Protecting Your Plan from Within: The Role of Education in Fraud Prevention

Benefits fraud in Canada costs the health insurance industry between $1.2 and $6 billion every year.1 Despite this staggering cost, many Canadians underestimate the consequences of submitting false or misleading claims to their employee benefit plans, according to research from the Canadian Life and Health Insurance Association (CLHIA).

For an employee it could mean job loss, prosecution and even jail time. For companies, it means rising insurance premiums and administrative costs, which may lead to them reducing, limiting, or eliminating benefit coverage in order to manage costs. For all Canadians, this means higher fees and less affordable coverage.

Who is committing benefits fraud? Well, sometimes it’s the plan members - employees or individuals - and in other cases, it’s the service providers. However, Sun Life estimates that 85% of its losses due to fraud involve collusion between both medical services providers and the employees who are making insurance claims.

In some very public cases, there have been large groups of employees committing fraud. For example, between 2014 and 2018, a multi-year, multi-million dollar scheme was uncovered involving a health benefits plan at the Toronto Transit Commission (TTC). Over 250 employees were fired, and ten people - both employees and a service provider - faced criminal charges, including prison time.

This begs the question, how are they doing it?

How benefits fraud is committed

There are a number of ways that someone can commit benefits fraud, involving both employees and providers. They include:

• False claims: Submitting claims for services or products that were never received.

• Forging receipts: Creating false receipts for non-existent services.

• Misrepresentation: Claiming non-covered services as covered ones, such as claiming spa treatments as if they were therapeutic massages.

• Sharing benefits: Allowing others to use your benefit’s coverage, or using someone else’s receipt as if it were your own.

• Identity theft: Using someone else’s identity in order to claim benefits.

• Upcoding: When healthcare providers claim directly for payment, and they claim for more expensive services than those that were actually provided to the client.

• Unbundling: Another direct billing scheme, where providers claim separately for procedures that were in fact a part of a single treatment, in order to increase the payout.

• Kickback schemes: This happens when service providers offer incentives to plan members for participating in fraud.

• Collusion rings: When groups of employees collaborate with providers to submit false claims under the agreement of splitting the money.

Although the ways in which fraud schemes are happening are numerous, the list of benefits that are commonly involved is relatively small.

Most common benefits involved in fraud

Some benefits are more commonly involved in fraud than others. Those that are most commonly involved include:

• Health benefits: this includes prescription drugs and medical services.

• Dental benefits: this happens when cosmetic procedures are claimed as medically necessary dental services.

• Vision care: when non-prescription sunglasses are claimed as prescription eyewear.

• Paramedical services: when non-covered services (ie. spa treatments) are claimed as therapeutic.

The TTC case mentioned above involved orthotics, but compression socks, massage, and physiotherapy are other commonly involved benefits.

What can employers do to prevent fraud?

Employers, and plan sponsors, play a significant role in preventing fraud. Education is usually the first step. Employers should communicate their plan’s true value, because when employees don’t understand what their benefits are worth, they often underestimate the employer’s contribution. However, when staff understand how much the company pays per employee and how claims impact premiums, it can shift the mindset from ‘this won’t hurt anyone’ to ‘this affects all of us.’ A greater awareness of the financial investment that companies make in order to provide benefits can also increase employee appreciation, which reduces instances of abuse.

Employers should also make employees aware of the consequences if they do abuse the plan by committing fraud. When people have a greater understanding of the seriousness of the consequences - getting fired, being fined, or even going to jail - this can act as a strong deterrent. Employers should include information about employee obligations and consequences, as relates to benefits, in their code of conduct or company policies.

In addition to preventative education efforts, employers can make sure that employees know that if they suspect fraud is happening, there is a safe and confidential way to report it. This might include confidential tip lines or whistleblower programs within the company.

Benefits fraud is not a victimless crime. It leads to higher insurance premiums, reduced or eliminated coverage, job termination, and potential criminal charges. The most important step that employers can take in reducing the incidence of benefits fraud is to ensure their employees understand the seriousness and impact - both to the company and them.

If you’d like to know more about how to keep your employee benefits safe, connect with Shannon for help.

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Citations

1. Canadian Health Care Anti-fraud Association