Benefits Fraud is constantly evolving, and it's a significant problem for Canadian insurers. Learn more about what constitutes benefits fraud, how to prevent it, and what the Canadian Insurance Industry is doing to detect and reduce it.
Benefits fraud is evolving constantly, and new schemes arise constantly due to new digital processes, new working arrangements, and financial pressures. It’s defined as someone intentionally submitting a falsified claim for financial gain. An example could be submitting a claim for a service that never occurred.
Benefits abuse is different. Someone is abusing their benefits when they access a treatment that is not medically necessary. They are using their benefits just because they have them.
Why is Benefits Fraud an Issue?
Employers and insurers lose millions of dollars each year to benefits fraud, and it's a crime that puts the sustainability of benefits plans at risk.
75% of Canadians believe that the biggest consequence of committing benefits fraud is having to pay back false claims or pay higher premiums, but the consequences are many:
Increased cost of the benefit plan
Job loss, lost benefits
Jail time and criminal record
Reduction of benefits.
The insurance industry paid out $40 billion in claims in 2020. This number increased by 10% since pre-pandemic levels. If only 1% of claims are fraudulent, that's $400 million in fraudulent claims. As claims increase, so does fraud.
Why Does Benefits Fraud Occur?
Benefits fraud occurs when three conditions are present:
Opportunity: System weaknesses, ineffective audit controls or claims monitoring, and lack of knowledge all create an opportunity for benefits fraud to exist.
Pressure: Financial distress, addiction, or greed can incentivize providers or plan members to participate in benefits fraud.
Rationalization: From either providers or plan members could come in the form of "I pay for my benefits," insurance companies have lots of money, or "I'll pay it back."
Our new working environment, which have led to a disruption in business practices, accelerated digital processes. Economic pressures such as job loss, fear of recession or inflationary pressures may lead plan members to commit fraud for financial gain.
Plan Members are not always to blame in benefits fraud. Highly organized operations use a variety of ways to access plan member credentials, create fake clinics, incite plan members to collude in the benefits fraud. Of course, plan members can also submit falsified e-claims or allow someone else to use their card.
What is the Insurance Industry Doing to Protect from Benefits Fraud?
If benefits fraud is detected at the plan member level, the plan sponsor is informed. If the plan sponsor wants to keep the plan member on their plan, then they will lose the option of submitting e-claims. Most insurers will demand that the plan member return funds, and the case may be referred to law enforcement.
The insurance industry has done a lot to raise awareness about benefits fraud among plan members and organizations alike. Industry data pooling and multi-carrier participation is allowing insurers to mine data to identify suspicious activity, investigate unusual patterns, and recover funds. Artificial intelligence is being used to detect suspicious activity such as a large number of claims coming from one organization or family members.
In Canada today, there are over 4,000 delisted providers. Providers can be delisted for a variety of reasons:
· Suspicious claiming and administrative practices
· Providing non-medical treatment
· Altering receipts or clinical notes
· Not complying with an audit request or providing insufficient information
· If their credentials have been used in a benefits fraud scheme
What Can You Do to Prevent Benefits Fraud?
Plan Design: Plan design controls such as maximums and co-insurance assist in establishing controls against benefits fraud.
Plan Member Communication: Giving employees specific examples of what constitutes benefits fraud, explaining the consequences, and providing training provide an additional layer of protection and disincentive to commit fraud in a plan.
Watch for the Plan Administrator Tip this month and ensure that you circulate it to employees.