Splitting Medical Bills and Manipulating Receipts: 19,400 Caught for Insurance Fraud Last Year... Up to Life Imprisonment Possible

'Non-Covered Insurance Fraud' Persists
Up to 10 Years in Prison
Life Imprisonment for Fraudulent Claims Exceeding 500 Million Won

The Financial Supervisory Service (FSS) on September 8 urged the public to be cautious, warning that insurance fraud involving the manipulation or splitting of receipts across multiple days to circumvent the daily outpatient insurance payout limit is on the rise. Those caught committing insurance fraud can face aggravated penalties, including up to life imprisonment. Accomplices are not exempt from punishment.

According to the FSS, the amount of false or excessive insurance claims for indemnity and long-term insurance, including forged or altered medical certificates, reached 233.7 billion won last year, with 19,401 individuals detected. The claimed amount increased by 15.1% compared to the previous year (203.1 billion won), while the number of individuals caught rose by 38.7% from the previous year (13,992 people).

Under the Special Act on Insurance Fraud Prevention, offenders can be sentenced to up to 10 years in prison or fined up to 50 million won. Not only those who facilitate, entice, solicit, or advertise insurance fraud, but also those who receive insurance payouts, those who induce third parties to obtain payouts, and accomplices are all subject to punishment. If the amount fraudulently obtained exceeds 500 million won, aggravated penalties apply, ranging from a minimum of three years in prison (for less than 5 billion won) to life imprisonment (for 5 billion won or more).

If a medical professional participates in insurance fraud by falsifying medical records, they can face a one-year license suspension, up to three years in prison, or a fine of up to 30 million won under the Medical Service Act.

On this day, the FSS introduced four types of insurance fraud cases involving false claims for indemnity insurance payouts.

The FSS reported that it notified the police of criminals (including hospital staff and patients) who exploited the tactic of splitting medical bills to receive indemnity insurance payouts, resulting in the arrest of over 320 individuals after investigation.

Patient A received high-intensity laser treatment for the knee on December 10, 2023, and paid 500,000 won by credit card. However, the hospital issued false receipts for extracorporeal shockwave therapy on December 11 and December 12, even though the patient did not visit the hospital on those days.

Hospital B lured patients by offering to issue false receipts for manual therapy and other treatments. The hospital manipulated receipts for expensive non-covered treatments over several days, ensuring that the daily outpatient insurance payout limit of 200,000 won was not exceeded. They even fabricated outpatient records to make it appear as though patients received consecutive treatments after their actual visits, issuing false documents. Patients submitted these documents to insurance companies to fraudulently claim indemnity insurance payouts, but were eventually caught.

The FSS also reported to the police a group that disguised non-covered cosmetic procedures as covered treatments such as manual therapy or athlete's foot treatment to claim insurance payouts, leading to the arrest of over 270 individuals after investigation.

Hospital C, working with brokers, provided non-covered cosmetic procedures to patients and falsified medical records to make it appear as though manual therapy and other treatments were performed. When patients paid for cosmetic packages, the hospital issued false documents matching the total payment amount.

The FSS also referred 269 individuals to the police for inserting false prescriptions for immunotherapy injections and other treatments into medical records, resulting in fraudulent insurance claims totaling 870 million won.

Hospital D did not provide immunotherapy injections for cancer recurrence or metastasis prevention, but falsely recorded such treatments in medical records to inflate medical expenses. The hospital manager used a doctor's ID to enter false immunotherapy prescriptions into patients' records daily or every other day during their hospital stays. For example, in the case of patient Kim, the records falsely indicated 273 immunotherapy injections over a 141-day hospitalization. Kim submitted these false documents to the insurance company and fraudulently obtained 28.39 million won before being caught.

There were also cases of fraudsters making false long-term admissions to residential care hospitals. The FSS detected suspicious activity and referred the case to the police, contributing to the arrest of 141 individuals.

Care Hospital E admitted patients who were capable of daily activities for extended periods without providing special treatment, instead performing cosmetic procedures and other services. The hospital director and counseling manager led the effort to create fake records matching the coverage limits of the patients' insurance policies. They provided cosmetic procedures and recorded false information about pain treatments, manipulating records to make it appear as though patients received outpatient treatments over multiple days.

The FSS advised consumers to firmly refuse any offers to cover the costs of plastic surgery, cosmetic procedures, or nutritional injections through insurance. The agency explained that succumbing to the temptation to inflate insurance claims by pretending to have received treatments that were not actually provided could result in being caught and punished as an accomplice. The FSS particularly emphasized the need to avoid complacent thinking such as "everyone else is doing it" or "this much should be fine."

Additionally, the FSS requested that individuals report any suspected cases or proposals of insurance fraud to the Insurance Fraud Reporting Center. If the reported case is confirmed as indemnity or long-term insurance fraud, the General Insurance Association of Korea or the insurance company may reward up to 2 billion won.

An FSS official stated, "We will further strengthen our planned investigations into indemnity insurance fraud," adding, "As hospital staff, brokers, and others become increasingly sophisticated and organized in committing fraud, we will closely cooperate with investigative agencies and the National Health Insurance Service to eradicate insurance crimes that harm the public."