Keeping health insurance costs down without cutting employees health benefits is a very common request from business leaders
With the costs of employer-funded health insurance rising at double digit rates year over year, employers are shifting some costs on to employees or exploring caps. While expenses are rising very rapidly and having an effect on your bottom line, the “sleeping” costs of plan abuse are often overlooked by employers.
According to a report by the Canadian Health Care Anti-fraud association, fraudulent billing activity translates to between $1.2 and $6 Billion dollars on private health care plans each year. To a great extent, people get away with it because some plans design allow its members to get away it. While having investigation of health claims may first appear to be a good idea, one must consider that forensic accountants are not medical billing experts and a typical healthcare transaction doesn’t leave that many traces in the first place.
In this article, we provide you three ways that will help you identify and reduce plan fraud and abuse, without giving up any of your benefits.
Fraud vs Abuse
The temptation of getting something for free is enticing. Excluding outright criminal activities that are designed to defraud your benefits plan, it is quite common to find employees at every organization who are willing to test the limits of their plan for personal gain.
Benefits plans can be exploited in a number of ways. Fraud can be generally defined as the intentional use of deception for personal gain at the expense of the benefit plan. A situation may be defined as fraud when a plan member knowingly submits false information on a claim with an intent of personal financial gain. Whereas abuse involves excessive use of the coverage under the benefit plan.
A scenario of plan abuse may include circumstances where a plan member seeks unnecessary treatment at the expense of the benefits plan. Whether claims are submitted manually or electronically, most if not all fraud prevention measures rely on computerized algorithms to detect potential fraudulent claims. But therein lies a flaw in the system – these measures, as important as they are, are designed to capture fraudulent claims as opposed to preventing it from happening in the first place. Considering the incentives for abuse, there are several ways an employer can take to align reduce an employee’s lure to abusing the benefits plan in the first place.
Group benefits are a promise an employer makes to an employee as part of their overall compensation. However the impact of increased claims have on a company’s bottom line is often misunderstood or not communicated clearly to plan members. To help your plan members understand the nature of costs, a good place to begin is by explaining the components of your plan, which is typically broken up in two parts: insurance and transactions. Insurance items would protect one from long term disability and critical illness. Typically these costs are spread over a large pool of members, often beyond one company, to minimize the impact these types of claims have on an insurance plan.Transactional items on the other hand have a more direct impact on your premiums. Transactional costs include drug and dental, as well as paramedical or elective health procedures. This type of benefit operates on a cash-flow basis, as opposed to traditional risk insurance. By illustrating the direct relation annual claims have on the future viability of the plan, or tying it in to total compensation could appeal to self-interest, and motivate more far-sighted use of these items.
2. Consider Plan Design
If your plan allows unlimited physiotherapy, then you become vulnerable to being exploited. A carefully designed plan can combine a number of techniques to control abuse and in turn reduce fraud. Consider paramedical benefits; services commonly included in most plans as an extended health benefit. Beneplan administers paramedical on a pre-approved basis before any procedure is completed. This gives you a tighter grip on costs without sacrificing the care your employees depend on. By adding a simple layer of pre-authorization reduces the incentives for plan abuse.
3. Tiered Plans
While a one-size-fits all approach might sound desirable, a tiered plan is designed to mitigate the costs of medication without impacting patient care. A tiered formulary divides drugs into groups, primarily based on costs. The most generic drugs fall under the first tier and typically come at the lowest cost, while the expensive brand names take the upper tiers – which is partially covered by the employer and partially covered by the employee – or co-pay. We have tested this approach with a group of our own member plan sponsors and have observed interesting trends. On average, the groups who used Reformulary had a 9% drop in drug claims over 6 months, compared to an average 9% increase in all other groups, an 18 point spread.
More often than not, the channel for the crime can also be the mechanism for a solution. Are you concerned about abuse or runaway costs in your plan? Is it dental, paramedical or drug costs? Contact Beneplan at email@example.com to learn more about how we can help you reduce your plan costs and keep your benefits coverage intact.