Sober home: Will we demand reform?

The largest Medicare-Medicaid takedown in history recently underscored the vast scope of America’s addiction epidemic — and the role insurance fraud plays as the deadly financier.

More than 400 people were charged with bilking health insurers out of $1.3 billion in bogus bills for addictive opioids across 20 states.

Corrupt sober homes are the newest discovery in the opioid crisis. Sober home owners routinely spoon drugs to addicts so they’ll keep relapsing. The homes, rehab facilities and drug-testing labs get more shots at inflated insurance billings.

Thankfully, the corruption is now wide out in the open. Investigative news stories have appeared in droves over the last few months.

We have to ask how so much fraud could’ve spread before anyone discovered the vastness of the crimes. Why did the safety net break down so badly, and how do we repair it?

The respected SunSentinel has done some of the best investigative reporting of sober-home fraud in South Florida. It believes:

“Shared responsibility also lies with insurance companies, who through incompetence or negligence seemingly have no problem pumping blood money into fraudulent schemes that feed a largely failed relapse industry by paying billions in insurance claims as if these were established medical procedures, which they are not, and which have, in fact, provided little in the way of sustained recovery for suffering addicts and desperate families,” the SunSentinel says in an oped.

Of course responsibility extends to lax policymaking, perhaps sleepy law enforcement and other corners of the safety net.

Once the drama of betrayed addicts and sleazy treatment dies down, will the story go away as just another news cycle? Or will we stay focused and keep up the pressure for workable solutions? Some of the hardest work lies ahead.

About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud

Can insurers fight fraud while privacy vanishes?

A billionaire tossed a verbal stone into an electronic pond, causing ripples worldwide.“ All these concerns about privacy tend to be old-people issue,” LinkedIn founder Reid Hoffman proclaimed about the new world of electronic communication.

However Hoffman defines “old people,” today’s electronic communication-linked world is raising privacy concerns across all generations. From retail breaches such as Target Corporation, through the credit-card account fiasco engulfing Wells Fargo, privacy invasions and protection are key topics.

Fraud investigations are a big part of the privacy conversation. Many tools used by investigators today were only Star Wars technology a generation ago. Predictive modeling, tracking cell conversations and the ever-expanding world of social-media probes all help battle insurance fraud. Some consumer groups and trial attorneys representing insureds express concern about how insurers use technology to redefine the relationship between insured and insurer. Many concerns have merit because the relationship between insurance carrier and policyholder derives from a written policy contract.

Insurers routinely invoke policy language. They cite the “duty to cooperate” or “duties in the event of loss.” Yet most policy language was written before cell phones and social media. Insurers are woefully deficient in updating policies to keep pace with rapidly changing electronic communication and a data-driven society.

Insurers and related organizations finally are addressing how privacy, claim investigations and policy contracts must be adapted for this new era. How well it is done will define how emerging technology is used in fraud investigations for future generations.

Fraud fighters must set standards so data and technology are properly used and guard personal privacy rights. Otherwise, courts and legislatures will impose those standards. That could have a profound impact — positive or negative — on the fraud fight.

Privacy issues facing fraud investigators today stretch far beyond social media. While Facebook, Twitter, Instagram and other platforms create a treasure trove of information for fraud investigations, the future bodes an entire new realm of data unlike any we have known. Welcome to the world of “big data.”

Big data involves data sets that go beyond the ability of commonly used software to capture, analyze and process.

The world’s technological per-capita capacity to store information has doubled every 40 months since the 1980s, and has grown exponentially since 2012.  Big data today is measured in zettabytes. That is one sextillion bytes of information — a “1” followed by 21 zeroes. The entire World Wide Web contained half of one zettabyte of data in 2009.

Billions of devices leave clues

Data collection no longer derives from human interactions. The Internet of Things (IoT) is an ever-growing worldwide network of non-human physical objects that feature an IP address for internet connectivity. They can communicate information without human assistance. Many trace the birth of IoT to 1982 when a Coke machine was modified at Carnegie Mellon University. The machine reported its inventory and temperature to a remote location.

