Legislative Update

This was expected to be a quiet year for many state legislatures because lawmakers often are focused more on getting re-elected in November. Still, the Coalition is tracking a record number of 99 fraud-related bills spanning 33 states — all in just the first quarter of 2018.

The bills address everything from patient brokering to stronger immunity standards for reporting suspected fraud. Thirteen anti-fraud laws already have been enacted, and 15 met their demise. This leaves 71 bills requiring our attention, and we expect several more bills in the coming months.

The Coalition casts a wide net around the U.S. in our pursuit of stronger anti-fraud laws. Whether that means talking with legislators at meetings such as NCOIL and NCSL, or regulators at NAIC gatherings, your Coalition is there. When we need an urgent push from members and colleagues, we urge you to write your state legislators to vote “yes” or “no” to fraud-related bills. Our grassroots tool called CQEngage makes it convenient to send a letter.

At the same time, Coalition members are our valuable eyes and ears. You may hear about bills or regulatory changes we should know about. Often a tip from a member alerts us to a bill we should act on. We greatly appreciate the leads you share. Equally, make sure your government affairs team knows about the Coalition and our work. The Coalition is the only anti-fraud group speaking for the entire fraud-fighting community — insurers, consumers and government agencies. Our united voice can carry weight with many elected officials.

So thank you for your interest and support. Our government affairs committee meets May 22, so let us know about important issues, bills or concerns we should consider addressing. I also look forward to seeing many of you at our midyear membership meeting, June 4-5 in Orlando.

Catherine A. Rankin
State Farm Insurance
Chair, Government Affairs Committee

Sometimes it truly is “déjà vu all over again” in Washington, D.C. Such is the problem with a proposal by the Trump administration to re-open the Pandora’s Box of healthcare fraud called Association Health Plans (AHPs).

Fraudsters hawked fake health plans similar to AHPs across the nation in 2000-2002. They promised trusting consumers full health benefits for below-market premiums. Instead, the crooks delivered junk policies that left sick and injured consumers with no health coverage and large medical bills they couldn’t afford to pay. An estimated 200,000 Americans were defrauded.

The Administration wants to authorize AHPs all over again. The stated goal is to offer more consumers and small businesses access to affordable group healthcare. Except the proposal is ambiguous about how large a role states will play in overseeing AHPs. If the measure undermines state oversight, scammers could exploit that gap by launching new waves of fake health plans. They would promise full coverage yet deliver policies that are useless pieces of paper.

The Coalition joined the loud chorus of voices urging the U.S. Department of Labor (DOL) to fully empower state regulation. The goal is to build a potent state-federal safety net. “Federalizing AHPs, especially with a 50-state regulation system already in place, is not the answer,” the Coalition wrote DOL. “States and the federal government should share oversight as currently exists under the ERISA regulations in place.”

“AHPs may be a well-intended idea. Yet the elysian promise has potentially damaging tripwires,” Smith said in an article he bylined for Bloomberg Law. “The proposal harbors oversight ambiguities and potential enforcement gaps that could put small businesses and individuals at risk of being exploited by scam artists who, history shows, inevitably will seek to exploit weakness in the new AHP system. The money will be too good for marketers of fake health plans to pass up.”

Many of the 99 fraud bills plus regulatory proposals the Coalition tracks nationally align with our 2018 legislative priorities. And all directly affect — positively or negatively — anti-fraud efforts.

Here’s the scorecard for the first quarter of 2018:

Alabama. Dishonest home contractors will find it harder to do business in the state. A new law requires contractors to be licensed for repairs exceeding $2,500. Fines for violations increase, and Alabama set up a recovery fund for defrauded homeowners.

Arizona. As our nation wrestles with steady fallout from the opioid crisis, states are cracking down on those seeking to make a fraudulent profit off desperate addicts. Gov. Doug Ducey signed a patient-brokering law to stop paying kickbacks for recruiting addicts (and non-addicts) in treatment facilities. Dishonest rehab facilities and drug-testing firms over-bill insurers, often for unneeded treatment or more treatment than the patient needs.

Abuses by towing firms also were tackled. Ducey signed a bill requiring fair, open hours for vehicle inspections and pickups at tow yards. Towing firms also must supply consumers and insurers with a detailed and timely statement of charges. Towing vehicles to far-off locations and excessive storage fees are prohibited as well.

Illinois. Semantics can be important. Illinois slightly modified the state’s fraud law to permit use of recovered insurance funds to prevent “crime” rather than stay earmarked for combating insurance fraud. This move likely will divert money from fraud fighting, thus risking undermining efforts to keep scammers at bay.

Iowa. Insurers victimized by insurance fraud gained the right to seek criminal restitution from fraudsters. HB 2238 gives defrauded insurers the right to lodge civil actions for repayment of money stolen from them by scams.

