Beyond the Breach
The old-school protection racket has gone high tech. There’s a whole new crop of criminals threatening businesses — demanding cash in order for the “privilege” of not having their livelihoods destroyed.
The bad guys may have ditched the fedoras and spats in favor of hoodies and Chuck Taylors. But the bottom line remains the same.
It’s all about the Benjamins. Or maybe the Bitcoins, in this case.
Welcome to the new frontier of cyber extortion — the world where a few lines of programming code can take a company hostage — or even shutter it for good.
Sure, the “old-fashioned” data breach is alive and well, but it has declined in profitability as the black market for credit card and Social Security data has become oversaturated. The bad guys, meanwhile, went in search of greener pastures.
Cyber extortion, in the form of distributed denial of service (DDoS) threats with ransom demands, began grabbing the attention of security professionals several years ago. These attacks are designed to cripple victims’ ability to transact any business online until the ransom is paid.
Welcome to the new frontier of cyber extortion — the world where a few lines of programming code can take a company hostage — or even shutter it for good.
The most obvious targets for DDoS attacks, initially, were those that stood to lose the most from a service outage. Payment processing vendors and online gaming sites were early victims.
Podcast: Mother-daughter duo Alina and Inna Simone tell Radiolab about being held hostage by criminals who burrowed into their lives from half a world away.
But the field of targets broke wide open with the birth of automated ransomware — malware that disables a computer system by encrypting data and locking the victim out.
A pop-up window displays a demand for ransom, typically with a threat to delete or publicly share the data if the ransom isn’t paid by a specified time.
Cryptolocker, first appearing in September 2013, netted around $3 million for its operators until it was finally isolated in June 2014. Variants such as Cryptowall, however, were quick to fill the void.
Prior to Cryptolocker, extortion events were somewhat rare and often involved someone with an axe to grind, said Tim Francis, a second vice president with Travelers and the company’s enterprise cyber lead.
“But around two years ago you saw a switch, which was the commoditization of the software that did the extortion for you … . Now it wasn’t somebody who knew anything about your company … it was just somebody out to make a buck.”
Cyber extortion has been propelled into a rather lucrative cottage industry, and potential targets are everywhere.
Reported extortion events have run the gamut from police departments to pizza chains. If criminals cast a wide enough net, they only need a small number of targets to take the email bait in order to collect a respectable payout.
Estimates of the amount being extorted from victims vary wildly. However, in a 2012 report titled “Ransomware: A Growing Menace,” researchers at Symantec were able to estimate the earnings for one particular extortion gang at $394,000 in a single month.
Any current figure would likely be much higher. But the chance of being able to obtain that figure is slim, because no one wants to advertise it.
There are multiple reasons why this type of attack is successful enough to keep criminals engaged.
For one, the rise of Bitcoin and other digital currency has enabled extortionists to operate in a virtually anonymous and untraceable environment.
For another, most criminal actors have shrewdly opted to keep demands modest, increasing the chances that a victim will choose the path of least resistance and simply pay up.
No one is ever eager to capitulate to the demands of an anonymous extortionist. And some have gone to great lengths to avoid giving in. Sometimes, however, that hasn’t been a sound risk management decision.
Code hosting company Code Spaces was hit by a DDoS attack in mid-2014 and refused to give in to ransom demands.
Instead it tried to take back its account by changing passwords. The extortionists, who had created backup logins, retaliated by randomly deleting files.
Most of the company’s data, backups, machine configurations and offsite backups were either partially or completely deleted. The company became a sad statistic — one of the 60 percent of small businesses forced to fold within six months of a serious cyber attack.
Speculation, however, is that many companies opt not to take such a risk, and simply choose the lesser evil and pay off their attackers. The SANS Institute estimated in 2009 that thousands of organizations were quietly paying off cyber extortionists.
“Not disclosing that you’ve been breached, in itself, is one of the main reasons that some decide to pay a cyber extortion threat rather than handling it with assistance from law enforcement,” said Jessica Lindo, vice president, professional lines at Allied World.
Lindo and other experts aren’t quick to opine on whether victims should or shouldn’t pay, because every situation is unique.
“Whether a company decides to pay depends on their assessment of the credibility of the threat,” said Lindo.
“If they are confident … that the threat is legitimate and can be actioned upon, they may be inclined to pay the ransom. … Within the retention it may be solely up to them to decide whether they want to pay the ransom without involving the insurer,” she said.
“Each situation would need to be analyzed on its own merits,” agreed Matt Donovan, national underwriting leader, technology and privacy, with Hiscox USA.
“Many companies are able to thwart ransomware issues if they are able to restore to an earlier backup of the file system. In these instances, the system restoration can potentially be a better option than paying the demand.”