Today the IoT collects data from items as simple as toasters, home thermostats, and washers and dryers to entire electrical grids and transportation systems for the world’s largest cities. IoT devices will top 50 billion by no later than 2020. These devices collect, share and retain data without human interaction.

For insurance-fraud investigations, the Internet of Things moves from a worldwide data cloud to retrieving valuable information: black box data concerning vehicle speed, braking and other information relevant to how an auto accident occurred to security panel downloads identifying who entered a building, and at what time before a major fire loss happened. How this data is authorized to be collected, what type of analysis is needed to ensure accuracy, and whether and how it is admissible in court are all issues that involve fraud investigators today.

Each of these these billions of devices leaves a data trail while communicating with each other throughout the world. Linking these electronic bits of evidence allows this information to be captured, analyzed and sold for its analytical value. Big-data analytics alone are valued at more than $100 billion and its growth rate exceeds10 percent a year. That is more than double the pace of “traditional” software business analysis.

How does big data help investigate insurance fraud? A telling case comes from Middletown, Ohio.

A fire broke out in Ross Compton’s home on Sept. 19, 2016. Compton frantically called 911. He reported the fire. He claimed he packed a few belongings in a suitcase, grabbed his computer, used his cane to break out a window, and hurled items out of the house before rushing out to save himself.

Investigators determined the fire was intentionally set. They subpoenaed the data from Compton’s pacemaker and heart monitor. A cardiologist showed Compton allegedly was not doing the strenuous physical activity he claimed during the 911 call. He was indicted for arson.

Insurance investigators use data analytics for purposes ranging from predictive models of workers-compensation injury red flags to vehicle license-plate reader reports purchased from databases containing billions of “hits” tracking vehicles as they move through public highways, parking lots and garages.

How data is being secured equally involves a number of options.They range from court-ordered subpoenas to companies providing access to databases and personal information with programs built for predictive modeling or claim investigations.

While the universe of data changes constantly, unchanged are authorization forms and out-of-date insurance-policy language. Virtually no policy contains provisions relating to compiling, using or analyzing personal data or big data for investigating fraud. This leaves a wide gap for attorneys and consumer advocates to assert insurers already are going too far

U.S. lags in privacy laws

Many Americans believe a right of privacy is enshrined in the Constitution. Privacy actually traces back to 1890. Samuel D. Warren and Louis D. Brandeis published “The Right to Privacy.” They advocated for a general common-law privacy protection. No U.S. court recognized such a right at the time.

Brandeis was a Supreme Court Justice when he authored the majority opinion in Olmstead vs. United States. 8 The court laid out a constitutional right “to be let alone.” Now every jurisdiction in the U.S. recognizes some form of a constitutional, common law or statutory right of privacy.

That right, however, has limits. Hoffman’s quote about privacy being for “old people” partially derives from the willingness of Millennials to give up more personal data than any generation before. In exchange, they gain the ability to readily access online information. Thus there is equally the right to surrender private data and information for some benefit or information.

A privacy right also may be surrendered by contractual agreement. This is where many insurers find themselves today, either through claims authorizations or using broad, archaic policy language to incorporate electronic data access.

The U.S. Congress and virtually all 50 state legislatures are considering updated privacy legislation. The U.S. lags behind many nations in establishing privacy laws. More than 80 countries have adopted comprehensive data protection laws. The U.S. remains notable for this gap.

Canada adopted the Personal Information Protection and Electronic Documents Act in 2001. Privacy protections for data processing in Europe were concluded within the Council of Europe in 1981. European citizens’ rights to data privacy also are protected under the European Convention on Human Rights. It protects an individual’s “private and family life, home and correspondence.”

The closest U.S. national protection is the Gramm-Leach-Bliley Act. Corporations, including insurers, must provide customers a written “privacy notice” advising how personal data and information are used. Supporters of the legislation could not foresee the dramatic rise of “big data” the new millennium would bring.

Insurers annually provide policyholders a federally compliant privacy statement. Many insurer fraud fighters, however, have no input into their company’s privacy language.

Often these statements contain lukewarm language such as: “We will not use your personal data for any purpose other than underwriting and setting of a fair premium. Attorneys in a lawsuit thus can assert impropriety when personal data is used to investigate claims. Insurers must do a better job of including language regarding insurance fraud in the permitted scope of private information and data collection.