Kentucky. Insurers that are the actual victims of insurance fraud by issuing payment to scammers may now seek criminal restitution as part of sentencing. A very antiquated provision of the commonwealth’s law requiring a criminal conviction before a consumer or insurer could bring a civil fraud recovery action has also finally been eliminated. The new law became effective after passage by the legislature and signing by the governor on April 26th.

Maryland. A new law limits the state’s requirements for anti-fraud plans. Only insurers with policies or certificates of insurance in force within the state must submit fraud plans to the insurance department.

Mississippi. Long overdue, new immunity protections go into effect July 1. The law protects those reporting suspected insurance fraud to any law enforcement, investigatory, prosecutorial and other fraud-fighting body. A good-faith basis for reporting is required — the new law won’t protect a person who makes false statements.

Nebraska. Legislators are seeking to weed out dishonest public adjusters. Stricter licensing requirements are now on the books. The new provisions require licensing, and expressly prohibit misrepresentation and other fraudulent practices. Such provisions help protect consumers from dishonest adjusters, and help ensure these types of fraudsters stay out of Nebraska after natural disasters.

New Mexico. After being crowned the nation’s auto-theft capital for 2017, the state sought to remove that “honor.” New Mexico created an auto theft prevention authority within the insurance department. The changes are included in the state’s Insurance Fraud Act and strengthen the ability of the DOI to investigate fraudulent claims associated with automobile thefts. The new agency must also file an update report each Nov. 1 detailing progress made and steps being taken to reduce vehicle fraud and theft.

Tennessee. The Coalition partners with Honda North America to protect consumers from injury or death from counterfeit air bags. The Volunteer State became the 17th state to make selling or installing phony airbags a specific crime. Motorists have been killed and maimed in crashes after fake airbags were installed, or totally removed without any replacement. Black market knockoffs cost just a few dollars on the internet, yet swindler body shops charge insurers $1,000 or more for manufacturer’s originals.

Utah. Legislators are striking back against patient brokering through a new law similar to Arizona’s. Utah now prohibits paying for referring patients for substance abuse treatment. The bill received unanimous support in the Senate, then cleared the House and gained the governor’s signature in March.

West Virginia. A patient-brokering law took effect as well. Long known as one of the nation’s worst states for opioid addictions, West Virginia made brokering patients a specific crime this spring. Physicians also bear more responsibility in administering pain meds, and insurers must cover necessary treatment. The measure amends the state’s opioid law. Brokering patients now is a specific crime.

The Coalition represents the fraud-fighting community at national meetings that address key insurance issues — fraud and non-fraud. We help influence the national debates on fraud issues by networking and giving presentations as the sole national group speaking for insurers, consumer groups and government agencies. Three of the major national groups that hold regular national meetings are Coalition members — the NAICNCOIL and NCSL. In fact, NCSL recently formed an insurance fraud task force, with the Coalition as a member.

Conferences like these are influential forums where emerging trends are discussed and model legislation and regulation developed — including anti-fraud. Many diverse interest groups thus attend. It’s important to have a seat at the table when decisions are made that affect the fraud fight.

Fraud is the overarching element that touches every aspect of insurance and insurance consumers. That’s why the Coalition works to ensure fraud is a prominent agenda item at these large seasonal meetings. It’s also why the Coalition attends, leads and urges stronger anti-fraud protections at these events. The recent NAIC spring meeting makes all this abundantly clear:

Matthew Smith reviewed three trends in presentations at the NAIC’s spring meeting in Milwaukee. He spoke to the NAIC’s Anti-Fraud Task Force, of which the Coalition is a longstanding member.

Privacy & police crash reports. Access to police crash reports is galvanizing a growing debate over personal privacy limits. Local law enforcement continues selling the reports to bolster budgets. The reports go to crooked clinics that lure crash victims for useless and inflated treatment that gouges consumers and auto insurers. An important Tennessee lawsuit seeks to prevent access by invoking privacy protection under the federal Driver Protection Privacy Act.

 Insurer civil actions. There has been a dramatic increase in state bills allowing victimized insurers to seek criminal restitution against scammers to recover the stolen money. Key is for bills to balance legitimate insurer recovery when the insurer pays and is the victim, while protecting consumer rights.

Patient brokering. State legislation limiting the trafficking of addicts for inflated rehab and urine testing claims increasingly is surfacing. Sober homes, rehab facilities and testing labs exploit addicts for large scams. Ringleaders are hiring recruiters and paying cronies illegal kickbacks to funnel patients for false claims. South Florida and Philadelphia are among the brokering hotspots around the U.S.

In addition to placing the Coalition prominently on the national stage for fraud-fighting concerns, we equally attend these meetings to listen. This ensures Coalition members are quickly alerted to the most up-to-date fraud trends and information.

If you plan to attend one of these important national meetings, please contact our government affairs chief Matthew Smith so we can connect and coordinate our anti-fraud agendas and messages. Just reach out to Matthew at 202-393-7332 or matthew@insurancefraud.org.