Today turbulent economy fuels fraudulent claims An Easy Out

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					  Today's turbulent economy fuels fraudulent claims.
   BY ERIKA COHEN




                                                                                                                              But no one in the in-
                   atharine Zdon of Derry filed      a tough economy. In fact, between the first half                     surance industry is laugh-




c
                   a claim with State Farm Fire      of 2008 and the first half of 2009, the number     ing. Nationally, about $90 billion worth of
                   and Casualty Company re-          of questionable claims reported to the National    fraudulent claims are filed annually, says Joe
                   porting her diamond ring          Insurance Crime Bureau jumped 13 percent.          Zuromsky, manager of Liberty Mutual's Spe-
                   stolen~it    wasn't. Welling-     Suspected insurance fraud in the Granite State     cial Investigations Unit for agency markets,
                   ton Potter of Jefferson filed a   increased 28.3 percent from 2007 to 2008, the      which covers personal and commercial poli-
                   claim with Vermont Mutual         most of any New England State.                     cies, and business liability insurance.
Insurance Company to replace items lost in a             None of those statistics surprise Thomas
fire, but rather than replace the items he took      F. Nickels, owner of Nickels Professional In-                    An Easy Out?
the cash and filed phony receipts. Donald            vestigations in Manchester, who explains that          While they say crime doesn't pay, fraudu-
Rankin of Goshen claimed workers' com-               insurance fraud is the "bread and butter" of       lent claims often do. Take the case of Donald
pensation for an injury he said prevented him        the private investigative industry. Worrying       Rankin and MEMIC. After receiving work-
from doing his job as a truck driver. However,       about job security? "Workers' compensation         ers' compensation for over a year, Rankin pled
Goshen found another truck driving job while         is better than unemployment" as it lasts lon-      guilty to a Class A felony. He paid $2,279
still receiving compensation from MEMlC.             ger, pays the medical bills and often leads to     restitution to MEMIC, wrote an apology let-
     If you think:those are unusual, they are not.   a settlement, he says. Is your business on the     ter and completed 200 hours of community
Insurance fi'aud is on the rise in NH and nation-    verge of bankruptcy? Funny, he says, "there        service. That restitution pay, explains Matt Har-
ally as people look for an easy source of cash in    are a lot more suspicious arsons these days."      mon, MEMIC's director of claims operations
         •
aIDS




