How to Fight the High Cost of Group Insurance Fraud

The costs of Canadian group benefits seem to be increasing each and every year. While there are a number of factors that play a role in this trend, one of the more difficult factors is the rise of fraudulent claims. In this article, I want to discuss the growing concern of group insurance fraud, explain how it can erode your employee benefits, and offer some solutions that can help you limit or eliminate the problem altogether so you can have more control over the efficiency of your group benefits plan.

Fraud Horror Stories

In order to describe what fraud actually looks like within an employee benefits plan, I’d like to share two examples of fraud that have been recently publicized in Canada:  

Beauty treatments paid by insurance fraud  – CBC News – April 19, 2010

Customers, spa owners, and registered massage therapists participated in insurance fraud schemes, which allowed clients to receive treatments not covered by supplemental health insurance while claiming them as legitimate treatments such as massage.  (There are several online video’s that can be found showing the actual story on CBC.) 

Air Canada workers charged with benefits scam – The Star – February 3, 2011

Six workers at Pearson International Airport in Toronto were arrested following what police described as a series of bogus benefits claims against Air Canada.  The local police investigation uncovered at least $126,000 in apparently fraudulent benefits claims.

How much fraud is in your benefits plan?

Fraud, by its very nature, is intended to be hidden – making it difficult to track how much it impacts a benefits plan.  While there are estimates suggesting fraud makes up approximately 4-8% of all health and dental claims, this only represents the amount of fraudulent claims identified, not the total number of fraudulent claims actually submitted. To put this into perspective, the typical group insurance package for a group of 100 employees costs between $300,000 – $400,000 per year; fraud could cost this plan sponsor(s) between $12,000 and $32,000 annually.

I think it’s fair to say that these statistics are unacceptable. The result is that increases at renewal time may be unsustainable, causing organizations to consider reducing coverage in order to fight the effects of fraud.  The decrease in coverage then impacts everyone, not only those submitting fraudulent claims.

What are the elements of fraud?

There are three elements to any fraudulent claim:

• Intent – The individual thought and planned to receive illegitimate benefits
• Misrepresentation – The individual provided inaccurate information to gain a benefit
• Theft – The individual received an illegitimate benefit

The strange thing about group insurance fraud is that well-intentioned individuals, most whom would never consider themselves to be criminal, have the potential to play a role in fraudulent claims either on the claimant side or as the service-provider.  It often begins with a mindset problem.  Claimants may feel as though they are entitled to their benefits and able to use them however they see fit; and the service providers may feel as though they are doing what they can to best-serve their customers and stay competitive in a difficult marketplace.

Individuals who take on a fraudulent mindset can take advantage of the employer-sponsored benefits plan in a number of ways. Here are the most common examples of how fraudulent claims are processed:

• Billing for Services Not Rendered
  • Example – Provides acupuncture receipt when no service was provided.
• Treating for something outside scope of service
  • Example – Massage therapist performs spa treatments and bills as massage therapy. 
• Allowing non-licensed individuals to provide service
  • Example – A non-registered massage therapist bills as if registered.
• Kickbacks or Referral Payments
  • Example – Pharmacy provides a financial incentive to a doctor on every referral to use their pharmacy.
• Over Utilization or Over Treatment
  • Example – A physiotherapist treats a claimant for the maximum number of sessions that are covered by the benefits package when not all sessions were necessary.

How can we fight fraud?

Insurers and claims payers are deploying processes, systems, and people to audit specific claims and benchmark them against regional and sector specific claim patterns. There is another important tool that plan administrators and group benefits consultants can use to product against fraud: provide better communication on what benefit plan fraud looks like, and communicate it more often.

Information is the key!

I think it’s fair to say that the typical claimant doesn’t intend to engage in fraudulent behavior; and most trusted providers or practitioners aren’t looking to engage in illegal business practices. So, starting today, you can engage your consultant to hold employee meetings to discuss fraud and provide information regarding fraud in your company newsletters or internal websites. It is important to help claimants become advocates for the plan in order to stop fraud at the root.

Organizations supporting you in the fight against fraud

The Canadian Health Care Anti-Fraud Association (CHCAA) was founded in 2000 to give a voice to the public and private sector health care organizations interested in preventing fraud in the Canadian health care environment.  They work with insurers and claims payers to help identify fraud and provide resources for detection, prevention, investigation, and prosecution.  On their website, they also provide a list of the CHCAA’s members who are interested in fighting health care fraud. They need your support. Let’s bring awareness to this issue and support the cause so we can work towards lowering the cost of group benefits.

If you are interested in discussing this topic, please don’t hesitate to connect with me at michael.kettner@kettnerbenefits.com or visit my website at www.kettnerbenefits.com.