Tag Archives: Insurance Providers

Private Company Employee Health

Our last post presented a short list of the chief fraud threats targeting government run health programs.  We thought it might be useful to practitioners to balance it with one on frauds directed at private company health insurance plans.  From one perspective, many of the schemes, as you’d expect, are similar; but there are significant differences. Losses due to fraud in both public and private health-care spending are notoriously difficult to estimate but amount to more than US $6o billion annually, according to a statement made by the then U.S. Attorney General  several years ago at a National Institutes of Health summit.  Like all fraud, by definition, health-care fraud involves deception or misrepresentation that results in an unauthorized benefit.  In the private sector, it increases the cost of providing benefits to employees company-wide, which in turn increases the overall cost of doing business, regardless of industry. And while only a slight percentage of health-care providers and consumers deliberately engage in fraud, that small percentage can raise the cost of doing business significantly. The increased costs appear in the form of higher premiums and out-of-pocket expenses or reduced benefits or coverage for employees and affect small businesses disproportionately.

But the news isn’t all bad.  The good news is that, especially with the rise of fraud prevention approaches based on data analytics, companies have more and more tools at their disposal to help combat this problem. Most important, perhaps, are the contributions our fraud examiner profession is making and the unique expertise we bring to fraud-fighting efforts. With the right approach and technology tools, fraud risk assessors can help identify control weaknesses that leave the organization susceptible to health-care fraud and track down potential indicators that such fraud may have occurred or is in progress. Working with management as well as with other assurance professionals and external parties, fraud examiners can help meet this challenge and even prevent it by applying well designed system edits that identify fraudulent insurance claims on the front end, preventing them from even being paid (pre-payment prevention as opposed to post-payment pay and chase).

Every fraud examiner and forensic accountant knows that access to the right information is critical to combating the ever mutating array of health-care frauds targeting both the private and governmental sectors. Asking the appropriate questions and carefully sifting through relevant data can reveal potentially fraudulent activity and shed light on abuses that otherwise may not be identified.

Much of the needed health-care information often resides with an organization’s health insurance provider or third-party claims administrators (TPAs); fraud examiners and company management should work cooperatively with these parties to obtain an understanding of the details. Specifically, employers should hold regular discussions with their providers or TPAs to collaborate on anti-fraud activities and to understand their provider’s approach to the problem. Providers, on their side, should share the details of their anti-fraud efforts with organizational management. They should also explain their, often proprietary, techniques used to detect fraud and abuse and provide specific examples of potential frauds recently identified.  Companies also have access to employee historical health claims databases through their insurance provider or their TPA. Analysis should be performed by these parties, and it generally should focus on identifying unusual patterns or trends as such findings could signal fraudulent activity in the claims data; the objective in doing so is to develop payment system edits targeting specific fraud schemes so that claims related to the schemes are prevented by the edits from paying the related health service claims.  Even if the data does not contain indicators of potential fraud schemes, fraud examiners should still recommend that it be mined continually to ferret out potential mistakes.

If it’s not already part of your client company’s regular human resource (HR) administration process, simply matching employee data with the TPA’s files could also shed light on potential problems. Some employees, for instance, may be in the wrong plan or have the wrong coverage. Moreover, former employees may still be listed as covered.  Which brings us to the big problem of dependent eligibility; I say ‘big’ because dependent eligibility is a costly issue for all employee health plans because providing costly health insurance coverage to the ineligible dependents of company employees can quickly prove a budget buster for enterprises of all sizes.

To determine a client’s risk of exposure to ineligible dependents, fraud risk assessors should start with an assessment of the controls built into the benefits enrollment process. If the organization doesn’t require proof of eligibility during the initial enrollment process, the risk of exposure increases. Risk also increases if proof is required upon initial enrollment but not thereafter, such as when covered children reach a certain age. Based on the level of risk identified, examiners, in conjunction with HR, can select one of several approaches to the next phase of their review.

–Low Risk: Offer employees an amnesty period. The organization should remind employees of the benefit plan requirements and let them know that a review of eligibility will be performed. They should be given a reasonable amount of time to adjust their coverage as necessary without any repercussions; sometimes this alone can result in a significant level of compliance.

–Medium Risk: Require eligibility certification. In addition to the steps associated with low risk, the organization should require employees to complete an affidavit that certifies all of their covered dependents are eligible under the benefit plan requirements.

–High Risk: Audit employee eligibility. The company’s internal audit function should perform a full eligibility audit after the organization completes the steps associated with low and medium risk situations.

As this blog and the ACFE have repeated over and over again, employee awareness can be the best fraud prevention tool available. Fraud Examiners working in every industry should learn more about health-care fraud scenarios and their effect on their client’s businesses and pursue opportunities to educate management on the cost drivers and the impact of fraud on their companies. If the organization’s compliance program includes employee training and distribution of periodic educational updates, this would be a logical medium into which to integrate employee awareness messaging. At a minimum, Fraud Examiners should be sure that any new employee orientation sessions cover basic healthcare benefits guidance:

–Don’t provide personal health coverage information to strangers. If the employee is uncertain why a third party is requesting certain personal information, they should be instructed to contact their company’s benefits administrator.

–Don’t loan an insurance card to anyone not listed on the card as a covered individual.

–Employees need to familiarize themselves with the conditions under which health coverage is being extended to them and to their dependents.

Given the complexities of health benefits administration, an organization almost cannot provide too much information to its employees about their coverage. Taking the guesswork out of the administration process can result in lower costs and happier employees in the long run.  Although many anticipated long-term benefits from U.S. health-care reforms contained in the Affordable Care Act, in the short term most employers were required to expand coverage offerings for employees and their dependents, thereby increasing costs. All of these factors point to an opportunity for health-care fraud to continue growing and, consequently, for Fraud Examiners and for fraud risk assessors to continue to play an important role in keeping this relentless source of monetary loss at bay.