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-
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
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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Source: National Insurance Crime Bureau
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
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*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
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grocery bags, he or she could lose their work-
ers' compensation. "But what choice do you
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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.
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
Mutual in 1991, he was researching four to
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.
"They are in hibernation." •