The cost of group insurance fraud to business can run into the millions, in the process raising premiums, adding to legal costs and occupying funds that might be used elsewhere. So how can HR managers deal with group insurance fraud when it arises and what can be done prevent it in the first place?
Earlier this year six Air Canada workers were caught defrauding their employee benefits program, scamming more than $126,000 through bogus medical claims. In the US, 500 Long Island Rail Road retirees were found to be involved in a widespread disability benefits fraud scheme that cost $121m (with $274m more scheduled to be paid out) and dated back over 14 years.
While these cases may be extreme, even a small number of false benefits claims can have a significant effect on the bottom line. According to Joel Alleyne, executive director of the Canadian Health Care Anti-Fraud Association, 2–10 % of all health benefits claims are fraudulent.
“That’s an awful lot of money,” Alleyne said, “and only accounts for claims that are outright fraudulent; waste and abuse of benefits is another issue entirely and is quite a gray area.”
Benefits fraud generally refers to intentional deception by a claimant or service provider resulting in a payment, while abuse may refer to over treatment, excessive billing and billing for unnecessary services.
Account manager at The Benefits Trust, a third party administrator, Karen Taylor Smith said benefits fraud can fall into a number of categories. “Fraud can vary in range from quite small scale to highly organized tactics and strategies with consequences reaching into the millions of dollars,” she said. “They might consist of false claims submitted by service providers or employees themselves.”
While most insurance providers have measures in place to detect fraudulent claims, the majority of fraud is detected using computer algorithms, detecting fraud after the fact rather than preventing it from happening in the first place. But there are ways organizations can deter employees from considering defrauding their benefits plan.
Types of benefits fraud
- False claims for services not provided
- Falsifying bills or altering bills to list services covered by insurance
- Unlicensed service providers performing services covered by insurance
- Receiving payment for referring employees to a dodgy service provider
Signs of benefit fraud
A number of warning signs can alert HR managers to fraudulent claims
- An unusual increase in a particular type of claim or an increase in claims from a particular service provider
- Altered bills: bills with white out or eraser marks
- Vague or few details relating to a workplace injury report or reluctance by the employee to have a workplace injury assessed
Benefit fraud policies
Have clear policies in place on how to deal with fraud when it occurs. Recovery strategies requiring the employee to pay back the money defrauded can be an effective deterrent.
- Interview your group insurance administrator Choose an administrator based on the fraud prevention measures they have in place or communicate with your existing administrator on what to look for to detect fraudulent claims.
- Establish whistle blowers The majority of fraud cases are detected through whistle blowers. Set up a process, such as anonymous online tipping, that allows employees to blow the whistle while avoiding negative consequences.
- Educate your employees According to Joel Alleyne, the number-one way for organizations to prevent fraudulent benefits claims is through education. “People need to understand these are benefits not entitlements. These costs are employee costs – they are spending money on benefits that they are not spending on something else – so it’s in everyone’s interest to do their best to make sure this money is being spent wisely and it’s there when they need it.”
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