Four tips to help employers curb benefits fraud

Group benefits are an invaluable tool most companies harness to attract and retain the best talent. For employees, they characterize a noble intent of care, compassion and protection. For employers, they can embody inherent risk.

“Benefits are a form of compensation. And most benefit plans do not give employers any control of that compensation. Fraud is just one of the threats you accept when you take on a plan,” says Mike Ignatz, head of business development and fraud investigation at the Benefits Trust.

The numbers are self-evident. According to the Canadian Health Care Anti-Fraud Association, fraudulent claims cost the industry between $1.2 billion to $6 billion every year. Despite its magnitude, benefits fraud often carries a perception as a victimless crime, affecting insurance giants that have deep pockets and can stomach it.

Read: Firefighter sentenced to six months in jail for benefits fraud

The irony is, it hits much closer home. Consistent fraud erodes a benefits plan by raising premiums for both employers and employees. And in more severe cases, it forces the plan sponsor to curtail or cull coverage altogether. Everyone ends up paying for the sins of a few.

The impact on small- and mid-sized companies can be even more severe, says Anthony Feher, owner of A.F. Group Benefits Inc. “Fraud departments look for large, systemic fraud. They don’t look for the one-offs, which might still be in the thousands but don’t register with the insurer.”

What does fraud look like?

Benefits fraud can result from the actions of plan members, service providers or both in tandem. Some fraud isn’t even truly intentional, says Ignatz. “Members might ask their provider to split up the receipts for a service into smaller ones to get around per-visit maximums. Dental offices might provide discounts to those who don’t have plans but charge full price to those that do and regularly utilize the new patient exam, even if the member has been a patient for years. Or, practitioners might recommend items based on available coverage — physio offices often call and ask for the rundown on paramedicals, orthotics and support hose.”

Read: Ontario police officer charged with fraud over benefits claims

The approach straddles notions of convenience and con. But it can develop into more insidious fraud when service providers or plan members start submitting claims for services never provided or for ineligible products, such as getting dress shoes and billing them as orthotics.

So what can employers do? Here are four tips to help employers curb benefits fraud.

1. Keep a close eye on things.

Begin by staying vigilant, says Feher. “Do a thorough retrospective review of the claims utilization, be it drug, paramedical or health services.”

He cites a case where his team had to ask an insurer to change its claims adjudication process for support hose because a group was abusing the benefit. “Manulife was paying $200 per pair, for up to four pairs a year. We had 40 people maxing that out. They were either sharing them with family and friends or getting kickback,” says Feher, noting it was costing the employer $20,000 a year. “Eventually, Manulife had to change their system, and now a $200 annual maximum has become the norm. We reduced claims to the benefit by 75 per cent.”

2. Always question why.

Feher also encourages employers to consider the purpose of the benefits plan: Why they have it, what they expect from it and what they want employees to gain from it. Answers to those questions could lead to better perspectives and solutions. “For example, your overall costs may be in line with your budgeting, but if those claims are only being utilized by five to 10 per cent of your employees, is that the best use of your dollars?”

Read: Toronto benefits fraud probe takes a turn as new charges laid over city claims

Sometimes, employers have a good reason, says Feher. “I had a client with an employee whose daughter had very specialized needs. And the employer wanted to help.” In other cases, it may be outright abuse, he adds. “In one case, we noticed a huge surge in claims for eczema drugs. Upon review, we saw 20 per cent of the employees making claims that were not traceable to the work environment. We ended up putting in a drug cap that was the best solution available.”

3. Educate employees about why they should care.

Ignatz says employees often have a sense of entitlement when it comes to benefits, especially when they contribute to the plan. The attitude is insurers will still make big profits, regardless of their claims.

But benefits plans generally don’t work that way, notes Ignatz. “When you commit fraud, you are really reaching into the pocket of the person next to you. They end up paying higher premiums or losing benefits because the employer can no longer support the claiming patterns.”

Read: ‘Sigh of relief’ as university professor’s firing for benefits fraud upheld

Therefore, it’s imperative that employees understand the cost of fraud. When employees come to realize they’re reaching into other people’s pockets, it becomes personalized and they’re more likely to follow their better nature, says Ignatz. “Once they understand that, encourage them to stay vigilant of providers misusing their plan dollars. Most insurance companies facilitate anonymous tip reporting — usually by phone or online. Make the presence of these services known and encourage members to use them when appropriate,” he adds.

Employees also need to understand they can’t blindly trust their health-care service provider. Many clinics make submissions on a person’s behalf, which can lead to over billing, warns Ignatz. “So when in doubt, ask for clarification. Know what your plan is being billed for.”

For example, people are often shocked to learn that a unit of dental scaling is 15 minutes, says Ignatz. So when the dentist bills for four units, it means the employee sat through an hour of teeth scraping. “When a patient knows things like these and asks probing questions, the provider is less likely to stretch the truth.”

4. Get creative with plan design.

Plan design is the best protection against fraud, according to Ignatz. Combined and family maximums, as well as benefits for just the employee, are certainly worth considering. “Does it make sense for an employer with office workers who primarily sit all day to offer to cover orthotics?” he says. “Even an employer whose employees work in a warehouse could consider covering orthotics just for employees and not their dependants.”

Copayments and deductibles are another effective prevention mechanism because they force plan members to take more responsibility for the cost and frequency of their claims submissions, notes Ignatz.

Health-care spending accounts also help deter fraud to a degree, says Ignatz. “Not only is it a finite amount, but that amount is displayed at the bottom of each explanation of benefits. Members see that amount decrease with each claim and they generally want those funds to be there when they need them for legitimate expenses.”

Read: 100 TTC employees fired or resigned over benefits fraud investigation

Employers are sometimes reticent to reduce coverage, as they don’t want to agitate their employees. In that case, remember the old 80/20 adage, says Ignatz. “Twenty per cent of users drive 80 per cent of costs, so the ones complaining are usually the ones responsible for the perpetual rate increases. By eliminating the risk of the open-ended plan and adding in an HSA, you are generally benefitting the 80 per cent of workers who were not your cost drivers.”

And most benefits managers also recommend against unlimited benefits of any kind since they’re costly and difficult to retract once paid, says Ignatz. “Many plan sponsors have taken to capping benefits in certain areas, such as orthotics and medical stockings, to control costs amid rising claims.”

In the end, fraud is difficult to prove beyond a reasonable doubt, especially when the practitioner is in on it. Vigilant and creative plan sponsors, as well as conscientious plan members, can prove the best safeguard against sneaky fraud that can suck the benefit out of group benefits.

This article originally appeared on Benefits Canada‘s companion site,