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Controlling Fraud in the Small Business Health Insurance Industry: Executive Summary

NCJ Number
Date Published
34 pages
Fraud in the small business health insurance industry was studied, with a focus on entities that market health insurance under the guise of being employee welfare benefit plans as defined by the Employment Retirement Security Act and that ultimately fail to pay medical claims to large numbers of their participants.
The research focused on the larger structural causes of fraud in this industry, the main forms that these frauds take, and policy changes that might reduce the incidence of fraud in the industry. The research used data collected from interview with regulators, investigators, prosecutors, and policy makers, primarily in Florida, Texas, California, and Washington, D.C. It also used quantitative data on regulatory actions taken by State insurance departments and case studies of individual fraudulent schemes that involved numerous organizations and individuals. Results revealed that the incidence of insider fraud in the small business health insurance industry had declined since the early 1990s, but it remains a significant problem as it continues to take on new forms. In addition, the ultimate sources of the problem lie in ambiguities and loopholes in Federal regulatory laws that allow individuals to sell health insurance outside the regulatory framework that oversees the insurance industry. Moreover, these frauds are perpetrated by organized networks of individuals and organizations that operate as ongoing criminal enterprises. Furthermore, many victims of these crimes experience severe physical and emotional harm; therefore, these offenses should be regarded as violent crimes. Finally, many of these dcriminal schemes have a significant international component, consisting of offshore insurance companies. Tables and reference notes (Author abstract modified)

Date Published: January 1, 1998