What is health insurance fraud? And how to avoid it

Health insurance is a game-changer. It has saved many from financial ruin while providing them with the care they need to save and improve their lives. While many use it to receive life-altering treatments in good faith, some misuse health insurance to make a quick buck or two. Health insurance fraud is a fast-growing get-rich scam that needs to be stopped in its tracks. Here’s everything you need to know about health insurance fraud and how to avoid any missteps as a policyholder.

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What are the different types of fraud in health insurance?

Claim fraud

As the name suggests, this type of fraud occurs when the policyholder or healthcare providers, such as hospitals and doctors, falsify claims to gain health insurance benefits that they are not eligible for otherwise.

Policyholder claim fraud

Policyholders can commit the following claim fraud:

Producing fake documentation to support a false claim. This can include prescriptions, test reports and medical
bills
Raising a claim for a treatment that has not been administered
Falsifying expenses incurred to receive more claim benefits

Healthcare provider claim fraud

Sometimes, even healthcare providers can become greedy for insurance money and commit the following acts of fraud:

Overcharging for treatments to get more money from insurance companies
Charging for treatments that have not been administered
Admitting patients who don’t need treatment or faking hospitalisation to receive claim benefits
Colluding with the policyholder to get an insurance claim under false pretences

Application fraud

When filling out the application for a health insurance plan, you have to be honest to a fault. Providing incorrect or misleading details in the application form is considered to be application fraud. Not disclosing your pre-existing conditions, providing the wrong date of birth, and misrepresenting other personal details can be classified as application fraud. This applies to dependents and their details as well.

Eligibility fraud

Providing false or misleading information about the policyholder or their dependents to get health insurance benefits that they would not be eligible for is considered eligibility fraud. While this may seem harmless, they have major consequences. Eligibility fraud could include:

Lying about or not disclosing a pre-existing condition
Providing the wrong date of birth to lower your age to escape a higher premium bracket
Faking relationships with those who are not related to add them as dependents under your policy
Providing incorrect information about one’s income and employment status

What are the consequences of committing health insurance fraud?

Committing health insurance fraud, whether intentionally or as a genuine mistake, can have major repercussions. Health insurance companies don’t take such issues lightly, as they result in monetary losses for them, which affects their bottom line. They also need to set an example to discourage others from committing such fraud in the future. Here’s what happens when health insurance fraud is discovered by the insurer:

Claim rejection

The insurer can reject the claim if the fraud committed by the policyholder comes to light. This will lead to the policyholder having to pay out of pocket for the treatment, and can cause substantial financial distress depending on the cost of the treatment.

Policy cancellation

If the fraud committed by the policyholder is severe in nature, the insurance company is well within its rights to cancel the policy in its entirety. This will leave the policyholder without coverage. They may also be blacklisted by the insurer, which may prevent them from getting a health insurance policy from another insurer.

Renewals

Fraud leaves a black mark against the policyholder. It can lead to trouble when the time comes to renew the policy. Non-renewal of the policy will result in loss of medical coverage and any benefits that the policyholder may have accrued over time.

Loss of network hospitals

You will not only be blackballed by the insurer for having committed fraud, but you may also not be able to access the insurer’s network hospitals or their services.

How to avoid fraud

Here are some tips to keep in mind to avoid activities that can be deemed as fraudulent by your insurance provider:

Disclose all the details asked by the insurance company honestly when filling out the application form. This includes any pre-existing conditions, previous surgeries and lifestyle habits such as smoking
Don’t share your policy details with others, including your policy number and e-card, as they may use them to file false claims under your policy
Always check your hospital bill to see if you have been overcharged. Also, verify if you have been charged for the treatments/services provided by the hospital and nothing beyond that
Never submit fake or forged documents when filing a claim
Use the insurer’s network hospitals for cashless claims, as they have less chance of committing fraud
Maintain the documents for every procedure you and your dependents undergo

Committing health insurance fraud is like shooting oneself in the foot. It serves no purpose but to harm your interests. When it comes to health insurance, honesty is truly the best policy. So make honest claims and avoid mistakes that can prove to be costly.

Frequently asked questions

Written by Roocha Kanade

2.5K Linkedin Followers

Reviewed by Dr. Harshita Dahiya

Health Insurance content enthusiast who turns complex topics into easy, binge-worthy reads—fueled by SEO, creativity, and way too much chai! Loves juggling multiple projects, cracking impossible deadlines, and sprinkling humor into the mix. When not geeking out over digital trends, you'll find her lurking on Quora and Reddit, planning the next getaway, or passionately decoding all things health and insurance!