INSURANCE FRAUD

SHEILA · August 2005

RECENTLY, WE ASKED ALL EMPLOYEES THAT HAD SPOUSES WITH DIFFERENT NAMES THAN THEIR OWN TO BRING HR PROOF OF MARRIAGE. WE FOUND ONE EMPLOYEE WHO GOT MARRIED 10 MONTHS AGO BUT WAS CLAIMING HIS WIFE FRO THE LAST 6 YEARS. SHE ALSO HAS HAD A CANCER OPERATION BEFORE THE MARRIAGE. WHAT WOULD BE THE BEST WAY OF HANDLING THIS?

THANKS,

marc · August 2005

First, please turn off your caps lock key. When you post in all caps, it is considered the same as yelling.

Your problem could be significant. I would discuss the options in-house, including your lawyer before proceeding.

If this is fraud, it is likely large enough to be a big time felony when you consider the cancer operation. It is likely your insurance carrier would look to the company for repayment, since it relied on information provided to you.

That would leave you holding the bag and looking squarely at the employee. Now that you are burdened with this knowledge - are you going to pursue the EE criminally, civilly or both? Are you ethically bound to come clean right away with the insurance carrier?

These are good questions which will test the character of your company and its officers.

irenesmsaclaims · August 2005

Marc's right, but there is another angle to consider here, and it depends upon whether or not your plan is self-funded or fully insured. If it is fully insured, and a misstatement is made on the application, an insurance company will typically rescind the coverage back to the effective date, in this case the spouse's effective date, when they were not married, (unless it was a common law situation and that was allowed then). In this case, the employer MAY not be liable for the claim, as it didn't know at the time, and the insuror would pursue the repayment from the employee. If self-funded and stop-loss coverage existed and it went into stop-loss, you could have the same situation. If it didn't go into stop-loss, then the provisions of the plan would prevail, and all plans should have provisions for fraudulent claims, eligibility rules and overpayment of claims requiring repayment by the claimant, including reduction of subsequent claims. The Plan Administrator should review this, and probably the company's attorney as well. Good luck with this!

lorrie · August 2005

irenesmsaclaims makes a point about common law. Check with the laws in your state and with your insurance carrier. It is possible that they met common-law guidelines when she was first put on the plan.

LivindonSouth · August 2005

But the first thing you do is terminate coverage. The second is terminate employment.

sandra_d · August 2005

Several years ago I discovered that one of our employees was covering his ex-wife on his plan. They were divorced for some reason I can't remember...something about receiving better gvt subsidy when single than when married. Anyway, they still lived together, and were happily unmarried. I was very upset about this, and thought our insurance carrier surely would provide us "back-up" on the fact that they weren't married, and terminate coverage retroactively, with the employee and ex-spouse owing past medical claims themselves. To my great surprise our (huge) insurance company couldn't have cared less, and was actually wondering why I was out to get the employee!! I have to think that wouldn't be the approach from most carriers, but yet today still find it a bit curious!

Whatever · August 2005

Question - When the insurance is terminated (since this involves fraud)is a COBRA letter sent to the spouse and if so, is period of coverage 10 months or 6 years?

POPEYE · August 2005

????? Since this potentially would be a fraud situation, would the insurance carrier consider that "Gross-Misconduct" and it not qualify for Cobra consideration????

TN HR · August 2005

The best way to handle this is to cancel Christmas for both of them. Luckily they are far enough away from Tennessee that they will not come down here for the open-trough, suckle the teat dry TennCare system.

Gene

jrzgrl · August 2005

If they didn't qualify for the insurance, they don't qualify for the COBRA. We've had a couple of incidents like this, and our insurance company followed our lead....if we didn't term the employee, then they didn't term them from the policy for putting a "spouse" on the plan. We now have a policy stating the EE will be termed immediately if it is found that they have someone on their plan who is not a dependent.

irenesmsaclaims · August 2005

I'm not sure that this would constitute "gross misconduct" and a denial of COBRA. In the very nebulous area of gross misconduct, it is fairly widely agreed that it would be an act for which a person could be arrested and charged, (like theft or killing the boss), but this could be arguable.

As for the time covered, it doesn't matter on the COBRA notice, since a person could be covered for one day and still be entitled to COBRA. Where comes into play is in the certificate of ceditable coverage upon termination.

LivindonSouth · August 2005

I would not issue a cc certificate. Or if I felt compelled to I would bold-cap a statement on it that the coverage was obtained fraudulently and the individual was not entitled to the coverage.

Disclaimer: This message is not intended to offend or attack. It is posted as personal opinion. If you find yourself offended or uncomfortable, email me and let me know why.

atrimble · August 2005

IMHO - the employee would be eligible for COBRA, as nothing occurred before discovery of the fraudulent act that would jeopardize the insuring of that body. However, the full period of coverage of the spouse was fraudulent, therefore the spouse was ineligible for coverage for the entire term, and as having never legally participated, is not eligible for continued coverage.

But that's just my opinion.

It also could be argued that the employee & spouse remedied the fraud situation by getting married, so COBRA would be applicable because the spouse "legitimately" participated as an eligible spouse for at least one day after the wedding.

Also, employee's COBRA eligibility could be voided if the employer or insurer persues fraud in court. If the employee is convicted of stealing or some such theft crime, then "gross misconduct" may be argued, as stated by irenesmsaclaims. I think the $ amount of the years' worth of claims would push this into the realm of felony theft.

Whatever · August 2005

I just looked at the applications for health insurance. What was interesting is that they include "files an application for insurance or statement claim containing any materially false information....commits a fraudulent insurance act, which is a crime and subject person to criminal and civil penalties."

I would interpret this to mean gross misconduct on the part of the employee and therefore COBRA would not apply. I don't think this is resolved by the marriage because if the wife was not covered legally for the previous 6 years, rules of pre- existing condition would apply to any treatment after the marriage.

INSURANCE FRAUD

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