As purveyors of identity theft coverage, The Phinn Group stays up to date on the latest industry stories and statistics to share with employees at the "lunch and learn" sessions they host on the topic each month.

One particularly memorable account involves a woman who was tracked down by authorities after hospital records showed she had just given birth to a baby with drugs in its system and abandoned it at the hospital. In reality, the woman's youngest child was over two years old and safe at home.

The situation required a round of DNA testing to prove she hadn't given birth to the drug-affected child. "Things can get that extreme," says Denise Phinn, co-president and CMO of the Georgia firm.

It may be an extreme example, but medical identity theft is a steadily rising sector of the growing ID theft industry, and one that can cost employers plenty of lost time and money - particularly the self-funded ones.

"Medical information is the segment of ID theft that is on the rise the most," says Craig Phinn, president and CEO of The Phinn Group. "Simply because many people have lost their jobs, they've lost medical coverage, and oftentimes you can just walk into the emergency room and give a name and that's it. You can get service in that name, and now all of a sudden somebody else is footing the bill for you."

A growing threat

Often, that someone else footing the bill is a person the perpetrator knows, such as a sibling, Craig Phinn adds.

However, as identity theft is increasingly carried out as a component of organized crime, as opposed to its origins as a crime of convenience, health information is frequently being sold by technical organizations that are perpetrating cybercrime offshore, according to Doug Pollack, chief marketing officer for ID Experts.

"We're starting to see a trend where people are moving from the more mundane types of financial identity theft and credit card fraud to trying to take advantage of your medical identity," says Pollack. "Unfortunately, it's a very valuable exercise for the people that are doing it."

According to a late July report from the Identity Theft Resource Center, of 385 organizations reporting data breaches so far this year, 113 were in health care.

There are a number of ways medical identity theft can occur, including the aforementioned use by an uninsured relative (where the card holder is often complicit in the crime) or unethical employees on the provider side who bill for services never rendered.

"Sometimes doctors and other medical practitioners are in cahoots on this - they'll take identities and medical insurance-related information for those individuals and get an electric wheelchair or dialysis machine or home oxygenator - things that are not cheap," explains Ed Goodman, chief privacy officer for Identity Theft 911. "Just between those three, you'd be looking at $30,000-$40,000 in medical billing for things that never get delivered but 'et paid for."

Medical identity theft "is like a freight train that's coming along right now," says Pollack. "If it's your health care identifier that's being used, or mine, it totally screws up our insurance and our health care records."

Goodman concurs that it's a crime on the rise - one that he believes will keep rising as the U.S. moves toward implementing electronic health records.

The growing investment in health information technology "in some respects makes the transport and value of medical identities much higher than it was when it was paper records," says Goodman.

Connecting the dots

Talk about identity theft in general is popular in economic climates such as ours, says The Phinn Group's Craig Phinn.

However, talk may be all it is, as Pollack reports that although ID Experts was expecting to see lower retention rates and lower sign-up rates across the board on the ID theft benefit, that hasn't happened.

In fact, they haven't seen the opposite either, where more people sign up because they are nervous about increased criminal activity. "It's kind of been steady as she goes right now," he says.

However, as more organizations connect the dots on the potential effects of stolen health ID numbers, Pollack expects it to grow in popularity as an employee benefit. "Because health benefits are - it's controversial - but they're considered the most incontrovertible benefit that organizations provide to their employees," he says, "and recently there was a study done [revealing] 10% of all identity theft in the U.S. is some type of medical identity theft."

Because identity theft as an employee benefit is still relatively new, it's one of the least sold at Kibble & Prentice, a Seattle-based USI Company. However, "demand for it continues to grow as we educate employers," says Bill Walker, vice president, executive benefits.

The rise in medical ID theft is going to impact overall health care costs for everyone in the long run, Goodman points out. "Who ends up paying for all this fraud? The insurance companies typically have to swallow it," he says, "but they have to pass those costs on somehow."

Higher priority for employer groups

The true impact is still hard to quantify, says Walker, but "as the medical carriers release more information on the impact of medical ID theft and who is liable, it will become a higher priority for employer groups - especially those who are self-funded - and not the carrier."

The most common form of protecting against ID theft has traditionally been credit monitoring. In the day and age of medical ID theft, however, it's a "pretty narrow solution," says Pollack. ID Experts has added identity- and cyber-monitoring components to their package, "because as the world's changed, there are a lot of additional types of threats that exist that aren't made visible through credit monitoring."

Similar to credit monitoring, identity monitoring expands the safety net by looking at more dimensions of an individual's identity by monitoring approximately 1,500 sources of public and private data, searching for indicators that something has changed, Pollack explains.

The uniqueness of medical ID theft "makes it a lot more difficult for anybody - even professionals like us - to resolve it," adds Identity Theft 911's Goodman.

While a lot of the service is making customers aware that something has gone wrong, rather than preventing it, ID Experts is in the process of building applications to enhance protection. The company recently came out with a health care identity protection toolkit.

"Think of it as a bunch of self-help tools for individuals to help them deal with the detection and remediation of medical identity theft issues," says Pollack.

Do your part

Overall, it's been a slow process of adoption by employers in terms of offering ID theft benefits to their employees, whether as a group benefit or voluntary, "but boy, there's no question that there's a motivation on both sides," says Pollack. "Because when an employee has an issue like this, it can take up gobs of time in dealing with the remediation of an issue that might occur."

Because medical identity fraud is typically intertwined with financial fraud, "you could be talking a significant amount of lost productivity and time," says Goodman. "So I think [employers] have seen the value in having this for those employees that do see this situation come up."

The broker plays an important role in the level of employer and employee interest and engagement in the benefit as well. The proactive approach at Kibble & Prentice is paying off with rising take-up rates.

"As we continue to educate employers on the emotional and productivity impact that ID theft can have on their employees, we are seeing an increase in the number of employers asking for this benefit," says Walker.

When partnering with brokers, ID Experts has found that some are more successful in marketing the product than others.

"I'm not sure whether it's that they really understand what's going on better than others, because they tend to have a lot of products and services that they're marketing," says Pollack. "But I think the ones that have drilled into the identity theft issue and figured out how to present it in a compelling way to their clients are much more successful.

"Organizations are inclined now to look for things that they don't need to do differently and don't need to pay for. If they provide a motivation for an employee to opt into this, then the enrollment rates can be much higher."

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