2017 and 2018 rocked giants such as the TTC, York Regional Police and Toronto’s St. Michael’s Hospital with cases of fraud and abuse of group benefits.
If these large organizations can’t prevent employee benefits fraud, what are the chances that small and mid-sized companies can? The reality is that smaller entities have some key advantages for providing group benefits that attract and retain key employees, while keeping costs down.
Let's understand benefits fraud, abuse and waste.There are three distinct issues to guard your company against:
- Fraud for financial advantage: An employee has 100% coverage for massage therapy without the requirement of a doctor’s referral. The receipt that they’ve submitted for their previous claim is still in their possession. They decide to change the date in order to claim the same amount again, thereby “making money” off the plan.
- Abuse for non-financial gain: Sometimes the employee deliberately commits fraud to get a benefit they feel they need. For example, the employee’s plan covers Orthotic insoles, but since their job involves a lot of walking, they want more expensive Orthotic shoes instead. The employee buys the shoes, asking the store to issue a receipt for insoles so that the cost will be covered.
- Unintentional wastage: Some employees bring in higher costs with no intent to defraud. This type of unintended abuse of the plan might include insisting on pricey brand-name pharmaceuticals, even though a lower-cost generic brand works equally well or purchasing their drugs at pharmacies with higher dispensing fees.
Prevention is better than cure.
Most 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 the chance of fraud, abuse or waste.
1. Build an ethical corporate culture
One of the biggest factors lies with company management – setting a high ethical tone such as walking the talk on worker safety, compliance with regulations, and treating customers fairly. If employees see leaders who provide a good ethical example, they’ll be more inclined to act ethically themselves. With regards to corporate culture, smaller companies may have an advantage – it’s easier to get four or five members of a management team to agree on building an ethical corporate culture than it is to persuade a much larger group.
2. Clear and consistent communication
Employees are more likely to use their benefits plan appropriately if they are aware of: their employer’s benefits philosophy; why management makes certain decisions; and the employer’s policy on abuse, prevention, and punitive measures for fraud. An advantage for small and mid-sized companies is the ease of creating awareness of how high claims costs will impact the bottom line. Engaging employees early on, and consistently, will set clear expectations about the use and abuse of their benefits plan. Clearly communicate that the benefits plan is not extra pay that is “lost” if all their benefits aren’t used every year but rather an emergency protection and illness prevention tool.
3. Work closely with a knowledgeable broker or consultant
Most insurance carriers will not set up an insurance plan without the involvement of a broker, hence they become an integral part of the benefits package. The employer can make this relationship work for them if the broker is knowledgeable about fraud prevention techniques and typical claiming patterns in the industry. It is also imperative that the broker is able to provide continuous monitoring of the group’s experience. Engaging an experienced broker or consultant, who can provide valuable advice on fraud and abuse prevention, will save the employer money in the long and short-term.