Benefits fraud cases ‘convoluted’

As activity becomes more sophisticated, stakeholders have to step up: Roundtable
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 04/26/2018
Benefits, employee benefits, payroll, health care
Gary Askin of Sun Life and Shannon DeLenardo of the Canadian Life and Health Insurance Association. Credit: John Hryniuk

In recent years, there’s been more activity when it comes to organized fraud, according to Ted Schendera, detective sergeant at the Ontario Provincial Police.

“If you think it’s just one insurance company that’s being taken, it’s not. If they’re doing it for one insurance company, they’re doing it for many others.”

In the United States, organized fraud is definitely big business, he said.

“We’ve seen entire hospitals be taken over by organized crime… there’s key people set throughout the hospital or clinic that are the organizers of that type of fraud for the submission of insurance claims or medical health benefits or whatever it might be. So it’s very alarming.”

Another challenge occurs when it comes to taking any evidence of fraud to the police for criminal prosecution, because often the activity is within the parameters of a plan, said Gary Askin, assistant vice-president of fraud and risk management at Sun Life Financial.

“We know it’s happening, we know it’s not medically necessary, but that’s where plan design and that type of thing have to really come into play. And working, partnering, with your clients to prevent that abuse,” he said.

It’s also important to educate employees about how benefits work, said Mary Madigan-Lee, vice-president of HR at St. Joseph’s St. Michael’s Providence Healthcare.

“One of the things many of our staff did not understand is the way we’ve set ourselves up with the insurer is that we pay for every claim. So we pay to have the claim processed but actually pay for the claim (too). And I think people actually thought… that they were maybe doing this against the insurance company more than actually their own employer and taxpayers… not that either is good, they’re not, but when they actually started to realize they’re taking money out of the hospital and doing this, it was a bit of an ‘aha’ (moment) for some people.”

The Canadian Life and Health Insurance Association updates its website regularly to highlight the different ways people commit fraud, said Shannon DeLenardo, director of anti-fraud and electronic claims.

“It will hopefully resonate with people to recognize that what they’re doing is fraud, or what they’re being asked to do (such as) sign blank claim forms or whatever. They might not always be doing it intentionally.”

It can also be a challenge on the legal side, as one Crown attorney said: “If I can’t make the jury understand this, then there’s no point in me prosecuting this,” said Askin.

“It was a large case but these can get very confusing, with multiple players in them, multiple statements, so we try to narrow it down,” he said. “It’s not the perfect situation but we have to work with the courts on that to get these cases heard.”

And things are moving along, with Ontario’s Serious Fraud Office and recruitment of dedicated Crown attorneys, said Schendera.

“It’s important to have a Crown that is going to understand the case… because these cases are so convoluted, especially the larger they are, the more organized they are. And there’s so many different people involved.”

It would also help if there was less stigma around fraud, he said.

“Why not become more acceptant on the company side or the government to say that ‘Yes, there is fraud and we’re doing something about it’?… You still see that, even in government, they’re worried about ‘Well, what are those lawyers going to say? What are the taxpayers going to say?’” he said. “We can’t be afraid of that anymore. We have to step up in order to start creating that risk, to stop the fraud, because it’s an accepted thing.”

To that point, St. Michael’s was worried about the publicity and the impact on its services after media put the spotlight on its benefits fraud, said Madigan-Lee.

“However, it was a good thing in a way because it then started, it opened up that (understanding of) ‘Oh, if it can happen at St. Michael’s, it can happen anywhere,’ because we’re a good hospital. So we weren’t very happy about the article that was published, but it created a lot of visibility for other hospitals, other organizations.”

Looking into the future of fraud with predictive analytics


Group benefits fraud occurs when the plan is exploited for the purpose of financial gain. And as fraudsters become more sophisticated, so does the need for more sophisticated methods to combat it.

Big data is fundamental in the fight against fraud. Data mining, reporting and asking the right questions offer extensive capabilities in fraud detection — and it starts with predictive analytics.

Predictive analytics brings together data science and business analytics. It is a proactive approach that uses various algorithms to review data from claims submitted by plan members, activity from providers, plan member demographics, and much more.

The algorithms are based on criteria that look for outliers against normal claiming patterns. The process simultaneously takes a wide range of factors into account to calculate the likelihood of fraud so we can predict where and when new fraud may occur.

Sun Life’s team of experts has a wide range of backgrounds and experience, including working with service providers like pharmacies and dental offices. They take this raw data and identify patterns that appear suspicious.

The team is able to review alerts and give feedback to the system — a vital component of predictive modelling that allows the system to gather more data and get a better understanding of suspicious behaviour. The system grows “smarter” — a form of machine learning. If suspicious activity is confirmed, the formal investigation process begins.

Fraud can be committed by a service provider, one or more plan members, or a combination of both. Depending on the fraud scheme, investigators will choose from an inventory of investigative strategies that may include surveillance or interviews to gather more information.

Many of the cases are complex and require many resources, thus a holistic approach is ideal. This means all stakeholders — group benefits provider, plan sponsors, law enforcement, regulatory bodies — should work together to assist in the investigation.

The outcomes vary. If a service provider is involved, Sun Life delists the provider to stop claims from being reimbursed. If suspicious activity by a plan member is detected, Sun Life collaborates with the plan sponsor to demonstrate evidence and work through the recovery process. In some cases, Sun Life may assist the plan sponsor with interviews, speaking notes, and other ways to help reduce potential reputational risk.

As fraud schemes become more complex, predictive analytics will continue to be a powerful tool in the detection of fraud. Sun Life’s team constantly implements new techniques, including neural networks, linear regression and random forest algorithms, to analyze vast amounts of data and find the outliers that may be more than just a red flag.

To find out more on how to prevent group benefits fraud and how to protect yourself, visit

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