HB2207 HD1

Report Title:

Insurance Fraud

Description:

Amends article 10A of chapter 431 and chapters 432 and 432D, HRS, to allow prosecution of health insurance fraud; establishes criminal penalties; allows recovery of amounts defrauded, and limits civil limits civil liability of a person providing information to assist in prosecution. (HB2207 HD1)

HOUSE OF REPRESENTATIVES	H.B. NO.	2207
TWENTY-FIRST LEGISLATURE, 2002		H.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

relating to insurance fraud.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that insurance fraud is on the rise both locally and nationally. Whether impacted directly, as a victim of insurance fraud, or indirectly, through having to pay increased insurance premiums, everyone is adversely affected by insurance fraud. Reliable estimates indicate that on the average, insurance fraud costs every household throughout the United States over $500 annually. In New Jersey, the cost for no-fault insurance fraud alone was estimated to be over $246 annually per household in that state.

Insurance fraud has also increasingly impacted the health insurance industry. Annual health care costs are estimated at $1,200,000,000,000 nationally, and health care fraud losses are estimated at three to fourteen per cent of the total health care costs, which means that there are roughly $36,000,000,000 to $144,000,000,000 in losses annually that can be directly attributed to health care fraud. Hawaii's health care costs exceed $2,000,000,000 annually. By conservatively estimating that three per cent of all Hawaii health care benefits are paid out because of fraud, losses to the Hawaii health care industry would exceed $60,000,000 annually.

To combat health insurance fraud, insurance companies need to be equipped with the information and knowledge necessary to investigate and prosecute individuals that are committing fraud. Act 155, Session Laws of Hawaii 1998, amended Hawaii’s insurance code in reference to motor vehicle insurance fraud and strengthened the section regarding limiting civil liability for those that share information regarding fraudulent behavior.

The purpose of this Act is to add insurance fraud provisions modeled after the provision relating to motor vehicle insurance fraud to chapters and articles of the Hawaii insurance code covering accident and sickness insurance, mutual benefit societies, and health maintenance organizations. Insurance fraud is not exclusively a problem for motor vehicle insurance; rather it is a problem across all types of insurance. These changes providing immunity from civil liability for people sharing information related to insurance fraud will enable health insurers to provide information regarding potential insurance fraud to other insurers and government administrative and law enforcement agencies to help identify and prevent fraud against the health care industry.

SECTION 2. Chapter 431, Hawaii Revised Statutes, is amended by adding a new section to article 10A to be appropriately designated and to read as follows:

"§431:10A- Insurance fraud; penalties. (a) A person commits the offense of insurance fraud if the person acts or omits to act with intent to obtain benefits or recovery or compensation for services provided, or provides legal assistance or counsel with intent to obtain benefits or recovery, through the following means:

(1) Knowingly presenting, or causing or permitting to be presented, any false information on a claim;

(2) Knowingly presenting, or causing or permitting to be presented, any false claim for the payment of a loss;

(3) Knowingly presenting, or causing or permitting to be presented, multiple claims for the same loss or injury, including presenting multiple claims to more than one insurer, except when these multiple claims are appropriate;

(4) Knowingly making, or causing or permitting to be made, any false claim for payment of a health care benefit;

(5) Knowingly submitting, or causing or permitting to be submitted, a claim for a health care benefit that was not used by, or provided on behalf of, the claimant;

(6) Knowingly presenting, or causing or permitting to be presented, multiple claims for payment of the same health care benefit except when these multiple claims are appropriate;

(7) Knowingly presenting, or causing or permitting to be presented for payment, any undercharges for benefits on behalf of a specific claimant unless any known overcharges for benefits under this article for that claimant are presented for reconciliation at the same time;

(8) Aiding, or agreeing or attempting to aid, solicit, or conspire with any person who engages in an unlawful act as defined under this section; or

(9) Knowingly making, or causing or permitting to be made, any false statements or claims by, or on behalf of, any person or persons during an official proceeding as defined by section 710-1000.

(b) Violation of subsection (a) is a criminal offense and shall constitute:

(1) A class B felony if the value of the benefits, recovery, or compensation obtained or attempted to be obtained is more than $20,000;

(2) A class C felony if the value of the benefits, recovery, or compensation obtained or attempted to be obtained is more than $300; or

(3) A misdemeanor if the value of the benefits, recovery, or compensation obtained or attempted to be obtained is $300 or less.

(c) Where the ability to make restitution can be demonstrated, any person convicted under this section shall be ordered by a court to make restitution to an insurer or any other person for any financial loss sustained by the insurer or other person caused by the act or acts for which the person was convicted.

(d) A person, if acting without malice, shall not be subject to civil liability for providing information, including filing a report, furnishing oral or written evidence, or giving testimony concerning suspected, anticipated, or completed insurance fraud to a court, the commissioner, the insurance fraud investigations unit, the National Association of Insurance Commissioners, any federal, state, or county law enforcement or regulatory agency, or another insurer if the information is provided only for the purpose of preventing, investigating, or prosecuting insurance fraud, except if the person commits perjury.

(e) This section shall not supersede any other law relating to theft, fraud, or deception. Insurance fraud may be prosecuted under this section, or any other applicable section, and may be enjoined by a court of competent jurisdiction.

(f) An insurer shall have a civil cause of action to recover payments or benefits from any person who has intentionally obtained payments or benefits in violation of this section; provided that no recovery shall be allowed if the person has made restitution under subsection (c).

(g) All applications for insurance under this article and all claim forms provided and required by an insurer, regardless of the means of transmission, shall contain, or have attached to them, the following or a substantially similar statement, in a prominent location and typeface as determined by the insurer: "For your protection, Hawaii law requires you to be informed that presenting a fraudulent claim for payment of a loss or benefit is a crime punishable by fines or imprisonment, or both." The absence of such a warning in any application or claim form shall not constitute a defense to a charge of insurance fraud under this section.

(h) An insurer, or the insurer's employee or agent, having determined that there is reason to believe that a claim is being made in violation of this section, shall provide to the insurance fraud investigations unit within sixty days of that determination, information, including documents and other evidence, regarding the claim in the form and manner prescribed by the unit. Information provided pursuant to this subsection shall be protected from public disclosure to the extent authorized by chapter 92F and section 431:2-209; provided that the unit may release the information in an administrative or judicial proceeding to enforce this section, to a federal, state, or local law enforcement or regulatory authority, to the National Association of Insurance Commissioners, or to an insurer aggrieved by the claim reasonably believed to violate this section."

SECTION 3. Chapter 432, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§432- Insurance fraud; penalties. (a) A person commits the offense of insurance fraud if the person acts or omits to act with intent to obtain benefits or recovery or compensation for services provided, or provides legal assistance or counsel with intent to obtain benefits or recovery, through the following means: