Suspicious no-fault automobile insurance claims are the most common type of health care-related fraud in New York state, according to a new report released by the New York State Insurance Department.
Here’s how the scheme works:
The perpetrators go out seeking to purposely cause accidents, or even to stage them. Once these bogus accidents happen, the individuals will go to medical facilities that are in on the scheme, dubbed "medical mills."
The suspects then order up unneeded tests including MRIs, psychological evaluations, acupuncture or chiropractic treatment.
Under the state’s no-fault law, individuals involved in car accidents are allowed up to $50,000 in medical treatments.
All these treatments and tests amount to tens of thousands of dollars per individual, and ultimately hundreds of thousands and sometimes millions for the medical facilities.
The report said of the 14,625 reports of suspected health care-related fraud sent to the department last year, 12,807 reports involved no-fault insurance.
"About one in five no-fault claims in the New York City area shows evidence of fraud,” said Robert Hartwig of the Insurance Information Institute. “In other words, the claim itself may have been entirely contrived. In New York state alone we are looking at a quarter of a billion dollars in no-fault fraud."
And according to Hartwig, regular law-abiding drivers are paying the price.
"Ultimately, insurers have to pass along these costs despite the fact they remove a significant amount,” Hartwig added. “It means every single policy holder pays what amounts to be a fraud tax."
The incidence of no-fault fraud has been on the rise since 2007. It has become such a pervasive and expensive problem that insurance companies hire investigators to look into suspected fraudulent claims.
The National Insurance Crime Bureau investigates the larger crime rings that perpetuate most of the false claims.
"It's very profitable and difficult to investigate," said Kevin Gallagher, an investigator with the bureau. “We're talking millions of dollars here.”
In 2008, the Queens district attorney charged 61 people for intentionally staging accidents and submitting false medical claims to the tune of $1.6 million.
And in 2006, a staged accident turned fatal. Waurd Demolaire was convicted of manslaughter for crashing into 71-year-old Alice Ross's car and killing her. Demolaire had caused the accident to collect insurance money.
If you believe you are the victim of a staged accident there are a few important steps you can take.
First, call the police to file a report, no matter how minimal the damage appears. A police report makes it more difficult for someone to collect a larger claim against your insurance company.
Second, take pictures. Using your cellphone or camera, document everything about the accident, including the people at the scene.
And finally, be cautious of people who just happen to “appear at the scene,” especially if they offer to take you a doctor or suggest a tow company, because they may be part of the scam.
You can search the website www.fraudny.org for more information about no-fault fraud.