Insurers should work cooperatively with groups such as the Coalition Against Insurance Fraud and National Insurance Crime Bureau on legislation impacting use of private data.

These organizations help draft legislation, and lobby statehouses, to ensure legislation is fair and equitable to all parties. The Coalition and NICB also monitor court cases affecting fraud investigations, including privacy issues. Both organizations file amicus curiae briefs with state and federal courts, seeking fair application of the law in combating fraud. The Coalition is uniquely positioned to be a strong — and balanced — privacy advocate with its insurer and consumer members.

Legislation and court decisions ahead will dramatically define the scope of what personal data may be used, and how, in all aspects of our society — including insurance fraud.

Facebook clues discoverable

Key criminal cases offer a guide for the future of insurance fraud investigation.

The New York Court of Appeals issued a decision involving Facebook on April 4, 2017. The New York County DA issued 381 warrants seeking access to user account information involving a criminal investigation of alleged Social Security disability fraud. Facebook moved to quash the warrants. It argued the warrants were constitutionally defective, over-broad and that Facebook’s users were entitled to personal privacy protection. The trial court directed Facebook to immediately comply with the warrants.

Facebook appealed. The New York high court upheld the warrants. Recognizing today’s world of electronic data, the court noted a traditional search warrant authorizes law enforcement to enter, search and seize property.

“These differences in execution, however, can be easily explained by the nature of the materials sought. The service provider is more likely to be better equipped to access and conduct a search of its own digital information than law enforcement personnel, and the data may be stored in different locations,” the court noted.

Arkansas saw a dispute arising from a search warrant issued by the Bentonville Police Department to The defendant James Andrew Bates allegedly murdered Victor Collins, whose body was found at Mr. Bates’ residence.

Crime investigators noted an Amazon Echo device in his home. The Amazon Echo or “Alexa” device is wireless equipment containing seven microphones equipped with sensors that use beam-forming technology to hear users from any direction.

Alexa can analyze speech, answer questions or respond to directives — including to other internet-connected devices. Bates also owned numerous Wi-Fi connected devices, including a “Nest” thermostat, home alarm system with door-monitoring alarms and motion sensors, weather monitor and remote-control lighting. Collectively, these devices can be remote controlled by cellphone, computer or similar devices. The court approved a search warrant directing Amazon to provide access to all information Alexa recorded during the time surrounding the murder.

As more homes become digitally equipped, more requests for stored data will arise for fraud investigations. The Facebook decision confirms that courts will allow securing such data when appropriate steps are taken to secure release of information.

Insurers seeking the same data may not enjoy the same privileges as law enforcement. Instead, they must rely upon updated policy language and re-drafted authorization forms to conform with today’s world of technology. Unless insurers do so, very relevant documents may not be discoverable.

Must ensure data admissible

Big data, the Internet of Things and the new world of communication information are breakthroughs in the fraud fight. We have at our fingertips today more information than anyone would have imagined a generation ago. At risk is whether insurers are moving promptly enough, and in the right direction, to ensure data and information are obtainable and admissible in court.

In addition to updating policy language and forms, insurers and consumer advocacy groups must work together to develop best practices for collection and use of this data.

Historically, insurers often moved in an authoritative, corporate manner. Courts thus found insurance policies to be unfairly one-sided “contracts of adhesion.” Insurers today face a unique opportunity to work cooperatively to adopt fair and equitable best practices and write new policy language that allows reasonable collection and use of data for underwriting, premium determination, claims and fraud investigation.

Insurers and consumers should develop mutually acceptable standards and practices as the world of big data evolves, rather than face a patchwork of 50 or more differing rules, regulations and laws.

Whether those standards are developed as a model act for state legislation or through appropriate channels as accepted industry standards also needs deciding.

Insurers can work cooperatively with consumer-advocacy groups and legislatures in a forward-thinking manner. Or they can simply wait and “see what happens.” Yet doing nothing is not an option. Decisions today will guide how this valuable treasure trove of information is used, or lost, for generations of insurance fraud investigators to come.

