It’s estimated fraud costs Canadian life and health insurers hundreds of millions of dollars every year, according to the Canadian Life and Health Insurance Association. These costs also impact group insurance plan sponsors.
Two examples of group benefits frauds recently detected by Great-West Life highlight the nature of fraudulent activity faced by the insurance industry.
One case began with a simple massage therapy claim that the insurer’s fraud systems flagged due to high claim volume within a family. A full review of the plan member’s claim history turned up a false hospital receipt, among other inconsistencies.
When the plan member was asked to provide details of her hospital stay, she submitted a bank statement into which she’d inserted false information, in an attempt to show the hospital charge. She also provided a fake name and phone number for a contact person to verify the invoice.
Deeper investigation revealed $15,000 in suspected fraudulent claims, which was reported to police to pursue restitution and criminal charges.
In another situation, a service provider was found to be committing fraud in collusion with a plan member. A tip from a former member revealed four clinics with the same owner were working with some patients to commit fraud. The clinic submitted claims for paramedical services on behalf of patients but, in reality, provided non-insured spa treatments to the plan members.
An undercover investigator visited the clinics and was offered participation in the fraud scheme and even received gift certificates for spa services in exchange for authorization for the clinic to bill Great-West directly for paramedical services that would never take place.
Acupuncture, osteopathy and physiotherapy claims related to the undercover investigator were later submitted, totalling more than $5,000 over three visits.
All four clinics have since been removed from Great-West’s approved provider listing and the matter was reported to the police to pursue restitution and criminal charges.
To help avoid plan impacts of fraud, the insurer has a team of experts that includes specialists from many different backgrounds, such as former police officers, former security and military intelligence analysts, certified fraud examiners, accountants, lawyers, pharmacists and medical and dental professionals.
Every claim that is paid is processed through a sophisticated risk-analysis tool to evaluate the likelihood of fraud. The tool uses statistical analysis to adapt to the evolving fraud landscape.
Unearthing a fraud may begin with an investigator identifying trends from previous fraudulent activity. Analysts use observations to build new fraud indicators into claim review metrics. Using intelligence-based techniques, analysts translate observations into detectable data points. These data points can then be used to analyze claim records.
Because claim and policy databases are so large, big data technology allows insurers like Great-West to mine extensive records to spot emerging trends on a large scale. Specialized analysis software is used to look more closely at social networks and geographic patterns, trying to identify behaviour that may indicate an elevated risk.
In the latest three-year reporting period, Great-West’s special investigations unit (SIU) investigated more than 1,800 cases of fraud, resulting in close to $3 million in prevented losses and close to $4 million in recovered funds.
When fraud is confirmed, a number of actions may be taken, depending on the dollar value and circumstances. Findings of an investigation may be referred to a law enforcement agency and the provider removed from a list of approved providers, if the provider was involved.
A complaint may be filed with a provider’s regulator or professional association. The plan sponsor may also be informed and a recovery of financial losses sought from the fraudster.
Despite all these measures, fraud continues to happen. In fact, some plan sponsors may experience escalated premiums to recover benefits costs lost to fraud. And these increases may trickle down to the plan members, who may see increased benefit plan costs.
Fraud prevention requires a joint approach between the plan sponsor and the insurer. Plan design is the first step to an effective, financially viable and healthy group benefits plan. Plan sponsors can also incorporate background and reference checks as part of robust hiring practices and provide ongoing staff education.
Fraud can happen for a variety of reasons. In some cases, individuals are experiencing financial hardship or other issues, such as gambling or substance addiction. Intervention and support for these individuals is important in order to help prevent them from turning to fraud for financial relief. In some cases, it may be appropriate to refer plan members to employee assistance programs.
Plan members too can take an active role in ensuring they aren’t unwittingly involved in fraud. For instance, they should never submit claims for services that weren’t provided by checking statements to ensure charges are accurate and refusing to take part in any fraud schemes a service provider may suggest.
It’s also important for plan members not to sign a blank claim form. Doing so could mean the provider could add any services and supplies they like, without the plan member being aware. And they shouldn’t accept money, products or services in exchange for benefits information.
The bottom line is fraud costs everyone — the insurance company, the plan sponsor and the plan member. That’s why it’s important for all involved to be constantly vigilant, understand and follow plan guidelines, and work together with law enforcement agencies and other stakeholders.
A zero- tolerance approach to fraud allows for rapid and focused action to combat benefits fraud and help protect the value of benefits plans.
Diane Bezdikian is senior vice-president of group benefits at Great-West Life.For more information, visit www.greatwestlife.com.
© Copyright Canadian HR Reporter, Thomson Reuters Canada Limited. All rights reserved.