Health insurance fraud is enough to make you sick. The National Healthcare Anti-Fraud Association (NHCAA) reports that 3% of healthcare costs (about $68 billion) are due to fraud. Health insurers are on the offensive protecting against bad claims. There are a few red flags that may trigger a review of your claim. Like the airline no-fly list and the tax auditor's check list, the flags may prevent you from getting what you think you deserve. (Learn more in Services That Health Insurers Often Decline.)

Healthcare providers and insurance companies use software to identify bad claims. The software creates and analyzes behavior patterns to identify anomalies. If your claim is flagged it may be for one of the following reasons.

  • Identity Theft
    Millions of Americans don't have health insurance, so the rate of medical identity theft is increasing. The theft could occur as easily as sharing insurance cards. Non-matching or frequently changing patient information is a flag for identity theft. (Learn more in Identity Theft: How To Avoid It.)

  • Coded but not Delivered
    Insurance coding is a big business. The medical codes keyed into claim systems identify the healthcare product or service that was delivered. The wrong code may signal a service that could not possibly have been delivered, like prostate surgery on a woman or an orthopedic exam on a limb that was removed years ago. Most fraudulent claims are not as blatant for example: a more common type of fraud would be to code for a more expensive and extensive exam than the one that was performed.

  • Split Claims
    Providers sometimes submit claims to health insurance companies spread out over several visits to obtain a higher payout. Splits also occur to avoid payout limits. Services that are normally performed together or require a fewer number of procedures stick out when compared to behavior models. The claims are likely to be investigated further or denied.

  • New Coverage and Major Procedures
    If you have new insurance coverage and undergo a major medical procedure within the first 12 months, the claim is likely to be reviewed to identify any previous medical condition. The theory is the insurance may have been purchased because the patient knew he or she was seriously ill. Many insurance policy premiums are priced based on the health and medical history of the insured, so unreported sicknesses on insurance applications lead to losses for insurance companies.

  • Multiple Claims
    Multiple claims for the same procedure from the same or different providers may trigger claim reviews. Getting a second opinion before a procedure is common, but having multiple colonoscopies by different doctors just doesn't sound legitimate. The timing of the procedures may also send an alarm when occurring close together.

  • Erroneous Prescriptions
    It is becoming common to call the doctor and have a prescription phoned into the pharmacy, but a new prescription without a doctor's visit is a red flag for prescription abuse. Prescription databases may be scanned to identify unneeded drugs. One clue is a drug for a previously undiagnosed condition.

Many health insurance claims are processed without additional scrutiny. Some claims initially flagged as fraud are investigated and found to be legitimate. If your claim is denied due to suspected fraud, follow your insurer's procedures for contesting the denial or contact your state insurance commission. (Learn more in How To Choose A Healthcare Plan.)