The life and health insurance industry is delving into data analytics, conferring with other members of the financial services industry and bringing in anti-fraud investigators as just some of the tools in their arsenal against rising fraud.
“Four or five years ago we weren’t talking about it as much as we are today so there’s a lot of discussion and focus because it is a growing issue,” says Stephen Frank, president and CEO of the Canadian Life and Health Insurance Association (CLHIA).
While there are no definite figures on how much fraud is perpetrated every year, Frank says the industry pays out $34 billion in benefits every year. Even if only 1 per cent of that is eaten up in fraud, that’s $350 million every year.
Where it’s coming from is hard to pin down, says Frank. It can run the gamut – from a single plan member falsifying a few claims to well-organized and sophisticated fraud rings.
At least two major benefits fraud cases have taken place in Toronto in the last decade. Said to be one of the longest fraud schemes ever discovered in Canada, Baycrest geriatric hospital let go of about 150 employees in 2019 for falsely claiming as much as $5 million in benefits over eight years.
The case involved misuse of prescription coverage for orthotics, knee braces, compression stockings and physiotherapy.
In 2014, the Toronto Transit Commission (TTC) began an investigation into a service provider called Healthy Fit that was issuing fake or inflated receipts. Some 223 employees were dismissed, resigned or retired to avoid dismissal when the scandal broke. On top of that 10 transit employees were charged with fraud.
Submitted false claims
In the scheme, employees would submit the falsified claims to Manulife, the company’s benefits insurer, collect the money, then share the payment with Healthy Fit.
The owner of Healthy Fit pleaded guilty to two counts of fraud over $5,000 and was sentenced to two years in prison in 2017.
About a decade ago, CBC television had an expose on some massage spas that encouraged their clients to help them in fraud, basically by writing up fake receipts for services the clients never received but for which they received payment for from their insurance company.
While some of these spa operators had their licences taken away, Dave Patriarche, president of group insurance firm Mainstay Insurance, says it’s a never-ending story as the current practitioner leaves the spa for fear of getting caught, but a new owner comes in and simply carries on the practice and the fraud.
Benefits packages can contain any number of products and services, but a major one is dentistry. Again, while this happens, the Canadian Dental Association (CDA) doesn’t have any independent estimates about the amount of insurance fraud taking place.
“But we agree that any fraud reduces the monies available for the provision of oral healthcare and [we] are happy to collaborate with the insurance industry towards its elimination,” says Dr. Benoit Soucy, director of clinical and scientific affairs at the CDA.
The Ontario Dental Association provides patients with a dental fact sheet outlining what patients should know about co-payments and how they fit into helping the fight against fraud.
Identifying red flags
Frank says CLHIA members are also investing heavily into technology, particularly by using artificial intelligence as one of the tools to identify suspicious behaviour in the market and identify red flags that could point to fraud. Many firms are also bringing in ex-law enforcement and anti-fraud investigators.
The CLHIA is also working with the property and casualty industry and banks to help identify some of the more sophisticated fraud rings that sprinkle their fraudulent activities across various financial services companies trying to stay under the radar. The CLHIA is also talking with regulators and some of the colleges to ensure they are partners in aiding the fight against fraud.
“There’s a lot going on right now, not only with the companies but within our industry and even across industries to take this really seriously and move it forward.”
Stay tuned for new initiatives that are expected to come out within the next year, says Frank.
Patriarche says in the end it’s the employer who pays the bill for the benefits package and ultimately the employees who end up losing when it comes to fraud. When there’s lots of fraud, rates are raised as increased claims result in increased costs. There are also times when an employer may decide to put in a change or a cap in a certain part of the benefits package, he says.
Some employers may even shut down their current benefits packages and move to health spending accounts (HSA), he says.
“The switch to health spending accounts has been a fairly common one over the past six or eight years,” says Patriarche.
One of the biggest issues the health industry has is that employees believe all they have to do is return the money to the employer or insurance company and everything will be fine.
Zero tolerance
“Nothing could be further from the truth,” says Frank. “It is almost universally true that an employer will fire you if you’re caught committing claims fraud – there’s zero tolerance in employer’s approaches today. You can lose your reputation within your industry; you can be charged criminally and we do that regularly.”
Patriarche says group insurance advisors can help raise awareness of fraud by telling clients to make sure they know what they’re paying for when they go to visit their dentist or other health-care specialist.
Frank adds that advisors need to realize how serious fraud is in the industry and work with plan sponsors and carriers to put in place solid plan designs with checks and balances that help lessen fraud risk. “Advisors can be a really helpful partner in all of this both in terms of education and plan design.”