The insurance industry loses about $1bn in fraudulent medical claims each year, but it does not have the time, resources and scale to combat the problem. Asia Pacific also has the highest percentage of claims fraud, sitting at 4%; this is double that of the EMEA region and almost triple that of the US. This was the problem that RGA attempted to solve with their claims adjudication automation solution.
Speaking at the Asia Insurance Review Virtual Claims Summit yesterday afternoon, RGAX digital innovation lead Wenyu Ji and and RGA executive director, health claims Steve Woh said that the average claim per size for medical insurance is small, but the total claim from health portfolios is massive due to the high frequency of claims.
Insurers must limit their fraud identification efforts to large cases, leaving a potentially sizable number of un-identified fraud within their claims received. According to their 2017 global claims fraud survey, only 24% of medical claims are examined for fraud – the majority is in life and mortality benefits. In contrast, the highest frequency of claims is in health and medical benefits, which represents only 4% of the claims examined. Further, the claims adjudication process is still heavily reliant on human review and is time consuming.
“Naturally, we look towards technology for help. Reinsurers offer automated underwriting solutions all the time; can we do the equivalent for claims management?” said Mr Ji.
The high frequency of claims is a benefit for an automated solution, as it gives the machine-learning algorithm many examples and cases to learn from. The goal is to have a solution that provides consistent decision making based on evidence and reduces judgement-based errors. This, hopefully, will lead to reduced claims costs and increased profitability for insurers.
Common types of fraud
A common type of medical fraud is to upcode or unbundle a procedure. In certain markets, each procedure is given a code during the claims process, which indicates its severity or complexity. “Many times, healthcare providers tend to game the system by breaking down a big procedure into separate smaller procedures, which ends up costing more than the single big procedure would have,” said Mr Who. “Upcoding is when a provider uses a code for a higher complexity procedure than what was actually done.”
He also pointed out that in Asia Pacific, patients are also admitted for one night hospital stays for simple procedures like a colonoscopy. “Typically, in other parts of the world, these are day procedures, with no hospital stay required,” he said.
In short, there are many opportunities for the industry to identify and manage these leakages and abuses of the system, he said.