in Manchester, covered only
the wage replacement Rankin                          claims filed in his unit are fraudulent. Of those,    misclassifYing their employees to lower work-
receiyed from MEtvIIC after it was determined        the firm's 113 investigators can prove fraud          ers' comp rates or dropping coverage and then
. e had gone back to work. "It's really a fraction   about 60 percent of the time. They do so by           failing to get new coverage. In those cases,
a - the oyerall claim," Harmon says. It did not      seeking out such red flags as a claim for a stolen    companies are fined more than it would have
  mer medical bills or benefits paid to Rankin       car that is seven or eight years old, as older cars   cost to maintain correct coverage. The depart-
prior to the fraud investigation.                    aren't likely to be stolen, or a rep0l1ed theft of    ment uncovers such practices through peri-
     While haying a felony on his record will        electronics where everything is neatly removed        odic wage and hour inspections of businesses.
undoubtedly hurt Rankin's job prospects, his         as thieves grab and go in haste, he says.             Jenkins says the department rarely has to
conviction is not the norm. It is one of just 13         And it appears people are as unsteady             investigate false claims as insurers are good at
prosecutions in NH in fiscal years 2007 and          as the economy. Zuromsky sees more slip               filtering those out and addressing them.
2008. The NH Insurance Department receives           and fall claims that have no witnesses. Lib-               But not all cases of insurance fraud are
about 300 claims of suspected insurance fraud        erty Mutual is also seeing a rise in suspicious       for financial gain. At CIGNA, the majority of
a year and resolves many outside court. The          claims of jewelry theft from homes.                   its NH cases involve prescription drug abuse
challenge, says Harmon ofMEMlC, is proving               It's not just individuals who are investigated    where patients "doctor or pharmacy shop"
fraud in court. Other options include going be-      for insurance fraud. All employers are required       to get additional medication, says Kenneth
fore a hearings officer at the NH Department of      by law to carry workers' comp coverage. At            Faustine, director, special investigations, for
Labor to terminate benefits. At Liberty Mutual,      the NH Department of Labor, Attorney Martin           CIGNA out of its Connecticut office. CIGNA
Zuromsky estimates that about 2 percent of the       Jenkins says there is an increase in businesses       combats the problem by limiting the number
                                                                                                         cases. Harmon sees it differently. While he
                                                                                                         acknowledges his company "cherry picks"
                                                                                                         customers and will not work with businesses
                                                                                                         with high claim rates unless they are willing
                                                                                                         to pay appropriate rates, he says MEMIC in-
                                                                                                         vestigates all cases fully. But having probable
                                                                                                         cause and proof of fraud-and         being able to
                                                                                                         prove it in court-are       two different things.
                                                                                                         That's why the company sometimes settles at
                                                                                                         a reduced rate rather than pursue a case it's
                                                                                                         likely to lose.
                                                                                                              In some cases, investigations require tech-
                                                                                                         nical know-how, not smveillance. Enter Judy
                                                                                                         Gosselin of lA.G & Co. LLC Investigation
                                                                                                         in Manchester. She specializes in computer
                                                                                                         forensics, recovering data and e-mail from
                                                                                                         computers, even after a fIre. She can go plac-
                                                                                                         es virtually without being accused of stalk-
                                                                                                         ing, for instance, catching someone setting
                                                                                                         up an online business after filing for worker's
                                                                                                         comp stating they can't do computer work
                                                                                                         due to carpal tunnel or eye strain.
                                                                                                              Gosselin says she also sees a lot of dubious
                                                                                                         bookkeeping. For example, a medical provid-
                                                                                                         er might submit false Medicare and Medicaid
                                                                                                         claims, using fake social security numbers
                                                                                                         for services never provided. She looks for re-
                                                                                                         curring names or locations or for charges to
                                                                                                         numerous members of a single family ..
                                                                                                              And Gosselin isn't the only person com-
                                                                                                         bating medical fraud. Insurers say patients are
of drugs a patient can get at one time, and           select few people taking advantage of claims       often the fIrst line of defense. Calls to CIGNA's
;:becking a patient's subscription history be-        that start off as legitimate, but they have the    national 24-hour fraud hotline have increased
iOre a pharmacist fills a prescription. It also       desire to extend the length of the claim," he      20 percent in the past year, says Faustine.
--elp connect patients with health specialists        says. "I think the reason is there is reduced in-       He says patients pay close attention to
:0 address any underlying addiction.                  centive to return to work when there is a like-    their bills and are quick to call if a bill lists
                                                      lihood of reduced hours, or, if while you were     a service not provided (called upcoding) or
           Investigating Fraud                        out, the company went out of business."            a visit that didn't happen. Those tips lead
      Investigating insurance fraud is dicey. While       Once MEMIC suspects fraud-signs            in- CIGNA to check for other misrepresenta-
=  may seem easy to trail a suspect, Nickels says     clude lack of an objective finding by a doctor or  tions by the same doctors-and          if it's fraud,
~. is the hardest part. Investigators can't tres-     an unusually long recovery for a basic sprain-     it is rarely limited to that one patient. "Inves-
    -- and they can be accused of stalking. And       it will decide whether to hire an investigator to  tigators call doctors and usually get, 'oh, it's
