Help small businesses prevent costly health insurance fraud

Health insurance fraud can cost small businesses thousands of dollars a year. Here’s what you need to know to help your clients combat it.

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dental-benefitsChanging dental procedure codes. Billing acupuncture herbs as treatments. Covering massage therapy for people who don’t need it. These are all examples of practices that can drive up costs for small businesses that offer benefits plans. How can you help your clients keep their costs down?

Margie Lambert, a life and health advisor with Cambridge Insurance Brokers Ltd., says businesses should keep an eye out for the most common ways in which plans are abused. She says paramedical fraud is the most common. A sign to look out for is “members claiming multiple practitioners—such as naturopath, chiropractor and massage—for multiple family members.”

Joel Alleyne, president of Alleyne Inc. and a senior associate with Atrim Group, says he’s also seen much more complex schemes where clinics have provided fake receipts in exchange for some of the profit, or where an employee has manufactured false claims—and even recruited other employees to participate in the scam, taking a cut of their proceeds.

Heath insurance fraud costs the average small business thousands of dollars each year, estimates Lambert.

Death by a thousand cuts
Although the examples Alleyne provides are striking, small businesses stand to lose significant income even from lower levels of ongoing fraud, he says. “Some people will cheat a little here, lie a little there. Others will cheat a lot, to the point where it’s really egregious. Either way, it’s death by a thousand cuts.”

This underscores the importance for advisors of encouraging clients to be proactive about mitigating fraud. There are two primary approaches, says Alleyne, and both should be used:

  • Educate employees about how fraud costs them indirectly.
  • Structure benefits plans to make fraud less possible in the first place.

Education is key
It isn’t uncommon for employees not to grasp the connection between fraud and their company’s bottom line, says Alleyne. Many have the misconception that the only loser in the arrangement is the big insurance company.
Employees may be less inclined to submit fraudulent receipts once they understand the connection between insurance payouts and the rising premiums a company pays.

“It’s about mindset,” says Alleyne. “Some employees have a sense of entitlement that comes from the idea that their benefits are part of their salary, and if they don’t use them, it’s like they’ve left some money on the table. You have to turn that around and get them to take ownership of the money that is being spent here.”

The key is to make sure employees understand that the money is coming out of the employer’s pocket, and that “in terms of the social impact, fraud can mean there is less money to go around for other things at work,” he says.

Firms can rely on their HR managers, benefits advisors or insurance brokers to provide education in the form of everything from posters to newsletters to emails to presentations, says Alleyne.

Transcontinental Media G.P.