Closer look deters arsonists, discovers scams,benefits all policyholders

Kenny Allen was alikable fellow. He went to church, coached youth basketball in the Muncie, Ind.area, and was making his way through life with limitless potential ahead.

He also lived in asecret world: He was an insurance thief. Kenny was a driving force behind thelargest home arson ring in Indiana history. And one of the largest ever in theU.S. His gang helped torch at least 73 buildings while he sang hymns ofrighteousness in pews.

Insurers were easy todefraud, Allen says. Their adjusters were so intent on making customers happy —he contends — that they rarely asked tough questions. Insurers could’ve quicklyexposed the claims for burned homes as money grabs with a little more effort.

Kenny went straightafter nearly five years in federal prison. He admits he screwed up, and todaygives workshops for investigators to help make amends. He partners with MikeVergon, the former ATF agent who arrested him. They’re friends and supportersin life — a touching story of Kenny’s redemption.

Yet his saga speaks toa bigger dilemma for insurers. If they investigate too many claims too closely,they risk policyholders thinking they’re cold and money-grubbing.

If insurers let too many suspect claims slide through tooeasily, they risk being prey for hunters like Kenny was. This slippery slopecan grow fraud losses, help raise premiums and — yes — reinforce a belief amongmany consumers that insurers are cold and money-grubbing.

Life isn’t always fairwhen you’re an insurance company, no matter how many good deeds you perform. Corporations aretargets of consumer upset simply because they’re big and make money.

Checking closely intosuspicious claims can trigger a lot of emotions. Fair or not, people’s feelingsof aggrievement or entitlement can quickly damage an insurer’s reputation.Especially when viral social posts can reach millions of sympathetic consumersin just hours.

Over the longterm,it’s a risk worth taking, and a story worth telling.

Insurers should do afar better job of telling people why they fight fraud — and why allpolicyholders benefit.

Being justifiablyknown for protecting policyholders from thieves seems like a pretty good way tobuild a business brand. And doing right by consumers.

If Kenny Allen’sright, taking the easy way out could’ve cost insurers more than millions infalse arson claims. He’s the first to admit, it’s a miracle nobody died in hisfires.

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Keeping in MLR improveshealthcare for everyone

Health insurer anti-fraud expenses will be left from the Medical LossRatio in a rule released by the feds. This decision deals withMedicaid managed care, and frustrated state and federal fraud busters. Theimpact will spread throughout the world of healthcare.

First, a short history: The Affordable Care Act requires healthinsurers to spend 80 or 85 percent of costs on claims and health services. Thislimits how much insurers can spend to run the business.

Regulators were left to decide what insurer expenses will beincluded in the MLR. The Coalition and other fraud fighters diligently tried toshow federal and state regulators why anti-fraud expenses should be included.Effective fraud fighting is directly linked to the quality of healthcare thatconsumers receive in many cases.

What makes this decision a bit grating is that federally fundedhealth programs like Medicaid are required to have anti-fraud efforts. Yetthose expenses are excluded from the MLR, and thus, health plans have littleincentive to invest more in combating fraud.

This decision has impact well beyond state-federal Medicaid.

States usually look to the feds for guidance when writing theirown regulations. If the feds exclude fraud expenses from the MLR, then stateswill be reluctant as well.

We’ve urged insurance regulators to include the MLR. They’re oftensympathetic, yet gamely stick to excluding anti-fraud expenses.

Fraud fighting is essential to quality patient care; this isn’tmere overhead. Scams often harm patients with worthless and botched treatmentsthat also can max out their policy limits. Stopping money-draining schemes alsohelps reduce the cost of health services. This benefits everyone.

That’s the rub. Fraud fighters know that good anti-fraud effortsreduce healthcare costs and improve services. Yet regulators stubbornly stayreluctant to even consider including anti-fraud expenses in the MRL.

It’s time for fraud fighters to speak out, and tell regulators andpolicymakers that fraud-fighting expense should be included in the cost ofpaying healthcare claims.

About the author: Howard Goldblatt is director of governmentaffairs for the Coalition Against Insurance Fraud.

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Awardbestowed by New York Alliance Against Insurance Fraud

March 16, 2016, New York, NY — Cited for an aggressivecampaign to counter workers-compensation scams throughout the state, New YorkInspector General Catherine Leahy Scott was honored with the “Fraud Fighter ofthe Year” award by the New York Alliance Against Insurance Fraud.

The award was presented during NYAAIF’s recent annual meetingheld here.

NYAAIF Chair Jim Berrigan credited the IG’s leadership incompiling an impressive record of prosecuting wide-ranging workers-compensationcases. They included fraud by claimants, medical providers and businesses.

“The IG’s efforts put teeth behind our anti-fraud marketingcampaigns in providing valuable deterrence though public awareness and vigorousprosecution,” Berrigan said in presenting the award. He also commended Scottfor reaching out and working with insurers to identify fraud trends and developstrategies to counter them.

NYAAIF also previewed its 2016 consumer campaign. It willinclude TV & radio ads, billboards and a roaming “Fraud Squad” vanplastered with anti-fraud messages. The campaign theme is “Insurance FraudHurts . . . Everyone.” It launches in May.

Frank Orlando, head of the fraud unit of the state Departmentof Financial Services, briefed fraudfighters on no-fault fraud trends in the state. The MassachusettsInsurance Fraud Bureau profiled a huge automobile rate- evasion ring thatoperated in New York and Massachusetts.

NYAAIF also elected four members to three-year board terms:Jim Potts (New York Central Mutual), Frank Sztuk (Hanover Insurance), Ken Jones(Travelers) and James Egner (Farmers Insurance).

NYAAIF is an alliance of 104 insurance companies in New York.NYAAIF was created in 1999 to educate consumers about the cost of insurance fraud and help consumers avoid becomingvictims.

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