::n·estigators tend to be unpopular, which is         prove its case. MEMIC also has an anonymous        a clerical error or a billing error,''' he says of
  hy ;-.Iickelspurposely has no sign outside his      fraud hotline. Harmon says the company pays        cases of suspected insurance fraud.
om e. Besides wits, tools of the trade include        close attention to businesses that are going
  inhole cameras that clip on shirts, low light       through financial difficulties or going out of                 The Cost of Fraud
;:an}eras and everyday video cameras. Nickels         a business, as people are more likely to file          Both insurers and investigators say many
:00 T_   for boats in people's yards and then vid-    claims then to insure they will have some form     people believe insurance fraud is a victimless
~rnpes the allegedly injured waterskiing. He          of income coming to them.                          crin1e. In fact, according to a 2008 study by
      e paid a person who filed a worker's comp             David McGrath of McGrath Investiga-          the Coalition Against Insurance Fraud, one in
;:!aim. but ran a hunting business on the side, to    tive Services in                                                                    five adults (or
~e hin1 on a hunting trip. Nickels videotaped         Seabrook spends                                                                     about 45 mil-
 . nip to prove the man's physical fitness. By        most of his time                                                                    lion    Ameri-
                                                                              "If you're a citizen in hard economic
;eying for such services, he can prove a case         on workers' com-                                                                   cans) consider
  iIhout being accused of a setup.                    pensation     cases times, would you rob a 7 -Eleven and                           it acceptable to
       Insurance companies are required by law        and says, "I've                                                                    defraud insur-
- haye antifi'aud units and those units often         seen people get
                                                                             risk going to jail for seven years or                       ance compa-
3re private investigators for surveillance, a         away with more steal thousands from insurance and                                  nies under cer-
;:r;:ne-intensive process that can last days per      than you think                                                                     tain conditions.
.:a:~ cost more than $1,000. Companies,
        and                                           they       should."    get slapped on the wrist?"                                       Zuromsky
....:- ell as the individuals accused of fraud,
     w                                                McGrath says if           -Joe Zuromsky, manager of Liberty                        says that per-
.,-- -ometimes hire attorneys to represent            he finds evidence                                                                  ception     may
i:eir respective interests.                           of wrongdoing,          Mutual's Special Investigations Unit                        be changing
      Despite the recession, there has only been      like       working                                                                  as people bee
::: _ percent increase nationally in workers'         for your brother                                                                    come     aware
.:omp claims between the first half of 2008           the landscaper while you supposedly have           of the costs involved. Faustine of CIGNA es-
~ the ame period in 2009. But, says Har-              numbing back pain, it's up to the insmers to       timates his company nationally prevents $100
     n of MEMIC, which covers more than               prosecute. And it's McGrath's opinion that         million worth of fraudulent claims a year. The
        employers in NH with premiums total-          the cost/benefit analysis--once lawyers and        savings can be staggering for an individual
::"'2 about $15 million, that sort of fi'aud can      other costs are factored in-makes         it more  company, especially a self-insured company
:- -difficult to prove. "What we're seeing is a       trouble than it's worth to prosecute many          that pays its own claims, but uses CIGNA as a
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                                           111:Wli"!
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 Reason                                                % Change                                                                           workforce challenges.
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manager. IfCIGNA stops a $45,000 claim that
should have been $15,000, that's $30,000 the
employer doesn't have to pay, Faustine says.                                    144 Conol Street, Nashua, NH 03064
     When it comes to workers' compensation,                                    603.882.6333/603.889.5460         (fox)
having a high number of claims is costly. Har-                                       Con tactUs@LinkAbilities.org
                                                                                         www.linkabilities.org
mon says companies with low loss histories can
have rates 30 to 40 percent below average, while
                                                                     *LinkAbilities is a project of Gateways Community Services and is mode possible under an agreement with the State
those with higher losses can have rates 100 per-                     of New Hampshire, Deportment of Health and Human Services, Bureau of Developmental Services, with Medicaid
cent above average. Nickels says premiums can                        Infrastructure Grant funds provided by the federal Centers for Medicare and Medicaid Services under CFDS 93.768.
go up $3,000 to $4,000 per person when a com-
pany has a hike in claims. That high cost is why
companies call in people like Sebastian Grasso,
president and CEO of Windham Group. His                                    When you're insured through Clark, you can rest assured that no matter
company works with businesses and insurers
to manage and prevent workers' compensation                               how fast your world spins, your risk is minimiz~d.                     Our agents understand
claims by assessing workspaces and suggesting                             the nature of an ever-changing               world and can provide the right solutions
ways to prevent injuries. But vigilance against
fraud can make things harder on people with                                    that keep your business or family well protected. Contact Clark today
legitimate claims, he says.                                                                           and ask how we can help cover you with confidence.
     His company has seen a slight decline in
business this year as he says fewer people are
filing for workers' compensation. The reason,
Grasso says, is fear. Older workers who may
have a legitimate injury don't want to risk fil-
                                                                                      The world doesn't rest.
ing a claim and losing their job in a tough
market when they are just four years from                                                     Neither do we.
retirement and have lost money in their 401k.
Younger workers also worry about losing
their jobs. "If they lose their jobs, there are
fewer jobs to get," he says. And it could be
a legitimate fear. According to the NH De-
partment of Labor, "There are no job security
laws in New Hampshire, but the employer
may be required to reinstate you if you are
released by your treating physician within 18
months of the date of injury."
     Soft tissue or repetitive stress injuries,
says Grasso, are subjective and challenging
to prove. In those cases, private investigations
can sometimes result in cutting off legitimate
claims. As an example, Nickels points to a sit-
uation where an injured person may have doc-
tor's orders not to lift more than five pOilllds.
If investigators see the person carrying heavy
                                                                        Business· Employee Benefits· Personal
                                                                        Portland· Windham. Saco • Manchester, NH
                                                                        1-800-244-6257 • www.c1arkinsurance.com
                                                                                                                                  <CI ARI< / /'-IS U R-A./'-I =E