That solution won’t fit every type of threat, however. The very public airing last year of Sony’s dirty laundry understandably rattled plenty of top-level executives. The threat of public exposure rather than outright deletion of data could easily be enough to force the hand of businesses that fear embarrassment or loss of reputational stature.
Lindo noted that in the event an insured is faced with a demand high enough to pierce its retention level, it would be a mistake to assume that an insurer would withhold approval to pay on a ransom demand.
“Once that threat is actioned upon, it could become a much larger cyber loss.” she said.
“And the loss may move from one handled solely by the company within the retention to one involving insurance.”
Cyber, Extortion, or Both?
There are a few gray areas surrounding the question of whether a cyber extortion event would trigger coverage in a typical cyber policy. Some also have questions about whether a kidnap, ransom and extortion policy (KR&E) would exclude a cyber event.
Travelers’ Francis said that as with any policy, it’s going to come down to whether the circumstances of the event align with the wording of the policy.
“Not every K&R policy is the same, not every cyber policy is the same,” he said.
“Like anything else, your agent or the customer needs to make sure their specific policy as written would cover it. … Certainly in any standard cyber policy you should expect to find some degree of coverage. But it would not be unusual for a K&R policy to cover cyber-related events in addition to non-cyber types of extortion events.”
“Having the financial backing of an insurance policy can bring financial security and the breach response expertise needed to navigate the attack when it occurs.” — Matt Donovan, national underwriting leader, technology and privacy, Hiscox USA
Brian Dunphy, senior managing director, management and professional risk group, Crystal & Company, added that because cyber extortion is rarely enacted under a policy, such a policy is fairly easily to obtain.
“But it’s not in many cases a standard grant of cover. It’s one of those things you have to ask for it if you want it.”
Not many are asking though, because they’re not thinking about it as an exposure unless there is a specific reason to consider their data sensitive.
But the bad guys don’t really care who they attack, said Francis, and plenty of organizations simply have no type of coverage in place.
“Cyber policies are still not purchased as frequently as they should be, but still they’re more likely to be purchased than K&R policies generally,” he said.
“Many companies have neither.”
Those companies could easily find themselves in a world of hurt.
“Having the financial backing of an insurance policy can bring financial security and the breach response expertise needed to navigate the attack when it occurs,” said Donovan of Hiscox.
Path of Least Resistance
Most cyber extortion is an opportunistic crime, said Allied World’s Lindo. Organizations with less than adequate security controls are going to be the most vulnerable.
“The controls you implement in a sophisticated security and business continuity program are the same controls that are likely to prevent a cyber extortion threat,” she said.
“So if there’s any good news in cyber, I think it’s that.
“The most important thing [risk managers] can do is to prioritize their assets,” said Lindo.
“Identify the most valuable data, most sensitive data — areas that would give you the greatest financial harm if disclosed, your most critical processes and applications.”
“Segregating the ‘crown jewels’ from the rest of your network can be an easy starting point,” said Donovan.
“You can’t just rip the plug out of the wall and expect the threat to go away.” — Brian Dunphy, senior managing director, management and professional risk group, Crystal & Company
Once you’ve identified those assets, then you can target your resources around preventing access to those assets and ensuring that you’ve built redundant systems around them to ensure business continuity in the event of an attack.
Many of the other precautions that should be in place are the same as those companies employ to protect against other types of network intrusions.
Beyond simple anti-virus software installation, said Donovan, companies should consider penetration testing, bug-bounty programs and data-classification programs.
“Daily backups can help thwart the ransomware attacks as well,” he said.
Travelers’ Francis poses an apt analogy: “There are a dozen houses on the street. One of them is well lit with clear lines of sight, the doors and windows are locked. [Criminals are] going to move on to the other house down the street that doesn’t have lights and leaves the door open; they’re going to take the path of least resistance.
“Lock your doors, turn on your lights. Use firewalls, have a process in place, use the right software, check your logs, have virus detection. It’s not bulletproof, but it may be enough to have the bad guys go after someone else instead of you.”
A far-too-often overlooked piece of the puzzle is having an incident response plan for a cyber extortion event, experts agreed.
“Today, I would say that cyber extortion is probably not a part of [most companies’] incident response plans,” said Lindo. “I’m not sure that most companies have fully considered these type of threats.”
Without a plan in place, there’s little chance for an organization to address an extortion event effectively, or prevent it from escalating.
“You can’t just rip the plug out of the wall and expect the threat to go away,” added Dunphy of Crystal & Company.
