Internal Initiatives – There are also opportunities for plan sponsors to make their plans more fraud-resistant through increasing employee awareness of the magnitude and cost of benefits fraud, encouraging honest use of benefits plans and implementing plan design features to frustrate would-be defrauders.
Employee communications materials should include clear references to the impact of fraudulent claims on the cost of employee benefits. Materials prepared by the benefits administrator should be reviewed by the plan sponsor to ensure that they emphasize the member’s obligation to make honest use of the benefits plan and state that making a fraudulent claim can void coverage and/or constitute a criminal offence. Education sessions on employee benefits plans should draw explicit attention to this obligation, and information about how to report suspicious activity should be posted prominently in the workplace and/or on the company intranet.
Most employers have implemented fraud prevention measures aimed at protecting company assets from rogue employees and service providers. Plan sponsors should ensure that conflict-of-interest and whistle-blower policies (ensuring protection for employees wishing to report their suspicions of fraud or other improprieties), as well as written codes of conduct, are broadly drafted to ensure that each makes reference to employee benefits plan usage. Employees who are reluctant to report suspicious activity on the part of co-workers to company personnel should be encouraged to use anonymous tip lines established by the benefits administrator. In addition, employees should receive regular reminders to review the Explanation of Benefits statement circulated by the insurer, along with any receipts provided by the medical services provider, to ensure that these documents accurately reflect the services provided. Any inaccuracies should be reported immediately.
Plan design can also effectively deter fraud. The use of co-pays and deductibles—while not always popular with employees—provides incentives to plan members to agree to only medically necessary procedures, obtain second opinions (particularly with respect to dental work) and carefully examine claims information. Similarly, while many plan sponsors have implemented annual and/or lifetime hard-dollar caps on certain benefits items as a means of controlling costs, these limits also reduce opportunities for fraud when applied to items that have proven most vulnerable to abuse, such as orthotics, medical stockings and other medical supplies, as well as paramedical treatments such as massage therapy.
Dealing With Defrauders
If fraudulent activity is uncovered, plan sponsors should be careful not to hastily publicize the discovery. Any investigation of the fraud may be compromised if the perpetrator is given notice that his or her activities have drawn suspicion. Instead, plan sponsors should immediately contact the insurer, as the insurer is the direct victim of the fraud and is best positioned to lead an investigation. They may also consider informing law enforcement—particularly if there is any suggestion that the employee is not working alone or is engaged in a wide-scale fraud—as benefits fraud is frequently prosecuted under the Criminal Code of Canada.
Finally, plan sponsors should consider contacting legal counsel if they have been defrauded directly (e.g., if the plan is selfinsured), as well as to ensure that they are not otherwise implicated in the fraud—for example, an insurer may allege that the employer, through its conduct, enabled the fraud to take place. Plan sponsors should also immediately establish and mark a “litigation file” for use in any subsequent litigation to ensure privilege over any documents produced in the course of an investigation or in dealings with the insurer.
Five Steps to Discourage Fraudulent Activity 1) Implement a whistle-blower policy – Employees who wish to report their suspicions of benefits fraud or other improprieties should be protected from reprisals. 2) Develop a written code of conduct and conflict of interest policy – Policies should be communicated to employees in a formal seminar setting. Consider requiring employees to execute agreements confirming that they have read and understood the policies. 3) Work closely with your insurer – Ensure that your benefits provider is using up-to-date techniques to prevent fraud and detect it when it does occur. 4) Educate employees about the cost of fraud – Emphasize that fraudulent claims increase the cost of premiums, which can lead to a reduction in coverage and/or take-home pay. 5) Consider design features that will help inhibit fraud – Co-pays, deductibles and annual or lifetime limits— particularly on items vulnerable to abuse, such as orthotics and massage therapy—can help reduce the incidence of fraud in your benefits plan. |
Sean Maxwell is an associate with Bennett Jones LLP in Toronto. maxwells@bennettjones.com
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© Copyright 2008 Rogers Publishing Ltd. This article first appeared in the October 2008 edition of BENEFITS CANADA magazine.