                                                                                                                                           Covered w#h confidence
grocery bags, he or she could lose their work-
ers' compensation. "But what choice do you
                                                                                                       30%

                                                                                                       25%
                                                                                                       20%
------company,inc.                                                                                     15%
     ERCIAL· INDUSTRIAL· RESIDENTIAL
                                                                                                       10%
ROOFING by EXPERTS
   • PVC & EPDM                                                                                               w
   • Metal                                                                                                    ~     <t:
                                                                                                                    ~ Z
                                                                                                                          I    0 ~ ~              Vl
                                                                                                                                                  :::>
   • Shingles & Slate                          • Landmark location Exit 4/1 -293                        Source: National Insurance Crime Bureau
                                                (North & South Access)
SERVICE & MAINTENANCE
                                               • Ample parking                                        have? You need the groceries," Nickels says,
                                               • Natural lighting                                     Zuromsky says abusers often seek the path
                                               • Meets ADA requirements

              Aco",~2D\'
                                                                                                       of least resistance, and historically that path


                    ~J
                   INC.
                                               • 480/3 Phase wiring
                                               • Sprinklered
                                               • Steel reinforced concrete construction
                                                                                                      has been insurance fraud, "If you're a citi-
                                                                                                      zen in hard economic times, would you rob
                                                                                                       a 7-Eleven and risk going to jail for seven
    Applicators of suspended                   • Common loading docks                                 years or steal thousands from insurance and
     ceilings and acoustical                   • Passenger & freight elevators                         get slapped on the wrist?" he asks,
           wall panels                                                                                     That is changing, however. The death of
                                                                                                       a 65-year grandmother in a staged car crash
        CALL US TODAY                                                                                 in Lawrence, Mass. led the Bay State to step
                                                                                                      up its anti-fraud efforts. Since then, automo-
353 West Street    5 Old Ferry Road
Keene, NH 03431    Bow, H 03304
                                                                                                      bile insurance in Lawrence has dropped 24
603-352-4232       603-224-0444                                                                       percent, according to Insurancefraud.org.
                                                                                                      But rather than giving up commiting crimes,
                                                                                                      Zuromsky says criminals head to Northern
                                                                                                      New England. Suspected insurance fraud
                                                                                                      jumped only 4.3 percent in Massachusetts
                                                                                                      between 2007 and 2008 (the lowest in New
                                                                                                      England), while Maine, NH and Vermont all
                                                                                                      increased more than 20 percent, according to
                                                                                                      the National Insurance Crime Bureau.

                                                                                                                     Future Claims
                                                                                                          Investigators and insurers fear fraudulent
                                                                                                      claims will increase if employers continue
                                                                                                      closing or laying off employees.

                                      Small                                                               Barbara Richardson heads the four-per-
                                                                                                      son fraud investigation unit at The NH In-
                                                                                                      surance Department. Richardson says cases
                                         enough                                                       reported to her department have increased

                                      to know you                                                     about IS percent in the last 18 months, and
                                                                                                      she depends on the Labor Department and
                                                                                                      the Attorney General's office to help inves-
                                      Brown and Brown of NH, Inc. offers you the enhanced,            tigate and prosecute them. "In this economy,
                                      cost-effective product line of a large company, with the        many people are having problems and they're
                                      personal, friendly, convenient local service we have            turning to insurance," she says.
                                      always provided,                                                    That wasn't how it used to be. When
                                                                                                      Jenkins started with the NH Department of
                                      • Auto                 • Commercial                             Labor three years ago, he saw about 10 ques-
                                      • Homeowners           • Financial Services
                                                                                                      tionable claims a month. Now his department
                                                                                                      sees about lOa week and half of those, as be-
                                                                                                      fore, tend to be violations due to intentional
                                                                                                      fraud or negligence. Insurers report similar
                                      93 Washington Street                      3 Hollis Street
                                                                                                      numbers. When Zuromsky started at Liberty
                                      Dover. NH 03820                           Pepperell, MA 01463
                                                                                978-433-2728
                                                                                                      Mutual in 1991, he was researching four to
                                      603-742-1452
                                                                                                      six cases a month, His investigators now re-
                                      309 Daniel Webster Highway South                                search 12 to 14 each month. And it's likely to
                                      Merrimack, NH 03054                                             get worse. Harmon says employees have two
                                      603-424-990 I                                                   years to file claims after a company closes.
                                      fax: 603-424-3203                                               "The speculation is these claims are coming,
                                                                                                      both fraudulent and legitimate," says Grasso.
                                      WWW.BBNHINS.COM
                                                                                                      "They are in hibernation." •

				
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