You might call it Social Insecurity.
Experts say a growing segment of insurance fraud involves the theft of individual Social Security numbers. The crimes perpetrated by scammers who obtain them are vast and intricate.
Consider, for instance, the case of Maria Gonzales.
According to the North Carolina Department of Insurance, Gonzales allegedly got a job using the Social Security number of a dead person. She then obtained a group insurance policy through her employer with that same Social Security number and eventually submitted a fraudulent claim for long-term disability, authorities say. Mutual of Omaha Insurance Co. paid Gonzales $11,300 for the claim; Gonzales was arrested and charged with one count each of identity theft, insurance fraud and obtaining property by false pretense. As of mid-January 2012, her criminal case was pending.
Guarding your Social Security number
Al Koehler, director of investigations for the North Carolina Department of Insurance, says that while stealing the identity of a dead person isn't common, it is part of a larger problem that should serve as a warning to consumers.
“People try to assume other people’s identities all the time. When we arrest someone, they’ve usually got two or three different Social Security cards on them,” Koehler says. “With a Social Security card, scammers can do almost anything.”
Koehler says his department arrests nearly 100 people a year for insurance fraud. In 2011, that number climbed to 150.
Insurance identity theft on the rise
James Quiggle, a spokesman for the nonprofit Coalition Against Insurance Fraud, says the scope and complexity of insurance identity theft -- particularly connected to health insurance -- is “going up like a Roman candle.”
The World Privacy Forum estimates that as many as 500,000 Americans have been victims of medical identify theft. And the crime is spreading fast, with the Federal Trade Commission receiving almost 19,500 reports of medical ID theft from January 1992 to April 2006.
“It’s the newest form of insurance fraud, and scammers are busily perfecting the business model for stealing people’s IDs to make bogus insurance claims,” Quiggle says.
The two types of insurance identity fraud
Insurance identity fraud usually takes on two forms: individual and wholesale.
In individual cases, a thief often obtains important personal information from a relative, friend or co-worker in order to pay for an operation, get medication or even file a false insurance claim.
Wholesale insurance identity theft, Quiggle says, is more common and “far more insidious.” This brand of fraud involves the theft of an entire roster of individual Social Security numbers. Those numbers then are sold to “dealers” who use that information to make large numbers of bogus claims against insurers. Or the numbers are sold on the black market.
Linda Webb, who once ran AIG’s fraud operations, is president of Contego Services Group, which conducts fraud investigations and provides other services to insurers. She suspects that the case in North Carolina was part of an elaborate wholesale scheme.
“There are a lot of creative ways of obtaining a dead person’s Social Security number, such as a mortgage company employee who has access to large databases, or even someone reading an obituary and backtracking to obtain personal information,” Webb says. “And then there are people out there selling these Social Security numbers on the street.”
Senior citizens susceptible to scams
Quiggle says senior citizens are particularly vulnerable to insurance identity theft. He says scammers often will set up elaborate operations in which they call senior citizens and lie about placing them on a national -- and non-existent -- Medicare registry in exchange for their Social Security numbers.
Scammers might even invite seniors to fake medical screenings, where they'll have their blood pressure taken and be supplied with nutrient drinks -- all for the simple cost of presenting their Medicare cards.
“Suddenly, those thieves now have a large database of Social Security numbers,” Quiggle says. “And they do it very quickly.”
Protecting your identity
Amy Bach is executive director of United Policyholders, a nonprofit that advocates for insurance consumers. She says the most effective way to curb this burgeoning form of fraud is simple: Be vigilant about protecting your personal information.
“I always remind people that insurance fraud hurts all of us,” Bach says. “Policyholders are always looking to pay the lowest possible premiums ... but fraud costs everyone money, and honest people wind up paying more for their insurance because of scammers.”
According to the Coalition Against Insurance Fraud, the nationwide cost of insurance fraud runs as high as $80 billion a year. The nonprofit National Insurance Crime Bureau estimates that fraud inflates average consumer premiums for auto, home and health insurance by $200 to $300 a year.
Mike Barry, a spokesman for the nonprofit Insurance Information Institute, says consumers never should share their Social Security numbers with strangers or other people they don't trust.
“In today’s society, (the Social Security number) is one of the key components to creating an individual profile,” Barry says. “That number has to be guarded as closely as possible.”
The risk of medical mistakes
Not only does insurance identity fraud harm consumers financially, it can have serious medical ramifications as well.
Quiggle says one of the worst consequences comes in the form of inaccurate medical records. For instance, if a thief’s medical history ends up on your records because he or she underwent surgery using your insurance, your blood type and medical allergies may be inaccurate.
“If their blood type is incompatible with yours and you go to the hospital unconscious, you might receive the wrong blood type or medications,” Quiggle says. “It’s an incredibly dangerous prospect.”
Barry, the Insurance Information Institute spokesman, recommends that consumers review the explanation-of-benefits forms sent by health insurance companies after services are billed by health care providers. It’s on one of these forms that a consumer might spot medical treatments that he or she never received.
Furthermore, Quiggle says, consumers should check their medical records each year and ask their health insurance provider or agent for a list of benefits paid under their policies.
“Many people don’t ever check these important documents because they can be dense and intimidating to read,” Quiggle says. “But it’s essential. Identity theft insurance fraud can destroy your credit, cost you your policy, and be dangerous to your health and even life.”