March is fraud prevention month, and in this article, we address what constitutes benefits fraud, why it happens, what insurers are doing to prevent fraud, and what plan sponsors can do.
Companies put benefits plans in place to support employees’ wellbeing, provide coverage for unexpected events, and attract the best people for their organization.
But estimates put fraudulent expenses at approximately 10% of total benefits spend. If you consider a typical benefits plan for 100 employees – conservative estimates are about $40,000 of plan costs. This kind of expense erodes the invested value of plans.
Costs of this magnitude threaten plan sustainability, however fraud continues to escalate due to a number of factors according to a recent publication by Sun Life.
Lack of understanding – plan members’ low awareness levels and lack of understanding could put them at risk of being susceptible to fraud.
Rising health care costs – increased costs associated with health care benefits means there is more to gain financially by fraud.
Organized crime – As debit and credit card fraud has become more difficult due to tighter controls, criminals have migrated to group benefits fraud.
Other priorities for law enforcement – Law enforcement agencies typically focus limited resources on crimes affecting individuals rather than companies.
What is benefits fraud?
There are three main types of benefits fraud:
Benefits abuse: This often occurs at the end of the plan year when employees use the benefits plan for things that are not necessary, such as using up their massage benefits at the end of the year even though they don’t need treatment for an injury or underlying condition.
Unethical practitioners may recommend unnecessary treatments to reach an annual limit. Other examples include prescribing designer sunglasses so that they can be claimed under vision benefits.
Employees who reach their annual maximum may be offered the opportunity to put claims under a child’s name rather than the parents’.
Employees may believe that these activities are victimless, they do represent criminal activities.
Intentional falsification: Recent cases include employees adding fake dependents to their plans and submitting claims for those dependents, often altering documentation needed to submit a claim.
Employees may also submit the same claim to multiple insurers to double reimbursement or let someone not covered by their benefits use their plan.
Large Scale Criminal Activity: Schemes include identity theft, where the names and credentials of accredited providers are used by imposters at facilities where they never actually worked.
One optometrist in BC obtained the benefits information for large numbers of patients and submitted eye exam claims reimbursed directly to the provider every year regardless of whether the eye exam occurred.
What Insurers Are Doing
Insurance companies must balance the desire for plan members to be reimbursed quickly for the majority of authentic claims and due diligence to prevent fraud.
Detecting benefits fraud is likened to finding a needle in a pile of similar needles. Many insurers have adopted sophisticated techniques for uncovering irregular patterns, volumes, and other anomalies.
Evolving schemes are being detected in a variety of ways:
Prepayment audits: based on random selection, threshold limits, and plan member profile.
Facility audits: claims are audited to ensure billing is correct and accurate
Toll-free tip lines: plan members who suspect fraudulent activities provide leads for investigations.
Service provider delisting programs: Once evidence of suspected abusive or fraudulent practices are detected, service providers can be delisted from having future claims reimbursed. These lists are typically communicated to plan members and plan sponsors on a regular basis.
Intelligence-led approaches: One scheme was identified when a particular therapist was providing high volumes of services relative to their peers. When the therapist was contacted, he confirmed that he did not perform any of the services claimed. In this instance, Sun Life uncovered a larger scheme in that therapists had responded to employment ads, their names and credentials were stolen in personal interviews, and then used to process fraudulent claims.
What You Can Do
While insurers are taking significant steps to build intelligence-led approaches to detecting and pursuing fraudulent actors in the benefits space, everyone plays a role.
A poll conducted by Environics research in 2018 revealed that 75 of insured Canadians believe that the main consequence of benefits fraud is having to pay higher premiums or reimburse claims. They don’t realize the magnitude of this crime.
Educate plan members in a way that helps them understand the value of their plan and their role as savvy benefits consumers. Educate plan members on what constitutes fraud and the potential consequences. The CLHIA’s Fraud=Fraud campaign is a great resource.
Ensure that plan members review their claims to ensure they are correct through the online portal or paper statements.
Update codes of conduct and employee contracts to address how benefits fraud will be handled. Consequences may include loss of benefits, repayment of fraudulent claims, termination of their employment, referral to police, and criminal charges.
Design your plan with fraud protection in mind. Things like including maximums for certain types of benefits limit the possible exposure to fraud.
We’d love to hear from you! Contact us to learn more about how your plan is addressing the risk of fraud.