Broken Promises: Fraud by small business health insurers by Robert Tillman. Boston: Northeastern University Press, 1999. 216 pp.
Reviewed by Ian Shaw, Centre for Research in Medical Sociology and Health Policy, University of Nottingham.
I was pleased to be asked to review this recent book on fraud by small business health insurers. My own academic credentials are in the field of health policy and welfare finance. However, much of my attention has been upon European health care experiences and this was a good opportunity to examine market failure in the US health care system. Private insurance schemes are making only very small inroads into universal, free at the point of use, state financed welfare systems in Europe. However, I think that most European academics in this field will be alive to the possibility of fraud existing in the health insurance markets – if only because of the awareness raised by John Grisham’s best-selling book The Rainmaker, which was published 3 years earlier. A contrast with The Rainmaker is not entirely flippant. Broken Promises is introduced with a case study that in some ways mirrors the dealings of Grisham’s fictitious "Great Benefits" health insurance company. Tillman also writes well and this book may well be considered an interesting read by the layperson.
Broken Promises is an interesting study of insider health insurance fraud. This book is about white-collar criminals but fundamentally it is also about the conditions which promote their crimes. The author explores the ways in which weak regulatory structures and prevailing market conditions have contributed to the occurrence of insurance frauds. The book analyzes the political and economic environment and demonstrates convincingly how these have enabled such fraudulent practices to flourish. He also examines how recent legal and institutional changes have created new demand for insurance but also greater scope for fraud.
Broken Promises is written in six chapters (plus a short conclusion), each around 30 pages in length with reference to numerous case studies. Chapter One describes the structural underpinnings of what Tillman refers to as "the social and political construction" of health insurance fraud. Tillman draws upon documentary evidence to provide numerous examples of the three most prevalent manifestations of fraud: swindles which involve multiple employer welfare relationships, employee leasing schemes, and fictitious labor unions as well as more recent innovations, such as"24-hour plans" and cover offered by some religious organizations. The next 4 chapters discuss numerous case studies involving these different forms of fraud. Chapter 2 discusses fraud resulting from multiple employer welfare arrangements. These arrangements were meant to provide alternative mechanisms for health insurance, but case studies detail what can go wrong, in particular when the trusts funding fails. Chapter 3 examines employee-leasing schemes, which do not, to my knowledge, apply in Europe. This is where small businesses can take advantage of economies of scale by banding together as a notional "leasing agency" and then "sacking" their staff – on paper – and rehiring them (again on paper) though the leasing firm who then provides health and other employee benefits at reduced rates. The number of US workers involved was around 2.5 million by 1995. It is clear from Tillman’s work that a significant number of these leasing agencies had very little, or no, assets with which to fund health care and that "cowboy" operators had moved into the marketplace with disastrous consequences for those insured. Chapter 4 examines frauds involving labor unions and involves description and analysis of what he terms "recombinant fraud" that continually changes in the face of prevailing conditions. This chapter utilizes a set of related cases in order to track and analyze the processes involved. The fifth chapter examines fraud by companies who purport not to be selling insurance by claiming to be a religious or a mutual organization rather than an insurance company. Fraud by these forms of organization raise questions for regulators on issues surrounding the definition of insurers and the role of the state in protecting consumers. The final chapter discusses the social and political barriers that are in place, which are hindering a change in legislation to better protect consumers from fraud. Amongst his conclusions, Tillman examines the role of the state in regulating the markets providing this core welfare service. The message of the book is clear. The regulation of health insurance, at the time the book was written, was (and may still be) chaotic and the state is failing in its fundamental duty to protect its citizens.
There are sections of this book that cry out for a deeper sociological analysis of risk and the state. For example, in a Focaultian analysis of policy trends in the liberal state the rational individual will wish to become responsible for the self as this will produce the most effective mode of provision for security against risk. Equally the responsible individual will take rational steps to insure against risk in order to be independent rather than dependent upon others. This is backed up by a moral responsibility or duty to the self (Greco, 1993). Here prevention and risk management becomes the responsibility of the individual. Reliance upon the state, even for protection against crime, is not to be encouraged (O’Malley, 1991). However, how can individuals protect themselves against insurance fraud? Individuals are insuring against risk but that insurance is itself becoming a risk. Reliance upon the state is not encouraged but it is now clear that the community cannot cope alone with fraudulent insurers. This raises issues regarding an enhanced role for the state, which may then have implications in other welfare fields. However, this book makes no claims to be a sociological text and the analysis is limited to the evidence found. In short it is a good exposé and worth a read for anyone interested in this field.
References
Greco M., (1993) "The Duty to be Well: personal agency within medical rationality" Economy and Society vol.22 (3), pp.357-72
O’Malley P., (1991) " Legal networks and domestic security" Studies in Law, Politics and Society,
Vol.11, pp.181-191.