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By Howard Goldblatt
The 1997 legislative season is shaping up as the most active ever in terms of initiatives affecting insurance fraud bureaus. Thirteen states considered measures that would either establish a fraud bureau or strengthen the operations of an existing bureau; location and funding were the main sticking points in legislative debates. After a lull in fraud bureau creation in 1996, the trend toward establishing these critical state anti-fraud tools picked up in 1997.
Since North Carolina pioneered the concept in 1945, 32 states have created a fraud bureau. Arkansas, Hawaii and North Dakota are the most recent to enact laws establishing fraud bureaus. Two were created in the 1970s, and five in the 1980s. The peak of this activity was 1992 when six bureaus were established.
In 1993, the year the coalition was formed, three bureaus were established (two for workers’ compensation only). Fraud fighting got a boost with four fraud bureaus created in 1994 and five in 1995, marking another peak. Last year, Tennessee was the only state to enact legislation establishing a fraud bureau (also for workers’ compensation).
Seven bureaus still investigate only workers’ compensation fraud, but in 1997, Arkansas expended its powers to cover all lines.
Arkansas’s new insurance fraud law, crafted in part along the lines of the coalition’s model bill, created an insurance fraud bureau in the insurance department. The new unit will work in tandem with the existing workers’ compensation fraud unit.
The Arizona legislature passed a bill expanding and strengthening its existing fraud bureau, while in Nevada, legislation strengthening the existing fraud bureau has been introduced. That bureau is in the attorney general’s office, while Delaware’s, located in the insurance department, has been deemed enough of a success to warrant legislation deleting a “sunset” provision passed three years ago and making the bureau a permanent agency of the insurance department.
Oklahoma has been the scene of a political struggle over the bureau’s location. While there appears to be a tentative agreement to place it in the insurance department, the bill is not expected to be enacted this year. However, it can be considered in the 1998 legislative session, and this year’s agreement gives a boost to the chances of passage next year.
“We’re pleased with the victories we’ve gotten this year,” said Howard Goldblatt, the coalition’s director of government relations. “I think it’s indicative of our ability to convince the public and legislators that 1) insurance fraud is a problem, and 2) it warrants the special attention a fraud bureau can give to the investigations and prosecution of this complicated crime.”
One fraud bureau actually was established by statute three years ago but never set up shop. The Iowa bureau’s funding was contingent on obtaining a federal grant, which never materialized. The 1997 legislature is moving to fund the bureau through general revenues.
In Georgia, which had taken that approach to funding, the insurance commissioner has proposed regulations assessing insurance companies doing business in the state to fund the bureau.
But into each life, they say, a little rain must fall and 1997 had its share. For instance, legislation sponsored by the Kansas insurance department to set up a fraud unit in the insurance department failed in 1997 due to a dispute between the attorney general and insurance commissioner. A similar bill in South Dakota failed when the legislature couldn’t be convinced the state had a fraud problem.
Virginia, right in the coalition’s backyard, delivered perhaps the most bitter of defeats. The Senate, unanimously passed an insurance fraud law, endorsed by the Richmond Times-Dispatch, that would have established an insurance fraud bureau. But a House committee, acting late at night at the end of the session, defeated the bill. “There was a real sense of frustration with a short session and our inability to educate the members on the House side because of that,” Goldblatt said. “Still the coalition and its partners feel that we can come back next year and finish the job.”
That’s not likely in New Mexico, where the governor vetoed a bill that would have created a fraud bureau in the insurance department. In his veto message, the governor said that the bill would have increased state employment and raised taxes on business. The reality, said Goldblatt, was the employment increase would be four people, and the “tax” was a special assessment the industry supported for funding the bureau, which offers its own form of payback to the state.
“Despite the defeats, the level of interest among legislators across the country is something all fraud fighters should be pleased to see,” Goldblatt said. “We’re getting the message out — both consumers and the industry want to see more done to fight fraud.”
© Copyright 1997 Alikim Media