AUGUSTA, Maine — Every year there are hundreds of complaints of possible insurance fraud made to the Bureau of Insurance. Sen. Nancy Sullivan, D-Biddeford, says its time to have a unit at the bureau devoted to investigating and prosecuting those complaints.
“The people that are selling insurance are asking for this,” she said. “And we all know that it is going on here in our state like it is in other parts of the country.”
Sullivan has sponsored similar legislation in the past, but she was spurred to introduce it again this session after getting her car insurance bill in the mail with a statement on it that she would have saved $100 if there were no fraud in the system.
“That is a lot of money to a lot of people, including me,” she said.
Sullivan said the legislation does not spell out how the bureau would set up the unit, but she expects it would be similar to past proposals that established a unit with staff at the bureau to investigate complaints and an assistant attorney general in the AG’s office to prosecute cases. In 2007 the estimated cost was $750,000 a year, about 25 cents a year per insurance policy issued in the state.
“This would not be a general fund item,“ she said. “This would be paid for by the assessment on insurance companies that funds the bureau.”
Sullivan said Maine is not exempt from insurance fraud, adding that 42 other states have similar fraud units.
The bureau reported to the Legislature two years ago that there was insurance fraud in the state and that a dedicated fraud unit would be useful as a tool to fight fraud. The study concluded the unit should have broad authority to investigate all areas of insurance fraud, including claims fraud, premium fraud, fraudulent insurer practices and any other type of fraud that affects the Maine insurance market.
Before becoming superintendent of insurance, Mila Kofman was on the faculty of Georgetown University and researched health insurance scams that led to a congressional probe of such fraud.
“When government fails to protect businesses and individual consumers from the criminal element, it is a failure,“ she said in testimony when the study was convened. “In fact, I led the effort at the NAIC [National Association of Insurance Commissioners] to pass a model law making it a felony to sell phony insurance.”
Kofman agrees a dedicated fraud unit is a good idea, but is concerned about the cost. She said there are not the resources in the bureau to absorb the costs within existing revenues.
“I don’t think it’s much to pay to go after the fraud we know is there,” Sullivan said. “We know there are millions of dollars in fraud every year.”
The legislation has been traditionally opposed as an unneeded cost in Maine by the Maine Trial Lawyers Association. MTLA lobbyist Richard Thompson said the data does not show that the state has a major problem or an increasing problem. The latest data from the bureau is for 2009 and it reports 332 reports of suspected fraud acts reported to law enforcement or other agencies, including the bureau, that is up only two from the 230 reported in 2005.
“This will not be paid for by the insurance companies,“ Thompson said. “It will be paid for by higher insurance premiums paid by consumers.”
Thompson said the insurance industry is looking to have government do the job of investigating insurance fraud that the industry should be doing. He said while the Maine Trial Lawyers Association has not reviewed this year’s proposal, he expects it will oppose the measure.
Sullivan said she expects the lawyers association will oppose the measure, but she believes the change in the make-up of the Legislature could mean this is the session a fraud bureau will be approved.
Sen. Rod Whittemore, R-Skowhegan, co-chairman of the Legislature’s Insurance and Financial Services Committee, said that may be the case, although he has not reviewed the measure.
“If in fact the insurance companies are in favor of it, that is on the pro-business side of things that certainly is something that this Legislature is supportive of,“ he said.
The measure has been referred to the Insurance and Financial Services Committee, but a public hearing has not been scheduled.
In a related matter, The Associated Press reports that Maine insurance regulators will hold public sessions this week on Anthem Blue Cross Blue Shield’s proposed rate increases. Anthem has requested average rate increases of nearly 10 percent for several of its individual health insurance products covering about 11,000 customers. If approved by the Maine Bureau of Insurance, they will take effect July 1.
Public comment sessions for consumers to say how the increases will affect them will be held Monday at the Corbett Business Building at the University of Maine; Tuesday, March 22, at Lee Community Hall at the University of Southern Maine in Portland; and Monday, April 11, at the Bureau of Insurance in Gardiner.