Top 12 Forms of Benefits Fraud

Addressing fraud at the plan member level is all about changing perceptions

What is the main driver of benefits fraud? Well, money, obviously. There is money to be made – or expenses to be avoided – and some people are going to take advantage. However, as many studies and audits of benefits fraud have shown over the years, a lot of the day-to-day misuse of benefits – and fraud – is committed not by hardened criminals, but by ordinary people who either don’t take it seriously or don’t think it through.

I think that’s one of the main reasons that it’s so hard to deal with fraud – we’re talking about some of our own people here and we don’t think they’re necessarily crooks. Fraud prevention is very much about persuading our people to take it seriously and to see it for what it really is – a crime.

Experts talk about a thing they call the “fraud triangle” in trying to understand what motivates people to break the rules. It consists of three elements.

1. Pressure and temptation. There is real or perceived financial pressure and a feeling of
   “need” to take advantage of the system in order to get by.
2. Opportunity. A chance to “get away with” a fraud presents itself, sometimes because they’ve heard other people say they’ve done it or sometimes just because it seems easy.
3. Rationalization. It’s probably fair to say that most people who commit benefits fraud do not admit to themselves that it is “fraud” or believe that it’s very serious. They tell themselves it’s a victimless crime, since insurance will pay. Or that they are actually entitled. Or that “nobody cares” and that “everyone is doing it.”

Now, I did say that many people who commit fraud are not hardened criminals, but ordinary people are quite often persuaded to participate in fraud by dishonest service providers who basically are criminals. They will claim to be “helping out” the client by, for example, performing a service not covered by benefits and coding it as something that is covered, or pointing out “unused” benefits or “room in the plan” to bill for other services.

So, what are we talking about when we talk about fraud? What forms does it most often take? Here are the top 12 I’ve pulled together, based partly on research I’ve done on the topic, and partly on what I’ve seen and heard over the years. (These points are not in any particular order.)

1. Flat-out false claims. A claim is submitted for a professional visit, or a service or a product, but the whole thing is entirely made up. There was no visit, no service, no product.
2. Falsified or forged receipts. There was a legitimate service provided, but the receipt or claim form has been deliberately altered to show a higher amount, or to add services that were not provided.
3. Identity sharing. A claim is submitted for a service to a plan member or – often – a dependent, but that service was actually given to another person using the identity of the plan member.
4. Identity theft. A person steals personal information from another person with benefits coverage, then uses that information to access services from a provider.
5. Substitution of non-covered services. A product or service that is not covered by the benefits plan is coded or described as a different service that is covered.
6. Incentivized claims. A service provider gives the benefits plan member a “gift” or prize if he or she agrees to max out the benefits plan – even if the extra services are not required.
7. Collusion. The service provider conspires with the plan member to maximize billings for services or products not provided and splits the proceeds with the member.
8. Up-coding. The service provider – often without the knowledge of the plan member – codes an appointment as longer, or a service as more complex than it really was.
9. Switching claimants. A plan member submits a claim for one person (whose coverage may have maxed out) in the name of a different person.
10. Double doctoring. The claimant goes to more than one service provider to obtain services or prescriptions and may report one of the claims in the name of a dependent.
11. Unbundling. The service provider delivers a given service or procedure, but codes and bills each step in the process as a separate service.
12. Misrepresentation of condition or disability. A claimant, with or without the collusion of a service provider, claims to be more debilitated that he or she really is, or claims to be unable to work for a longer period of time than is justified.

One of the big problems that benefits providers face in combatting fraud is that they are very reluctant to do anything that will complicate or delay the claims-handling process for all the plan members who routinely submit perfectly legitimate claims.

But there are things we can do to push back against fraud while still remaining sensitive to the need to process claims quickly and not make it difficult for all the legitimate claimants.

For starters, we can promote claims integrity in terms of “Help us protect our benefits plan.” This can be presented to plan members through employee communications in a very positive way, such as when it’s part of a list of tips to help claims to be processed quickly.

Show you do care about claims. Push back against to assumption that “nobody cares” by following up on a random sampling of claims with a few routine questions to the plan member.

Warn against unscrupulous providers. Use employee communications to warn against the possibility of abuse of the benefits system or unscrupulous practices by providers. A message such as “Don’t get caught up in benefits fraud!” will let plan members know that misuse of benefits is a serious matter.

Ultimately, of course, we all end up paying for benefits fraud. Plan members may not realize that the total budget for benefits has a limit, and that any money paid out for fraudulent claims raises the cost of the overfall plan and limits the level of benefits that the plan sponsor can offer. And, finally, we do have to keep in mind that benefits fraud is a firing offense – you could lose your job, not to mention that possibility of getting caught up in a police investigation and even being charged.

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I really appreciate comments, ideas, suggestions or just observations about the blog or any other topics in benefits management. I always look forward to hearing from readers. If there’s anything you want to share, please email me at bill@penmorebenefits.com.

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