Benefits Fraud – An ‘Intelligent’ Response
Benefits fraud is big business. The private sector spends about $60 billion annually on healthcare in Canada and it’s estimated that fraud represents anywhere from two per cent to 10 per cent of that total. Translated to dollars,1 this is between $1.2 billion and $6 billion with much of this cost borne by Canadian employers who sponsor benefits plans.
The abuse of benefits plans by plan members remains an ongoing concern, but the stakes are now higher. The combination of more money at risk, new technology, and the movement of organized crime into the benefits space has created the potential for benefits fraud on a much greater scale.
With police focused on violent crimes and sophisticated fraud schemes, insurance carriers are tasked with doing much of the work related to the prevention and detection of fraud as well as that related to the investigation and preparation of a case for trial, all of which is needed to bring benefits fraud criminals to justice.
The issue is traditional reactive investigations are ineffective and time-consuming. As fraud sophistication grows, it’s clear that the insurance industry can no longer respond to future threats with yesterday’s solutions. The answer lies in the adoption of leading law enforcement techniques and using them in the healthcare benefits fraud arena. And the activity at the centre of the approach is simple in name, but powerful in effect: leverage intelligence.
Intelligence-led strategies involve the use of information to anticipate potential crime activity or trends, then taking proactive steps to mitigate the effects of crimes or prevent them from occurring.
“Intelligence-led strategies provide reliable and timely crime analysis,” says Tom Girling, director, Criminal Intelligence Service Ontario. “To be truly effective in solving crime and, more importantly, predicting and preventing that crime, we must use these powerful tools to identify patterns and linkages. That way we get to the source and have a better chance at degrading criminal capabilities.”
These strategies began several years ago when law enforcement was faced with mounting crime rates and were looking for a proactive approach to put them ahead of the crime curve. A renewed focus on information gathering, combined with improving technologies, allowed them to make strides in that direction. The events of 9-11 further accelerated the need to anticipate events and prevent criminal activity before it occurred.
That’s the same strategy behind Sun Life Financial’s anti-fraud approach. The gathering of intelligence is no longer the sole domain of law enforcement and this strategy allows Sun Life Financial’s investigative services unit to better protect benefits plans and reduce costs.
Efforts to actively detect potential fraud begin as soon as a plan member submits a claim. The first line of defence is audit software that is applied to every claim to detect data anomalies and irregular claiming patterns and characteristics. The audit criteria can be easily changed to react to new risks and emerging fraud schemes. Claims are also randomly drawn to undergo a validation process to identify signs of potential fraud.
“When suspicious claims emerge that indicate a wider pattern of fraud, fraud intelligence analysts subject the information to various software programs, cross reference the information through a collation process, and mine the raw data to turn it into actionable intelligence,” says Stuart Monteith, senior vice president, group benefits, at Sun Life Financial Canada. “This ensures that the information gathered is both accurate and relevant.”
A team may also initiate a process to collect additional information. This process can involve traditional investigative activity ‒ like interviewing witnesses, suspects, and whistle blowers ‒ as well as undertaking covert operations such as secret shoppers and surveillance. It may access public records to enhance the database of information and better understand the potential for criminal activity that may be impacting a benefits plan.
Predictive modelling that can identify outliers that may indicate fraudulent activities can also be applied. In one recent case, predictions on exactly where a new false front clinic was going to be set up were made even before it opened.
Information acquisition, data analytics, and fraud identifying technology are only part of an intelligence-led approach.
Any success in the fight against fraud requires collaboration. Individual fraudsters and criminal organizations are counting on regulatory constraints and the insurance industry’s competitiveness to stifle the sharing of intelligence and create a criminal opportunity for them.
Sun Life supports industry co-operation and collaboration. Its fraud risk management team is actively building relationships across public (Canada Revenue Agency, Insurance Bureau of Canada, Financial Services Commission, etc.), private, and police stakeholders to enhance the sharing of information. And, it is committed to reporting every case of suspected fraud to plan sponsors and, where appropriate, providing the police with both the information and support necessary to bring these cases before the courts.
The face of healthcare fraud is changing and a new breed of organized fraudsters is determined to exploit any weaknesses. They operate without rules and borders – and without regard for their victims. Traditional investigative strategies simply react to threats, creating a cycle in which insurance carriers are always on the defensive. This means investigations must focus on the criminals – not just the crimes.
This approach levels the playing field. While no anti-fraud efforts are foolproof, an intelligence-led strategy provides clients with a proactive, comprehensive, and sustainable strategy that maximizes opportunities to not only identify and uncover fraud, but to deter this activity before it happens.
Gary Askin is assistant vice-president, fraud risk management, at Sun Life Financial.
Canadian Health Care Anti-fraud Association