Civica and Fraud Detection in the Private Health Insurance Industry

As a preview to some of the issues that will be discussed in our upcoming 15^th Annual Health Insurance Summit we spoke to Richard Fiddis, the Managing Director of Civica International and Rob Thomas, the Managing Director Health Solutions at Civica International about fraud detection and the work they do in the health sector of Australia.

Can you tell me a bit about Civica?

Richard: Civica is a UK based company with a turnover of over $500 million per annum, so it’s a fairly extensive organisation. I’m the Managing Director for Civica International which is based in Sydney and we look after all of Civica’s operations outside of the UK. Health is a key sector for us in the UK and elsewhere, and particularly in Australia where we have been providing systems for the health sector for the last twenty years.

Can you tell us about the healthcare sector in Australia, and what your company does in that area?

Richard: We provide a range of systems to the health sector, particularly in the UK. If I talk to the UK for a minute, it is obviously not a sector that is organised the same way over here. What we tend to do over there is provide administration and patient care systems, as well as systems that are there to provide for both acute and non-acute care. We typically do that in the UK to both the private and nationalised health service. What we do in Australia however is unique.

Rob: We manage solutions for the private health insurance industry, so our clients are private health insurers and also a private hospital group. A third of all private health insurance policies in Australia sit on solutions developed by Civica, and over 40% of policies for overseas students sit on solutions developed by Civica. We are responsible for over $6 billion in benefits being paid each year, our funds collect about $6.2 billion in premiums through our systems and we have about 5 million active Australian customers on our systems. We focus on providing bespoke solutions for our clients or their business which includes private health insurance, but also includes overseas students and visitors. As a key stakeholder in the market we are looking more and more to solve problems for the industry in terms of improving automation and improving data flow.

What interests Civica in fraud?

Richard: My history prior to Civica involved running major data sharing infrastructure mainly in the financial sector for the prevention of fraud, misrepresentation and so on. I worked to enable the financial sector, through sharing data, to reduce the level of fraud and therefore losses. This overall made them much more efficient. This is an established practice in many parts of the world, and I was involved in a number of those fraud sharing schemes and getting them set up. It then moved in to insurance and it became a major part of how insurers effectively minimise the risks of taking on new customers and paying claims by sharing data to prevent fraud.

In Australia we’ve noticed, through the significant presence we have, that there isn’t a data sharing scheme that enables the private health finds to actually share their experiences to help everyone else in the market prevent fraud. That’s one of the key areas that we want to talk about at the Summit, because we found that in setting up these data sharing schemes it takes time for major players in the market to get used to the idea that by sharing data they can mitigate their losses and produce a more efficient service. This then allows them to in the end deliver more benefits to their customers by extracting the fraudulent claims from their operation.

You plan on speaking with Dan Johnson who is the Vice President Health Strategy at Experian at the event. Can you tell me how that partnership came about?

Richard: There is a shared history. I used to work for Experian until I joined Civica 2 years ago. I was with Experian for about 16 years before that in setting up these data sharing schemes for the insurance and finance sectors. We are sharing it because Experian is a trusted 3^rd party that is used to holding data from competitors in the market. The data can then be used to help those competitors run more efficient operations. They have the track record of doing these types of systems in very similar environments, and it seemed to be a marriage of two parties. Civica, with its specialism in health and the running of health systems and it’s experience in managing claims particularly with Experian having it’s data management and data capabilities to enable efficient matching to occur and to ensure that the security of the systems is at the highest as a trusted intermediatory.

How big is the issue of fraud in Australia, and what impact is it having on the Australian healthcare industry?

Rob: It’s really hard to quantify – that is part of the process that we’re going through. But we know that there is over 30 million extras claims paid every year, and experience offshore demonstrates that fraud is actually a significant issue. So what we would like to do is go about proving what the amount really is, and how we can go about arresting it.

Just to provide some further background on that, when a health fund collects a premium from a member, about 86% goes back in benefits. It costs about 8% to run the operation of the health fund, and about 5% in profits. Health funds don’t have many levers to play with, but one of them is the benefits they pay out. If they are paying out fraudulent benefits that’s putting pressure on premiums. So if health funds can control fraud and minimise that they can actually control premium increases better. We think that there is an interest in everyone doing it – everyone wants to afford private health insurance. Insurers only charge as much as they need to operate, and they obviously want to be more price competitive, so systematically irradiating fraud is one of the most  significant things we can do as an industry to improve the effectiveness and the efficiency of the industry.

How is Civica making a difference in fraud prevention?

Richard: We are in the early stages of encouraging the health funds themselves to share data, and this technically requires a number of funds to take the initiative, and we are out there talking to them and trying to build a good business case for why this makes sense. Traditionally where we’ve done this, where these types of fraud sharing schemes have been set up, the early adopters get the major benefits over time. This is very much showing what has been done in other sectors in Australia, what is being done in other parts of the world to try to prevent and tackle fraud in the health sector. So hopefully there will be buy in from the health sector over here to enter this type of data sharing initiative.

Are there any presentations at the Health Insurance Summit that you would like to see and why?

Rob: There’s quite a few actually. A couple of our customers are presenting, so we are always interested in hearing what they have to say Medibank and nib for example. I’m keen to hear from Dan Johnson from the US who is our fraud expert because he will have a lot of insight into the US market which will be fascinating. I’m looking forward to hearing that. Finally, I’m also looking forward to hearing from Dr Rachel David, the new CEO of Private Healthcare Australia, to see her views on changes needed in private health insurance.

Richard Fiddis will be discussing PHI and fraud detection at the 15^th Annual Health Insurance Summit. For more information, including our current agenda, please head to our website.