*KPMG ensures the anonymity and confidentiality of all those who call them to report fraud.
This article is for information purposes only and is not intended to replace professional advice.
As an employer, you can help prevent group insurance fraud!
Are you looking for interesting work benefits to recruit and retain employees? A group insurance plan is one way for companies to stand out. Unfortunately, such plans are costing more, and fraud may be a contributing factor.
When it comes to group insurance fraud, everyone pays the price. Let’s shed some light on its impacts and how to prevent it in companies like yours.
How does fraud affect group insurance plans?
According to the Canadian Life and Health Insurance Association (CLHIA), healthcare claims fraud generates losses in the hundreds of millions of dollars every year in North America. Fraud affects plan members... not to mention the insurer, employer and plan administrators.
In other words, everyone pays for the few who are careless or determined to cheat the system, which jeopardizes the sound management and sustainability of group plans.
What kind of fraud is there?
There are two types.
Abuse: This refers to excessive claiming or claiming for unnecessary services by the plan member.
Fraud: This means getting reimbursement for a claim that the claimant is not entitled to. This is when a service provider, clinic or individual gives misleading information about a treatment or product.
Examples of fraud... and sanctions
Fraud can be committed by service providers or professionals, their staff and plan members themselves. In fact, they are often in cahoots. As for sanctions, they will depend on the nature of the fraud.
A service provider example: An eyeglasses provider submits invoices for services that are more expensive than what was provided. Plus, they offer a promotion where customers are offered gifts that encourage them to buy high-end frames and lenses that they don’t need.
Possible sanctions: The company exposes itself to a lawsuit and risks having to pay back the excess amounts. As for members of a professional order or association, a complaint could be filed against them, and insurers could remove them from their eligible service provider list. Healthcare professionals risk losing their right to practice.
A plan member example: Vincent’s plan did not reimburse his latest claim because he has reached the maximum amount for that year. Dead set on being reimbursed, he changes the date on the receipt. He feels entitled because ‘he pays his premiums’.
Possible sanctions: Vincent's insurer could suspend that coverage or terminate it altogether. He will also have to pay the amount back. He could also lose his job loss, get a criminal record... the outcome will depend on the seriousness of the offence.
Fraud prevention and detection: roles and responsibilities
Preventing and detecting fraud is a shared responsibility. Ensuring sound group plan management and keeping costs under control is a team effort.
The role of insurers
Insurers take fraud seriously because their profitability as well as the sustainability of their plans are at stake.
This is why they:
- Enact policies and apply them.
- Make the sanctions on group insurance fraud known.
- Make plan members aware of the impact of fraud and of their role in ensuring their plan’s viability.
- Implement the latest in fraud-detection technology.
- Get involved in the investigation of violations.
Since March 2022, Canadian insurers under the CLHIA have come together to lead joint investigations. This allows them to feed information into a large database and use advanced AI to detect inconsistencies and dubious practices.
The role of employers (including plan administrators)
Employers and administrators have a vested interest in preventing fraud.
They can make efforts to:
- Ensure that plan members understand how group insurance works.
- Explain the impact of abuse and fraud on coverage costs.
- Set out clear rules of conduct and sanctions for failure to comply.
- Consult the insurer on how to protect themselves from fraud (e.g. setting limits on certain types of expenses, adding deductibles).
Do your part
Preventing fraud requires teamwork. Since it affects everyone, including plan members, let's all do our part to prevent it!
This is the best way to maintain fair premiums and make such plans accessible to all. It is also the kind of benefit that is appealing to future employees.