“There’s a lot that needs to be addressed. … It’s like practicing a fire drill for kids in school — when the alarm sounds, does everybody know what their roles and responsibilities are? Cyber extortion is just like that. Do you know what to do? Who to contact? The steps in which things are supposed to take place?”
When faced with a threat, said Lindo, you never want that to be “the first time you’re discussing what you’re going to do and how you’re going to respond.”
The threat of cyber extortion is yet another reason why risk managers must help their organizations understand that data security is an enterprise-level issue.
“It’s important to have a culture that understands the value of the data that they’ve got, and the ramifications financially and reputationally if that data was to go missing or to be made public,” said Francis.
And that culture must be driven from the top of the organization down into every department, so that data security is top priority for all.
“There’s no one weak link,” he said.
Top Risks Ranked by Risk Managers
The global risk landscape is so rich with exposure that it’s not surprising that two recent surveys show divergent worries by risk managers.
In a recent study of 1,400 global CEOs and risk managers by Aon, damage to reputation and brand was the clear-cut No. 1 choice.
“I think it’s a combination of things but when you think about all of the other risks that are there, damage to reputation and brand is really the culmination of the connectivity of all different kinds of risks,” said Baltimore-based Theresa Bourdon, group managing director at Aon Risk Consulting.
“So any one of the other risks, if a company is not prepared for them, is going to affect their reputation and brand,” said Bourdon. “It’s kind of where it all collects right at the top of the brand of the organization.”
The uncertainty and unrest overseas obviously made a major impact on the global respondents of the Clements survey.
“There are many, many companies which are either contemplating or have already engaged in opening operations overseas, and that’s happening across all industries,” said Scott Lockman, Washington, D.C.- based director of commercial insurance at Clements.
More than one-quarter (28 percent) of top managers surveyed by Clements stated that political unrest was their top concern, while 25 percent cited kidnapping and 10 percent cited terrorism.
Twenty-one percent said they delayed plans to expand into new countries due to rising international risks.
Lockman said that when the organization speaks with its clients about civil unrest, it doesn’t necessarily have to be about a physical threat.
“A devaluation of a currency can cripple a business, like what’s happening in Venezuela, for example.” — Scott Lockman, director of commercial insurance, Clements Worldwide
“A devaluation of a currency can cripple a business, like what’s happening in Venezuela, for example,” he said. “Their economy is in turmoil right now.”
“Specifically we have seen spending on political violence insurance go up 20 percent over the past couple of years,” said Washington, D.C.-based Patricia Loria, Clements’ marketing communications manager.
Meanwhile, in this year’s Aon study, political risk dropped out of the Top 10 list.
“It was No. 10 the last time we did the study in 2013 and now it’s down to No. 14,” Bourdon said. “Political risk is one of the risks we don’t think is getting the attention it deserves.”
The global economic slowdown was No. 1 in the 2013 study; it dropped to No. 2 this year, she said.
As for cyber risk, Bourdon said she was surprised to learn that 82 percent of the respondents — who ranked cyber risk in the Top 10 (at No. 9) for the first time after being No. 18 in 2013 — said they were ready for the risk and only 8 percent said they had a loss of income as a result of a cyber attack.
Another surprise for Bourdon was the threat of terrorism. “We were very surprised that it was very low on the list,” she said. “There is sort of an out of sight, out of mind mentality here.”
Also out of mind, she said, was pandemic risk, which ranked at No. 44.
“We haven’t seen regulations decreasing, we’ve only seen them increasing.” — Theresa Bourdon, group managing director, Aon Risk Consulting
One perennial concern, Bourdon said, is regulatory risk, which usually ranks as a Top 5 risk.
“We haven’t seen regulations decreasing, we’ve only seen them increasing,” she said. “You look at the global economic expansion. That’s brought additional regulations.”
Bourdon noted that Aon’s respondents were also very concerned about the impact of catastrophic property damage, such as from a hurricane or large fire.
Property damage and medical expenses represented the largest sources of financial losses among respondents to the Clements survey.
It’s all in the Code: Five Essential Characteristics of HCPCS that Influence Outcomes
Payers are no stranger to codes. Claim and policy administration systems are filled with them. Moreover, whether designating claim type, feature, branch office, policy term, type of injury, or another classification, their use facilitates consistency and understanding. Codes also guide clinical and financial decision-making. At the foundation of medical cost management are three code sets. The International Statistical Classification of Diseases and Related Health Problems (ICD) diagnostic and procedure codes, ICD-10-CM and ICD-10-PCS respectively, are used to classify diseases, disorders, injuries, infections, and symptoms. National Drug Codes (NDCs) help ensure claimants received the correct strength, dosage form, and type of medication. Their use also helps pharmacists recognize the difference between products that may look or sound alike. Yet another useful code set is the Healthcare Common Procedure Coding System (HCPCS) created to identify services, products, and procedures rendered for the condition. It is on this code set we will focus.
