Employees often consider false claims as ‘victimless crimes,’ says expert
Benefits fraud was in the spotlight recently when 150 workers were let go from a Toronto hospital in July.
A multi-year scam was uncovered at Baycrest Health Sciences, with total financial losses in the millions.
Concerns around alleged misuse arose last year, as the health-care organization was exploring the establishment of an approved provider network for health benefits, says Baycrest senior communications adviser Michelle Petch Gotuzzo.
A third-party audit found irregularities, which revealed a significant number of employees spanning a variety of job categories involved in benefits misuse, she says.
“We are extremely disappointed by these findings.”
The incident is the latest example of a large-scale benefits scam in Canada, says Ryan Conlin, a partner at Stringer in Toronto.
“I don’t doubt that this has been an issue lingering in the background for years,” he says. “But I think it’s become — even before Baycrest — on the front burner for employers. There’s been some other high-profile cases.”
The issue of fraudulent health benefit claims is a growing trend across Canada, say experts, and it’s an issue still misunderstood by employees.
Insurers have been taking the problem more seriously, with investments in technology, people and processes, says Karen Voin, vice president of group benefits and anti-fraud at the Canadian Life and Health Insurance Association (CLHIA) in Toronto.
“With advancements in technology, it does increase people’s opportunity, because fraud is all about opportunity,” she says. “That’s why insurers continue to invest and put significant resources towards mitigating fraud.”
“Benefits fraud does occur daily, and it does cost the system hundreds of millions of dollars annually,” says Voin. “At its simplest, benefits fraud — or fraud — is inherently about deception, so it’s hard to quantify. It’s not new, but it is growing in prevalence.”
“Benefits fraud is serious, and that’s part of what we’re trying to achieve through the education campaign — [it] is really raising that awareness at an industry level,” she says. “Health and dental benefits fraud is occurring daily and the unfortunate reality is that it’s misunderstood.”
Identifying benefits fraud
Interestingly, cases of health insurance scams are often are grand in scale and involve a large number of employees, says Conlin.
“That seems to be the trend,” he says. “It’s not an isolated act by a rogue employee… It’s often a huge number of them.”
While there are cases of individual employees making fraudulent claims, more often they are spearheaded by a rogue employee who has become involved with an “unscrupulous provider of benefits,” says Conlin.
At a base level, these cases involve a legitimate provider issuing falsified invoices to clients for services that were never provided — with a percentage of the claim returning to the provider. Insider co-operation is necessary for these types of scams to find success, he says.
“The second you get an unscrupulous operator involved, it really doesn’t ultimately matter what it is.”
And while fraud involves a person intentionally being misleading for financial gain...“Both have an impact to a plan.”
Three-quarters of Canadians believe the punishment for benefits fraud is simply paying higher premiums or reimbursing employers for fraudulent claims, while just 25 per cent understand they could lose their jobs as a result, according to a survey of 2,000 workers by Environics Research in 2018.
Employees have historically viewed fraudulent benefits claims as a “victimless crime,” according to Conlin.
“[They think] you’re not going to get caught, and — even if you are — nothing awful’s going to happen,” he says. “But in an age where the cost of benefits keeps getting more and more expensive, I think there’s been a heightened focus from employers on auditing these claims more closely.”
Simply put, workers who commit fraud are at risk of losing their jobs, says Conlin.
“Employees have to realize the first offence is one of the relatively few situations for long-service employees that will justify termination for cause.”
In a unionized situation, there may be opportunity to challenge the dismissal, he says. “But, in most cases, an arbitrator is not likely to give someone their job back when they’ve committed an act of dishonesty.”
Criminal prosecution is also a possibility, if the case is brought to the attention of legal authorities, says Conlin.
“If someone complained to the police, the employee could be prosecuted criminally and face jail time for fraud — just like you would for any other fraudulent situation.”
Advice for employers
Robust audit processes are essential in the fight against benefits fraud, says Conlin.
“Employers have to be sure that the benefit claims are properly audited, particularly if the employer’s administering that benefit plan themselves, as some do.”
Prior to choosing a benefits provider, an employer should thoroughly understand the audit provisions in place, as well as how the insurer identifies red flags, he says.
Education of employees can help them become aware of the criminal consequences attached to fraudulent activity, says Voin.
“Education is really key and, as part of that, educating employees that there is zero tolerance within their workplace,” she says. “Whether you’re talking about fraud or abuse, it still goes back to education… and making sure that they are aware of how to [report].”
“It’s really just helping [employees] understand what the intention of the benefit plan is — which is for medically necessary services — and what the impacts are on them and their co-workers, if they are abusing the plan,” says Voin.
Training should also touch on recognition of possible fraud so staff can avoid becoming involved. Provision of an anonymous tip line is also helpful, she says.
Finally, employers and HR professionals could look at the overall plan design of the benefits package to ensure employee co-pay options are in place so workers share service costs and limits are placed on any categories that could be susceptible to abuse, says Voin.
Unlimited plan maximums should also be avoided, she says.
Going forward, Baycrest will ensure its external benefits administrator sets up an approved provider network and conducts additional audits, says Petch Gotuzzo.
“Further education will [also] be provided to our staff regarding our benefits, what they are for and what constitutes misuse of our benefits plan.”