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Work with vendors to detect and prevent costly health insurance fraud.
An employee lends her uninsured sister her insurance identification card so the sister can get the foot surgery she needs.
A physician beefs up his billings by conducting unnecessary procedures on patients.
A supplier bills for medical equipment an employee never receives.
These are just a few examples of fraud that occurs in employer-provided health insurance plans. U.S. health care spending in 2010 reached $2.6 trillion, and experts estimate fraud-related losses to be 3 percent to 10 percent of all health care spending.
When someone makes a fraudulent health care claim, self-insured employers pay for the claim from their own coffers. Fully insured employers pay the price of fraud in the form of higher premiums.
No employer is immune. “Fraud is not specific to large employers or small employers or insurance companies or Medicare,” says Julie Malida, principal for health care fraud in the Chicago office of SAS, a business analytics software and services company. “It occurs across all of them.”
Types of Fraud
In general, there are two types of fraud: provider fraud and beneficiary fraud. Provider fraud is far more significant and problematic.
“The provider side represents a much greater risk and has a much greater impact,” says Louis Saccoccio, chief executive officer of the National Health Care Anti-Fraud Association in Washington, D.C. “Beneficiary fraud is on a much smaller scale, and its dollar impact is much less significant.”
Beyond the monetary losses from fraudulent claims, patient health can be at risk. “You find patients who have been physically exploited by being subjected to unnecessary invasive diagnostic tests,” says Bill Mahon, president of The Mahon Consulting Group LLC, a health care fraud advisory firm in Great Falls, Va.
Mahon cites the example of Chicago cardiologist Andrew Cubria, who was sentenced to prison for more than 12 years and fined millions of dollars for subjecting 750 patients to unnecessary cardiac catheterizations.
In addition to performing medically unnecessary procedures, unscrupulous doctors or hospitals might misrepresent services delivered or bill for services not rendered. Other common types of provider fraud involve ordering unnecessary lab tests and inappropriate durable medical equipment.
Beneficiary fraud often involves prescription drug abuse and medical identity theft.
Although some metropolitan areas tend to experience higher levels of health insurance fraud, any employer in any location can be a victim. Two factors increase the odds of fraud: the level of benefits provided and how easy it is to game the system. For example, an employer plan with very rich health benefits is at greater risk of fraud, particularly if the plan has no policy limits and few restrictions on the way benefits are paid, Malida says.
In general, employers can prevent and mitigate the risk of fraud in three ways:
Due to the medical privacy requirements of the Health Insurance Portability and Accountability Act (HIPAA), employers are somewhat limited in what they can do to prevent fraud. Instead, employers must rely on their vendorsÑthird-party administrators, utilization review vendors, insurance carriers and so onÑto scrutinize insurance claims for signs of fraud.
“Without this HIPAA-protected information, employers don’t know what they don’t know” when it comes to fraud, says Dawn Haag-Hatterer, SPHR, CEO of Consulting Authority in Frederick, Md. “They can’t proactively investigate or monitor whether there is any fraud or abuse within their own health plans.” Many employers also don’t have the manpower or internal expertise to handle fraud prevention and mitigation.
Fraud Hot Spots
Health insurance fraud can be found anywhere, yet some areas of the United States have more incidents. Employers with a large concentration of employees in these areas should be vigilant.
For example, "if employers are not flagging claims from South Florida and Southern California, they are missing the boat," says Bill Mahon, president of The Mahon Consulting Group LLC. Stolen member identification numbers and insurance cards are a significant problem in those areas.
The U.S. Department of Health and Human Services and the U.S. Department of Justice have teamed up to establish Health Care Fraud Prevention and Enforcement Action Teams, or HEAT, with anti-fraud law enforcement activities focused on nine cities and metropolitan areas: Baton Rouge, La.; Brooklyn, N.Y.; Chicago; Dallas; Detroit; Houston; Los Angeles; Miami-Dade County, Fla., and Tampa Bay, Fla.
Therefore, how well-equipped vendors are to identify and prevent fraud becomes paramount. “As HR professionals, it is our responsibility to be thinking about fraud and to be more informed about what type of protection” is present through the employer’s vendors, says Trish Schuman, director of human resources for government contractor LCG Systems in Rockville, Md. Understand “the safeguards vendors have in place to detect and prevent fraud and the process the vendor uses to notify the employer if there is fraudulent activity.”
When an insurance carrier or third-party administrator identifies potential fraud, they typically conduct an internal investigation. That’s why the vendor’s anti-fraud experience and capabilities are important. If fraud is suspected, the employer’s primary role is to cooperate with and keep track of any investigation. Request a periodic progress report to ensure that the vendor is thoroughly addressing the problem.
To find out how well vendors perform in this area, ask them. Focus on the resources the vendor commits to anti-fraud activities, its detection systems, the existence and size of investigative units, and its track record of preventing and addressing fraud.
