​The Benefits Swindlers

Employers, insurers, and regulators all have a stake in fighting workplace benefits fraud.

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​A Toronto hospital has fired about 150 employees accused of falsely claiming benefits in one of Canada's largest benefits fraud schemes, The National Post reports. Baycrest Health Services acknowledged that $5 million in fraudulent claims occurred over an eight-year period at its Baycrest Hospital.

Consultants first discovered the fraud several months ago while they were vetting a potential partnership between Baycrest and other hospitals. A third-party internal investigation revealed that hospital employees submitted invoices for services they never received and paid a kickback to providers. Another scheme involved accepting products unrelated to the medical device that had been prescribed and paying the provider the difference in price between the two products.

Baycrest has opted not to press charges against the individuals who were allegedly involved.

Lessons Learned

Workplace benefits fraud is on the rise in Canada, costing insurance companies hundreds of millions of dollars each year, according to the Canadian Life and Health Insurance Association (CLHIA). For example, in 2018, employees at the Toronto Transit Commission were found to be engaging in similar benefits fraud activities worth as much as $5 million.

Baycrest's benefits administrator has said his company has "rigorous standards and protocols in place to defend against and detect such activities." He said the company is committed to becoming more vigilant about benefits fraud and has implemented measures "to further guard against similar misuse." Here are some additional measures that employers and regulators need to consider to combat this increasing problem:

  • Increase regulatory audits. From a regulatory and compliance standpoint, the Canada Revenue Agency (CRA) could step up audits within the benefits service provider industry. The CRA requires that a service must actually be provided where there is an invoice.

    In Canada, insurance and service providers are both federally and provincially regulated in specific ways. Regulators should review whether these regulations are adequate to prevent benefits fraud. In particular, new provincial regulations may be needed to monitor service providers and levy fines on noncompliant providers.

    As part of this effort, the benefits insurance industry should take more comprehensive actions such as delisting unscrupulous providers. This has been effective for the biggest providers. For example, in 2018, Sun Life delisted 1,500 providers from across Canada — no longer accepting their claims — after proving their involvement in false claims. Benefits insurers also should carefully weigh the use of up-selling of services and related performance rewards, which can further contribute to benefits fraud.

  • Apply technology to fraud management. Insurance carriers should invest in fraud management and business-process solutions that can also support efficient operations. Sun Life, for example, uses data analytics and machine learning to identify suspicious behavior, intelligence analysis to identify players in complex schemes, and investigative skills to monitor a facility's member-claim activity.

    From the business-process perspective, a direct billing system can deter both providers and employers from attempting benefits fraud. Such systems require service providers to submit electronic documentation at the time the service is provided.

    Increased scrutiny of frequent and higher-value claims through monitoring and audits is another technique. Additionally, both insurance carriers and employers should have strong whistleblower programs in place to encourage people to come forward with cases of suspected benefits fraud.

  • Educate the public. Employers and regulators should educate both employees and the public that benefits fraud is not a victimless crime. From the fraudster's perspective, the Fraud Triangle applies: Fraud typically occurs when three elements are present — opportunity, rationalization, and pressure. People take advantage of opportunity with the perception that there is little chance of detection, penalty, or consequence. They rationalize their actions by feeling entitled to the benefits, even though their employer pays directly for claims.

    Moreover, many Canadians feel workplace benefits fraud is not a significant problem. According to an Environics Research survey conducted for the CLHIA, 75% of respondents believe the consequences of benefits fraud are simply paying higher premiums or paying back wrong claim payments when uncovered. The insurance industry and regulators need to counteract these false perceptions.
Art Stewart
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About the Author

 

 

Art StewartArt Stewart<p>​Art Stewart is an independent management consultant with more than 35 years of experience in internal audit, financial management, performance measurement, governance, and strategic policy planning.​​​</p>https://iaonline.theiia.org/authors/Pages/Art-Stewart.aspx

 

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