Health Insurance Fraud Now Costs Rs 10,000 Crore A Year, Says Report

A joint report by Boston Consulting Group and Medi Assist estimates that the health insurance system is losing Rs 8,000-10,000 crore every year because of fraud, waste and abuse. The report adds that losses relate to inflated or fabricated claims, which also puts additional financial pressure on insurers and raises overall health costs. As claim payouts rise, the premium levels as well as out-of-pocket spending get affected.

According to the study, retail health insurance policies have the highest exposure to misuse. The study also notes that group health insurance plans are affected and have gaps in many sectors. The incidence of suspicious claims is higher in the banking, financial services, and healthcare segments in group policies. Inpatient and outpatient claims are also linked, which shows the prevalence of fraud across different parts of the healthcare network.

Reimbursement Claims Show the Highest Fraud Risk

The report reveals that, by type, reimbursement-based claims bear the highest level of fraud risk. Group reimbursement claims have nearly nine times more fraudulent activities in comparison with group cashless claims. For individual policies, reimbursement claims show almost 20 times more fraud risk compared to group cashless claims. According to the report, reimbursement claims allow greater scope for misuse since documents are submitted after treatment, making verification slower and less detailed.

Further, fraudulent activities are most prevalent in claims within the range of Rs 50,000-2.50 lakh. These mid-ticket claims are big enough to build financial incentives, the report says, adding that they receive less scrutiny compared to high-value claims. According to the report, the fraud typically includes misrepresentation of diagnosis, forged documents, and inflated treatment bills. Even smaller fraudulent activities have also become common in some areas, adding to larger system leakages, the report says.

Report Calls For Stronger Controls And Better Data Flow

The report suggests that insurers should strengthen their early checks. The study recommends standardised medical coding at both hospitals and at the insurers’ end to reduce irregularities in medical records. It also suggests use of AI and data analytics to identify unusual patterns in claims at an early stage.

Improved data sharing is seen as a key requirement. This can be facilitated through the Ayushman Bharat Digital Mission and national claim exchange platforms to help insurers, hospitals, and third-party and claims administrators to verify claims with speed and accuracy. 

As the report puts it, frauds can be reduced with stronger coordination without impacting genuine claims. The report adds that claims resolution, which fall in the grey area between genuine and fraudulent, can reduce losses and improve trust in the health insurance system.