Anyone in business wants to focus on growing their own business – not getting pulled down into the weeds on a topic such as employees who defraud and abuse the company’s benefits plan.So is there a way to sow measures into your benefits plan that will reduce chances of fraud and deter abuse of benefits? Yes, there is – through “intelligent” benefits plan design.
This involves harnessing the power of “consumerism” – the employee’s sense of financial self-interest in saving money to make them feel more committed to managing costs. It’s been well proven that if employees pay even a small part of the costs of the benefits out of their own pocket, they’ll think twice before accessing that benefit. It also means they’re less likely to use the benefit fraudulently.
There are three “levers” you can pull to put your plan into a sweet spot of the most results for the least money: share the cost burden, avoiding unlimited benefits mandating a doctor’s prescription for paramedical services.
1. Share the cost burden with employeesThere are three popular mechanisms for cost sharing: introduce co-payments, implement deductibles or make employees pay a part of the premiums. Each of these mechanisms has different “intelligence” levels in preventing abuse.
Co-payment, which means employees pay a percentage of the overall cost of each claim they make, is the most intelligent way of deterring unwanted claims costs. Take this example, where an employee is entitled to five visits to a physiotherapist, pays a small but noticeable part of that cost each time. As a result, they may decide that after the fourth visit they can do the prescribed exercises at home. Statistics show that if employees must bear some of the cost, abuse or fraudulent use of that benefit becomes less attractive.
2. Avoid “unlimited” benefitsStudies have shown that the benefits most susceptible to fraud are those with no annual limits or caps built into the plan design. While newly set-up plans might not have this issue, plans set-up decades ago (that have not been reviewed regularly) are prone to overly generous benefits – an easy target for abuse & fraud. If massage therapy has an unlimited number of visits in a year with no cap on the maximum claimable amount per visit, it becomes an open door for unwanted and unnecessary claims costs. This in turn will impact the group’s experience negatively and cause high premiums on renewal.
3. Doctors: the gate-keepersWhile more common in older times, doctor’s referrals for paramedical services are becoming less common these days. Employees and their dependents who wanted to visit a paramedical practitioner (such as massage therapist, physiotherapist, chiropractor or chiropodist) would have to get a medical referral from the visit to be reimbursed under the plan. While this trend is fading due to “choice” and “convenience” of employees ranking high on the priority list, this can still be a valuable tool for controlling claims costs.
This serves as another purpose in fraud prevention too. The more people are involved in the delivery of medical service, the lesser the opportunity for fraud. While it might be easy to collude with a single provider and forge receipts for hypothetical visits, it would be harder to do so if there was a third party involved.
What employers need to keep in mind: each plan is different from the next. While some mechanisms work for some, they might be unnecessary for the other. There is no blanket solution that will solve every employer’s rising costs equally effectively. The key is to get sound advice from an experienced broker or benefits consultant who knows the market and can identify gaps in a plan.
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