiaries. Mary Hummel had left the policies with Russell Reichard to pay for her funeral. But she died without designating the funeral home as beneficiary. The Winchester man then faked her signature authorizing him to collect. Reichard claimed he was merely cutting corners, but received 30 days of home detention Monday. His license also is being reviewed.

CRIMINAL CHARGES

* The former head of a chiro training empire bilked insurers by teaching young chiros how to sell patients useless services, the feds charge. Dr. Paul Hollern operated Louisville, Ky.-based Uncle Paul’s Chiropractic Business Training. Hundreds of new chiros across the U.S. paid thousands each for his courses. He allegedly taught bait-and-switch tactics, urging chiros to offer free exams and X-rays but then tell patients the X-Rays revealed other problems. That would lead to yet more X-rays and insurance billings, the feds charge. Hollern’s empire crumbled in 2004 when students stopped paying him after his former COO charged Hollern used those tactics illegally in his own practice. The Kentucky chiro board started investigating, and the students grew worried he was teaching tactics that would create legal problems and liability exposures in their practices.

* If only the dead could talk. Well, one dead person did—at least through a Florida mental-health caseworker who allegedly billed Medicaid despite the person’s demise. Hector Payares billed Medicaid more than $2,000 even though the woman had died nearly two months prior, prosecutors say. The South Florida man allegedly created service-activity logs for his employer, New Horizons Mental Health Center. Payares also forged statements the dead woman had made even though she was buried at the time, prosecutors say. He faces up to 10 years if convicted of all charges.

CIVIL SUIT

* Home-improvement products giant Masco Corp. won a $2.26-million federal RICO default judgment against 86 former employees who tried to scam the firm’s workers comp program. They all were represented by the same law firm, and claimed vague ailments after being examined by one of four doctors. The former employees all reported the same problems, including pulmonary, sight, hearing and orthopedic maladies. They’d been recently laid off due to a New Jersey plant closing. Tipsters told Masco the workers were coached how to fake certain injuries, and the company says its own medical exam of 30 employees found no worker-related ailments. None of the defendants responded to Masco’s ensuing RICO suit, and a default judgment was entered. Workers-rights advocates say the decision could have a chilling effect on future workers comp claims. Masco says an aggressive RICO response can be an effective tool other employers can use to fight comp fraud.

ADMINISTRATIVE ACTIONS

* Two Atlanta city employees bilked the city out of $39,000 by making a bogus claim on the cancer-ridden daughter of one of the women, the city charged after firing the pair. Tamieka Edwards died of leukemia but wasn’t enrolled in the city’s life-insurance programs. But the city paid her mother Denise Lattimore $39,000 anyway. She had convinced fellow city worker Shirley Miller to add Lattimore to the policy the day after Tamieka died, making her the sole beneficiary, the city charges. Miller also had signed up Tamieka to the insurance program just two weeks before she died, even though she wasn’t eligible, the city charges.

ETC.

* Fraud convictions rose 74 percent to 151 total in Virginia last year, the State Police say. Referrals to the police also increased 15 percent to 1,895. Property-casualty investigations rose by more than a third, with a large portion involving workers comp. The police have done an especially effective job of promoting their fraud hotline statewide, leading the nation with 2,155 hotline referrals in 2005, according to the coalition’s recently released study of state fraud bureaus.

* The District of Columbia has improperly paid up to $4.4 million a year in disability money to employees who had returned to work, retired or no longer were disabled, says a report by the District’s inspector general. One employee received “bruises” around his neck and shoulders when a stack of metal trays fell on him, but he never went to city-paid vocational rehab and received at least $96,000 for more than 12 years. Another employee injured his hand but received more than $15,000 for 15 months after returning to work. An employee developed pain in her back and neck while moving classroom furniture. She later resigned, started collecting unemployment benefits yet continued drawing disability money. The District should review all open claims and conduct quarterly reviews of compensation, the inspector general says.

QUOTE OF THE WEEK

“My client didn’t wake up one day and say, ‘Today, I’m going to pretend to be a psychologist,’ She intended to help people . . . My client is not a thief. . . . She’s not a fraud. And she’s not guilty.”

— Lawyer for ex-stripper Lucy Wightman of Boston in opening arguments yesterday in her trial involving charges of healthcare fraud and practicing without a license.

OTHER HEADLINES THIS WEEK

* Healthcare fraud trial of ex-strippers gets underway in Boston
* California warns consumers about pre-paid funeral policies
* Louisiana insurance agent arrested for stealing premiums
* Florida couple charged with $200,000 medical fraud
* Michigan skin doc convicted in upcoding billing scam

Details at www.InsuranceFraud.org/

MEETINGS & CONFERENCES

* June 13-15, 2007 — Fraud Education Conference
Orlando, FL (Florida Insurance Fraud Education Committee)

* June 19-22, 2007 — Health Care Fraud Schemes
Scottsdale, AZ (National Healthcare Anti-Fraud Association)

* June 21, 2007 — Board and Membership Meeting
Washington, DC (Coalition Against Insurance Fraud)

* July 23-24, 2007 — Advanced Fraud Investigation Seminar
San Diego, CA (National Association of Insurance Commissioners)

* September 9-12, 2007 — Annual Seminar & Expo on Insurance Fraud
Las Vegas, NV (International Association of Special Investigation Units)

* September 10-11, 2007 — 2007 Annual Meeting
Lisbon, Portugal (International Association of Insurance Fraud Agencies)

For more info, visit online events.