Stories of fraud and abuse of group benefits have recently rocked the York Regional Police and Toronto’s St. Michael’s Hospital.If these large organizations cannot prevent employee benefits fraud, what chance do small and mid-size companies have? Actually, these smaller entities have some key advantages for providing group benefits packages that attract and retain key employees, and keep costs down.
Understanding employee benefits fraud and abuseThere are three distinct issues to guard against:
- Unintentional abuse: Some employees cause higher costs with no intent to defraud. This type of unintended abuse of the plan might include insisting on pricey name-brand pharmaceuticals, even though a lower-cost generic equivalent works equally well.
- Fraud for non-financial gain: Sometimes the employee deliberately commits fraud, to get a benefit they feel they need. For example, the employee’s plan might cover orthotic insoles, but since their job involves a lot of walking, they want more-expensive orthotic shoes instead. So, they buy the shoes, asking the store to issue a receipt for insoles so that the cost will be covered.
- Fraud for financial advantage: An employee has 100% coverage for massage therapy without a doctor’s referral required. The receipt submitted for the previous claim is still in his possession & he decides to change the date on the receipt to claim the same amount again. Thereby, he is “making money” off the plan.
Steps you can take now to protect your benefits planMost companies rely on the due diligence of their insurance carrier to prevent and detect fraud and abuse – perhaps not realizing that high claims costs will translate into higher premiums for the benefits plan in the following year.
Here are three no-cost initiatives you can take to ensure your employee benefits plan does the job, while minimizing abuse and fraud.
1. Build an ethical corporate cultureOne of the biggest factors lies with company management – setting a high ethical tone such as walking the walk on worker safety, compliance with environmental and other regulations, and treating customers fairly. If employees see leaders who provide a good ethical example, they’ll be more likely to act ethically themselves. In this, smaller companies may have an advantage – it is easier to get four or five members of the management team to agree to help build an ethical corporate culture, than it is to persuade a much larger group.
2. Clear & consistent communicationEmployees are more likely to use their benefits plan appropriately if they are aware of the employer’s benefits philosophy, why management makes certain decisions and also about the employer’s policy on abuse prevention and punitive measures for fraud. An advantage for small and mid-sized employers is the ease of creating awareness about how high claims costs will eventually impact the bottom line. Engaging employees early on and consistently will set clear expectations about use and abuse of the benefits plan.
Employers should highlight their commitment to investing in employees’ well-being and that of their families. Communicate clearly that the benefits plan is not extra pay that employees “lose” if they don’t use up all the benefits they’re entitled to each year.
3. Work closely with a knowledgeable broker / consultant
Most insurance carriers will not set-up an insurance plan without the involvement of a broker and hence they become part of the benefits package. The employer can make this relationship work for them if the broker is knowledgeable about fraud prevention techniques, typical claiming patterns in the industry & provides continuous monitoring of the group’s experience. Engaging an experienced broker or consultant can provide valuable advice that would prevent abuse and fraud, saving the employer money in the short- & long-term.