About the author: Matthew J. Smith, Esq. is associate director of government affairs for the Coalition Against Insurance Fraud, and Of Counsel to the law firm of Smith, Rolfes and Skavdahl, Co., LPA, which he founded in 1989. Mr. Smith is a frequent lecturer on insurance law matters across the U.S.

Insurance fraud continues to finance opiod epidemic


First came Prince, who died from an overdose of the painkiller fentanyl in his Minnesota home.

Next came singer Chaka Khan. She beat the reaper by entering into rehab this month, along with her sister.

The Grammy winner admitted fentanyl is her escape drug of choice. Chaka wisely gave up her summer concert appearances to focus on getting clean.

“The battle of addiction is a serious and long process, which is why I chose to address my use of prescription medications — which came about as a result of the knee surgery I had a few years ago,” she said.

Fentanyl is one of latest prescription painkillers to grab headlines. It’s used for severe pain, and is approved for longterm treatment. The stuff also is up to 100 times stronger than morphine, and 50 times stronger than heroin.

Fentanyl quickly shoots into the bloodstream. Dopamine then elevates, stoking the brain’s reward areas. The sweet euphoria grows into dependence, then addiction.

States like New Jersey and Mississippi are reporting spikes in fentanyl overdose deaths.

Insurance fraud is the largely untold story. It’s helping finance America’s epidemic of opioid addiction — billions of stolen insurance dollars worth.

Some fentanyl addicts reportedly are scamming health insurers to score prescriptions that feed the need. Same with other painkillers such as hydrocodone, or anti-anxiety meds and muscle relaxants.

Insurance scams may or may not have funded Prince’s or Chaka’s highs. Yet scams still are part of the bigger opioid picture, so we should be very concerned.

Insurers are stepping up investigations, plus education of doctors and patients to head off addiction. Law enforcement is going after shady pain clinics and pharmacies that dole out insurer-paid scripts.

Still, we risk getting exhausted by it all. We’re subject to steady parades of news stories about people dying from insurance-paid overdoses. Plus welcome busts of cold-blooded pain docs. They’re keeping addicts fed with pills — are we getting fed up?

Sadly, it may take a celeb’s drug death or rehab to keep headlines fresh and the public concerned. Let’s stay concerned, whether it’s a Grammy winner or small-town factory worker just trying to get clean.

Scammers make desperate excuses to escape insurance-fraud busts

FOM_July16Not smart enough to lie about his injured ankle. That was the Hail Mary defense Todd Romero tossed up, trying to steal workers-compensation money for a supposedly injured ankle.

Insurance fraudsters like Romero often doll out brainless excuses when trying to vindicate their criminal behavior to investigators, judges or curious onlookers.

Errant birds, blood-sucking insects, multiple-personality disorder and too dumb. These are just some of the daffy defenses fraudsters peddle when cornered and trying — with a straight face — to explain unexplainable insurance cons that lurched out of control.

Investigators quickly see through paper-thin excuses. Claim denied, scam busted.

Take Romero. The Louisiana offshore oil worker lied that he hurt his left ankle while stepping onto a well platform from a crew boat in the Black Bayou. He started hauling in workers-compensation money for his injury.

Romero’s doctor told him to wear an orthopedic boot. Romero kept trying to find docs who’d give him a more-serious diagnosis — bigger injury equals bigger insurance money.

Yet video caught Romero pushing his truck, and walking normally without the boot. His employer denied his claim and accused him of fraud.

Romero lacked “mental acuity” to commit fraud, he desperately contended in court when confronted with the footage. After all, Romero was age 22 before he graduated from high school, he said. In other words, he wasn’t smart enough to be crooked.

Yet Romero earned a professional license and hydraulic crane operator card, and was certified as a first-aid responder. Claim denied in a civil suit.

Burglar and victim?

Then there’s the strange case of Elvis hobbyist Herbert Stewart. Thieves ransacked the Bethlehem Township, Pa. man’s home, he told his insurer. Nearly $7,000 of Elvis records, pictures and other memorabilia were lifted.

Stewart hid the stuff in his closet the whole time. For some reason he never thought insurance investigators actually would look for the stuff. They quickly found his Elvis stash, leaving Stewart to explain away his false claim in court.

