Insurance fraud is a billion-dollar problem, and it affects businesses of all sizes. Even though you want to think the best of your staff, it’s possible that some of your employees may be knowingly (or unknowingly) committing insurance fraud. As the employer, you must respect your employees’ right to privacy while still ensuring that you’re not the victim of fraud.

Detecting employee health insurance fraud is difficult. Because of privacy laws, including the Health Insurance Portability and Accountability Act, you can’t simply demand to see your employees’ health insurance claims. You also can’t directly ask your employees about their health or medical treatments. However, you can work with the health insurance provider and third-party audit firms to review trends and look for fraudulent claims.

Common Types of Fraud

Allowing someone other than the insured to use health benefits is one common kind of health insurance fraud. Typically, health care providers work diligently to verify a patient’s identity before giving care. Misuse of health coverage for children is especially difficult to stop at the provider level because infants and very young children tend not to have photo identification; an employee could be taking a niece or nephew in the place of the child who is legitimately covered. Typically, your health insurance company or a third-party audit firm can review claim trends to detect overuse of an employee’s policy.

If your company’s health insurance plan allows employees to pay for services and then file for reimbursements, your policy could potentially be used by an unscrupulous employee looking to collect cash on fraudulent claims. Sometimes, these claim receipts are simply forgeries made to collect against health services never rendered. Employees, either on their own or in collusion with the employees of health care providers, can also generate or alter claim receipts for legitimate services, but at a higher rate than the provider actually charges.

If you have an employee who had his or her insurance card stolen, you could be paying for a health plan to cover someone that neither you nor your employee knows. This kind of scheme tends to generate very expensive claims, and you could see your company’s premiums jump in just one year because of stolen identity claims. Ensure that your employees report stolen insurance cards immediately to avoid this type of fraud.

Stop Fraud in Its Tracks

Because fraud detection firms will maintain an employee’s anonymity, they can delve into the details of claims in ways that you, as the employer, simply cannot. If you provide time and attendance records for your employees to the fraud detection firm, the firm can cross-reference employee work times with service appointments to find any conflicts. In addition, fraud detection firms can search for claim trends that fall outside the norm, usually indicating fraudulent claims.

Detecting and deterring health insurance fraud must be a joint effort between you, your employees and the health insurance company. Ask your employees to report any strange claims to the health insurance provider immediately. By avoiding fraud, both you and your employees will avoid unnecessary cost increases.

Dylan Murray has an MBA from San Diego State University and a bachelor’s degree in communication from Boston University. He is a licensed insurance agent in California, but he works as a professional researcher and writer reporting on business trends in estate law, insurance and private security. Dylan has worked as a script analyst with the Sundance Institute and the Scriptwriters Network in Los Angeles. He lives in San Diego, California, and Marseille, France.