When processing ancillary benefits in workers’ compensation and auto no-fault, HCPCS can determine whether the item is considered medically necessary and therefore, available to the claimant and otherwise related to the compensable condition. Codes can also affect the reimbursement amount. Thus, if a coding error is made, there can be significant adverse impacts to payers and claimants alike. For example, the vendor could stop supplying the item based on insufficient reimbursement, or the payer could deny the product or service completely. Both are detrimental to the claimant or overall claim outcomes. Coding errors may also result in claim leakage if applied incorrectly or misunderstood in the review process. It is therefore essential that payers be mindful of five essential characteristics of HCPCS.
#1 – HCPCS are generic
Like pharmaceuticals, there are many different providers and manufacturers of similar durable medical equipment (DME) items. However, HCPCS are not specific to brand and usually hundreds of different products can fall under the same HCPCS. In addition, some codes include certain services, such as evaluations and fitting fees, whereas some codes do not. For example, some health HCPCS rarely indicate the actual services being provided in the home, such as wound care or home infusion, but instead simply indicate an RN or LPN visit.
#2 – Unit of measure influences coding
Some supply codes have very specific units of measure, which can result in HCPCS quantities that are not whole numbers and can result in mathematical errors or rounding. For example, HCPCS code A4450 has a unit of measure of ‘per 18 square inches’ and is assigned to a roll of tape that is 2 inches by 5.4 yards, equaling 388.8 square inches. The quantity for this HCPCS code would therefore be 21.6. Additionally, some HCPCS codes specify ‘per pair’ or ‘each,’ so understanding the actual supply is important to determine the appropriate quantity.
# 3 – Sometimes, there is not a specific code
Centers for Medicare and Medicaid Services (CMS) has created a number of miscellaneous codes that have generic definitions and can be used when no other CPT or HCPCS code matches the description of the product or service provided. Miscellaneous codes can be easily abused either unintentionally due to lack of time and knowledge, or intentionally by a provider seeking a higher reimbursement rate. This is because miscellaneous codes typically do not carry a fee schedule due to their versatility and, therefore, may be reimbursed at higher amounts than a non-miscellaneous code. For example, K0108 defines a ‘wheelchair component or accessory, not otherwise specified;’ however, most wheelchair parts have a specific code outside of this one which could be more appropriate while also carrying a lower allowable amount.
#4 – Supplemental modifiers are useful
A supplemental modifier or identifier is a billing value that further clarifies the HCPCS/CPT code by telling the payer more about the billed product or service. Their application influences reimbursement because fee schedules largely differ depending on which modifier is reported. A rental (RR) for example, does not warrant the same reimbursement as a purchase (NU) yet both a purchase and rental of the same product carry the same HCPCS. Consider the following codes, K0001 = ‘STANDARD WHEELCHAIR’, K0001 RR = ‘STANDARD WHEELCHAIR’ that has been rented, and K0001 NU = ‘STANDARD WHEELCHAIR’ that has been purchased. Depending on the fee schedule, reimbursement could be $45 or $500.
Modifiers are also useful because they can define the unit of measure. By default, a HCPCS with a modifier of ‘RR’ is a rental per month. However, in some cases a provider may bill for a device daily and therefore interpret the fee schedule as daily rather than monthly. In this scenario, the provider may bill with a daily unit of measure, billing a quantity of 30 instead of the allowable amount of one. For devices that are rented daily, such as a negative pressure wound therapy device or continuous passive motion device, it is important to understand the unit of measure being used (monthly or daily) and be mindful that the daily billing exceeds the monthly allowable.
# 5 – The diagnosis influences allowable amounts
Some HCPCS change based on the diagnosis of the injured person and therefore, the allowable amount may fluctuate. For example, depth-inlay shoes are coded as an Orthotic (L – code) if the patient does not have a diabetic diagnosis and is using the shoes for orthopedic reasons. The same depth-inlay shoe may be used for a diabetic patient, but it would warrant an A-code, which can have a higher reimbursement level.
The use of coding assists claims professionals in compensability decisions, guides clinical decision-making, informs point-of-sale utilization controls, influences claim handling policies and procedures, and provides a valuable data point in statistical and analytics models. Moreover, their use facilitates better clinical and financial claim management in terms of payments that are more accurate, greater processing efficiency and consistency, and improved clinical management as a result of better understanding the medical condition(s) associated with the claim and the various therapies in use. Remaining mindful of the aforementioned five essential characteristics of HCPCS can therefore not only mitigate claim leakage but also achieve a better outcome.