No matter what level of anti-fraud activity a vendor demonstrates, employers should still pressure providers, insurance companies and other vendors to step up fraud detection and mitigation. Especially good times to address the subject: when vendor contracts are up for renewal and when HR professionals establish new vendor relationships. Fraud prevention should feature prominently in requests for proposals for health care vendors.
Bill Einhorn, administrator of the Teamsters Health and Welfare and Pension Trust Funds of Philadelphia and president of Administrative Service Professionals Inc., a third-party administrator based in Pennsauken, N.J., offers insight into the anti-fraud measures vendors can take internally by discussing the measures his company has adopted.
Einhorn relies on strict segregation of duties to prevent internal fraud. The company does not allow one function or individual to handle a claim throughout the process. For example, the claims processing, information technology and accounting departments might be responsible for different parts of the process.
To prevent provider fraud, Administrative Service Professionals uses “an outside service to check claims against a large claims database to identify potential fraud,” Einhorn says. “We may only have 15 or 20 claims from a specific doctor, but this particular service may have 5,000 claims” to compare against.
On the pharmacy side, Einhorn suggests looking for vendors that monitor consistent patterns of prescriptions. If a patient has been receiving high-dose OxyContinÑa drug subject to widespread abuseÑfor a period of time, the vendor should contact the prescribing doctor and request to see a copy of the patient’s treatment planto make sure that drug is appropriate for the patient.
Third-party administrators, pharmacy benefit managers or insurers can design the plan to require patients to fill OxyContin prescriptions at one particular pharmacy to more easily monitor usage. They also can review pharmacy activity on the family level as well as the individual patient level. If a husband and wife or multiple family members have prescriptions for OxyContin, it could indicate a problem that would not be apparent when looking at individual activity.
An Educated Patient
Patients are one of the most important resources when it comes to combating health insurance fraud. Educated patients:
To increase engagement, employers should emphasize what employees stand to gain from being vigilant about fraud and what they stand to lose if fraud leads to unnecessary and potentially dangerous care and higher insurance premiums.
The growing prevalence of high-deductible and consumer-directed health plans provides employees with an incentive to be more knowledgeable about what is being billed. When employees pay for a higher proportion of care out of pocket, they are more likely to be vigilant about the necessity of that care and to look for improper charges. “Consumer-directed health plans give employees a reason to look for fraud,” Einhorn says.
The explanation of benefits statements employees receive from insurers or third-party administrators following a health care claim represent another important tool for preventing fraud. Benefits professionals should educate employees about the need to carefully examine the information in these statements. If employees find charges that don’t seem right or are inconsistent with the care they received, or if employees simply have questions about the services listed, the employer must provide clear guidance on what employees should do and steps they can take to alert the insurance carrier or third-party administrator of their concerns.
At a minimum, most insurance companies and third-party administrators provide information about health care fraud on their websites, including material about how to spot and report suspected fraud. HR and benefits professionals may ask vendors to provide online or in-person training or other resources to employees.
Employers should emphasize that employees need to keep their health insurance identification numbers and their insurance identification cards just as secure as they keep credit cards and Social Security numbers.
Although HR and benefits professionals must adhere to HIPAA privacy regulations that limit their ability to review individual insurance claims, they can still play an important role in fraud prevention. Robert Miller, PHR, HR director, risk manager and employee benefits manager for the Greater Los Angeles County Vector Control District, regularly scrutinizes claims data that comply with HIPAA for anomalies and conducts dependent eligibility audits to ensure that the health plan covers only eligible individuals.
“If utilization increases sharply or in an unusual way, that is a sign to start looking deeper,” Miller says. “Be vigilant because the only indication that something is wrong may be that your costs are continuing to rise and you don’t really have a reason why.” Moreover, Miller notes that catching a problem early can minimize the resulting damage and losses.
Haag-Hatterer emphasizes the need for quarterly reviews of aggregate claims by the third-party administrator or the employer to see if there are major utilization changes, particularly for self-insured employers that pay directly for fraudulent claims. “I want to see what my costs are,” she says. “Question the trends.”
For example, if a benefits professional is working for a company that has employees spread throughout the United States but is experiencing a large concentration of prescriptions for certain drugs in one location or from one provider, that might warrant closer inspection.
How quickly an employer identifies potential fraud is critical. Health care fraud investigations typically generate a financial return of $3 to $7 for every $1 invested, with higher returns occurring when investigations are conducted early, Malida says.
Insert “fraud detection into the payment process before the claim is paid,” Malida urges. “On average, when you try to chase the money after the claim is paid, the chance of getting that money back is 10 percent or less.”
The author is a New Jersey-based business and financial writer.
SHRM article: Analyze Plan Data to Stem Health Care Fraud (Benefits Discipline)
SHRM article: Curbing Health Fraud (HR Magazine)
SHRM article: Employee Health Data: Evaluating Your Vendors’ Privacy Standards (Benefits Discipline)
SHRM tool: Ensuring the Privacy of Employees’ Health Information
SHRM tool: Guarding Against Identity Theft: HR’s Role
Website: National Health Care Anti-Fraud Association
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