Understanding and Preventing Employee Benefits Fraud
Not only is benefits fraud illegal, but it can also undermine the sustainability of your employee benefits plan. Employee benefits fraud can quickly add up to hundreds, thousands or even millions of dollars. Employee benefits fraud does matter and there are important ways that you can help fight it.
Benefits Fraud Explained
Employee benefits fraud occurs when providers, facilities, clinics or individuals intentionally submit claims with inaccurate or misleading information about the service, product or treatment.
Often this type of fraud involves collusion between a plan member and a provider, but individuals and providers can also commit benefits fraud independently. Some of the most common types of employee benefits fraud include:
- Claiming for services not rendered
- Upcoding goods or services
- False claims
- Unbundling services in order to claim more
- Excessive or unnecessary charges
Sample Scenario #1
A plan member visits a vision care provider. Their employee benefits plan covers prescription eyeglasses. While interacting with the provider, the plan member mentions that they would really like designer sunglasses. The provider suggests that they make a benefits claim for prescription eyeglasses, but instead the plan member chooses a new pair of designer sunglasses (with no prescription). The provider and plan member are colluding to commit fraud by falsifying a claim.
Sample Scenario #2
A group of plan members begin working with a massage clinic to submit false claims. The massage clinic provides receipts to plan members, even though they don’t receive any messages. The plan members and the massage clinic split the proceeds once the employees are reimbursed. This is an example of a collusion ring where multiple employees and a provider are committing fraud by claiming for services not rendered.
These types of scenarios occur far too often. Providers reassure plan members that this practice is normal. Plan members feel pressure from other employees or from providers to commit fraud. They’re reassured that it isn’t fraud and that the employer “owes” them or that it’s the insurance company that pays, not the employer.
Why Does Employee Benefits Fraud Matter?
It goes without saying that fraud is illegal. It’s a criminal offence, so that is the first and most obvious reason that it matters. But there are other important consequences of employee benefits fraud.
For an employer, employee benefits fraud matters because it threatens the sustainability of the benefit plan by “artificially” increasing the cost of the employee benefits plan. Benefits fraud means the employer is now paying for products or services that employees aren’t actually receiving (so don’t need) or they are receiving products or services that aren’t actually covered.
As costs rise, employers may need to reduce benefit offerings, impose caps or remove benefits. This ultimately hurts other employees who actually need coverage for these goods and services. It also hurts the employer who may use their benefit plan as part of a recruitment strategy.
Reducing fraud in an employee benefits plan should be considered a cost-containment opportunity. If less money is spent paying fraudulent claims, then more money can be used to provide other benefits and coverage.
Fighting Employee Benefits Fraud
There are many ways to fight employee benefits fraud. There are three main players in preventing fraud: the claims payer or provider, the employer and the employee.
- Claims payer/provider
The claims payer or provider has the biggest role in preventing employee benefits fraud. In many cases, this is an insurance company. They are the only party with access to all claims payment information.
One of the most effective ways that claim payers fight employee benefits fraud is through an intelligence-led approach. This means using tools and analysis to identify patterns or linkages that could be potentially fraudulent. This analysis looks for things like “flocking:” a large number of employees from the same plan sponsor who is all using the same provider. History has shown that offenders often associate with other offenders.
Once the analysis identifies suspicious activities, the fraud investigations team begins looking into the associated providers and plan members. This may mean contacting the provider to request receipts or reaching out to the plan member.
After investigating, the claims payor or provider may choose to flag a plan member or suspend their e-claims. They may also choose to de-list providers. This means they will refuse to pay claims from a specific provider. This is often a quick solution that almost immediately stops the fraud from continuing. This is an important element because criminal investigations often take a very long time, and unless a provider is delisted, the fraud would continue until the criminal investigation is complete.
The employer’s role in fighting employee benefits fraud is to educate plan members: help them understand what constitutes fraud. Talk through sample scenarios and teach them to avoid pressure from providers or other employees. Communicate with them about the effects of fraud on the employee benefit plan and the company. This should be an ongoing effort, as plan members come on and off the plan and as new providers are used.
One technique for combatting fraud: set up a confidential reporting tool where employees can anonymously report suspected fraudulent activities. And, if your organization has a code of conduct for employees, include employee benefits fraud as unacceptable behaviour resulting in discipline, termination and/or criminal charges.
The employee’s role in preventing employee benefits fraud is to know what fraudulent behaviour looks like and to be able to resist and report it when its possibility exists.
Together, the claims payer or provider, employer and employee can fight employee benefits fraud in order to help preserve the long-term sustainability of the employee benefits plan.
Good Advice is Key
Are you interested in finding out more about fraud prevention and how GroupHEALTH can support you and your employees? Review your options with one of our licensed advisors on the phone, or contact us for a comparison quote.