He has multiple-personality disorder, Stewart told the judge. One personality was the burglar, and the other was the victim. Stewart’s medicines weren’t working, thus freeing his thief personality to rob his insurer. Stewart received six months of probation.

“Stop listening to the other guy. Alright?” the judged ordered.

It’s unclear which personality is serving the sentence.

Tried to save woman?

“If there were a Mount Rushmore of bad luck I think Andy House’s face would be on it,” federal prosecutor Chris Tortorice said.Anthony Thomas’s arson plot was cooked, and his excuse was half-baked. The New Orleans landlord burned down his duplex apartment, receiving a little insurance money for lost rental income.

A buddy rented an apartment in a house. He wanted to make an inflated insurance claim for damaged furniture. So they decided to burn down the entire house.

The crony splattered gasoline throughout the home and set the fire. The blaze lurched out of control, leaving Thomas trapped inside.

He barely escaped. He had serious burns and spent 60 days in the hospital’s burn unit. Investigators were curious how Thomas and the house were burned at precisely the same time.

Um, well, Thomas tried to save a woman trapped in a burning car near the apartment, he said. No go, the court retorted. Thomas has permanent burn scars, and no insurance money. He’ll have 17 years in federal prison to rethink his excuses.

“He did not gain anything from it,” his perplexed attorney John Hall Thomas said. “It’s difficult to understand why he did this.”

Veered into marsh

Blame an errant pelican and mosquito hoards, Andy House told insurance investigators probing why his $1-million Bugatti Veyron veered into a salty East Texas marsh to its doom.

Only 300 Veyrons were made. They were geared to reach 250 mph. House over-insured the car for $2.2 million and stood to make a hefty profit if his insurer paid the damage claim.

So House roared down a straightaway and calmly veered into the murky goo. He left the motor running, pulling salt water into the engine — effectively flooding and totaling the car.

A low-flying pelican suddenly swooped in front of the Veyron, House told his insurer. He jerked the car to avoid the bird, accidentally barreling into the swamp. House said he left the engine running because he was too busy swatting mosquitos in the boggy goo.

Yet in a fit of incredibly unlucky timing, a car enthusiast saw the Bugatti jetting down the road. Awed, he whipped out his cellphone to capture the rare moment. He recorded House zooming down the road and smoothly ploughing into the lagoon. No pelicans in sight, no sharp veering.

The video became an online sensation. Car lovers winced over the Bugatti’s demise. It also was one of the most-expensive crashes of a single car in history.

Investigators quickly discovered the video during an online search.

Birds and bugs didn’t wash with the court. House was left with a sodden $1-million wreck, a year in federal prison, and must repay the $600,000 insurance settlement. He also has a permanent place in the notorious Insurance Fraud Hall of Shame.

“If there were a Mount Rushmore of bad luck I think Andy House’s face would be on it,” federal prosecutor Chris Tortorice said.

Adverse decision in Kentucky could embolden crash rings


A Kentucky lower court has thrown a wrench in the campaign to combat the growing scams involving PIP crashes in the Bluegrass State. The court agreed with two claimants in an auto crash. They’re suspected of fraud. Insurers have no right to compel them to attend an examination under oath (EUO), the lower court ruled.

The Coalition and NICB filed an amicus brief this week asking the Kentucky Supreme Court to overturn the decision and restore insurer rights to use EUOs.

EUOs are a powerful weapon to get at the truth. When summoned, many fraudsters don’t bother showing up —especially lower-level ring members. They feel the few dollars they’re making don’t offset the potential of getting caught.

EUOs are a deterrent as well. Knowing there’s a chance you might have to give details of a claim under oath helps keep people honest.

Take the EUO away, and more fraud rings likely will escape detection and feel emboldened to commit more fraud.

The Kentucky claimants contend insurers use EUOs to harass and intimidate honest claimants. We’ve found no evidence to support this contention. We determined that insurers use EUOs very infrequently, and only when necessary to discover truth about a claim.

In fact, EUOs can be an important tool to validate legitimate claims.

Sometime later this year, the Kentucky supreme court will announce its decision. Here’s hoping they support uncovering the truth about potentially fraudulent auto claims.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.