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Rooting Out the Root Causes
When benefits fraud gets out of hand, it’s a sign of big problems higher up

Benefits fraud is back in the news, with reports of a large-scale, organized scheme being uncovered at Toronto’s Baycrest Hospital, and as many as 150 employees being dismissed or allowed to resign as a result.

We’ve talked about fraud here before, and things that can be done about it, but this time I’d like to discuss the bigger issue – what it says about the overall “wellness” of a workplace where a thing like this could happen.

To cut to the chase, if that many employees are willing to knowingly engage in an out-and-out fraud scheme, then I suggest the problems with workplace culture and employee morale go much, much deeper than just the benefits fraud.

Baycrest is not the first big case to make headlines in the GTA.

At last count, 223 employees of the Toronto Transit Commission had been fired, or been forced to resign or retire following a lengthy investigation into an organized scheme in which employees submitted claims for things like orthotics and compression socks that they didn’t need, and in some cases didn’t even receive. They then accepted cash kickbacks from the supplier after the insurance company paid claims. (The TTC is now suing their insurance carrier and claims it should have done more to spot the fraud and put a stop to it. If nothing else, this should give the insurance carriers more incentive to stop fraud.)

When I look at stories like these, I have a hard time understanding how it could happen. Yes, fraud is fraud (as an information campaign branded “fraud=fraud” from the Canadian Life and Health Insurance Association makes clear), but cases like Baycrest and the TTC are mind-boggling. We’re not talking about an employee submitting a false claim for a prescription, or a service provider entering a false code to ensure coverage for something that isn’t covered – both of which are serious enough

No, we’re talking about an employee cooking up a criminal scheme with a service provider. The service provider submits claims for products and services the employee does not need and usually doesn’t receive. The employee signs off. When the claim is paid, the provider splits the cash with the employee. Okay, in the real world, I can even understand how that might happen once in a while. But it’s the next stage of the scheme I have such a hard time picturing: the dishonest employee then goes out and persuades some of his or her co-workers to join the fraud. Not just a few buddies. In the cases we’re talking about, it’s dozens or hundreds of fellow employees who are invited to join in – and many of them agree.

What does that conversation in the lunchroom sound like? “Hey, buddy, I just made a couple of thousand bucks – cash, tax free. No risk. Everybody’s doing it. My friend at the clinic can fix you up. Are you interested?” Well, it had to be something like that. And hundreds of people said, “Yes, I’m in.” (And I’m guessing that the employee doing the recruiting isn’t taking the risk of disclosure for nothing – he’s almost certainly getting another kickback for every new fraudster he steers to the crooked clinic.)

Sun Life Financial has published a paper entitled “Group Benefits Fraud”that I think is very helpful in understanding what’s going on, and provides information and perspective on how to deal with the root causes. I highly recommend that you give it a read.

One of the things I found most helpful in the paper was a thing they call “the Fraud Triangle.” It suggests that benefits fraud usually requires three elements:

  • Opportunity: the perception that there’s little chance of detection, penalty or consequences.
  • Rationalization: a sense of benefits entitlement, or unawareness that it’s the employer’s money that pays for benefits claims.
  • Pressure: Desire or need for financial gain, and encouragement from (the dishonest) provider.

This is useful and helpful. But I would go further than that and add three more elements to the basic causative factors that create an environment in which ordinary people are willing to engage in fraud:

  • Alienation: A sense that they are not a part of a workplace community, that it’s “us against them” and “every man for himself.”
  • Peer pressure, justification: A sense that “everybody’s doing it” and why not just join in and go with the flow?
  • Cynicism: A sense that management doesn’t care about them, or their work, or even about any of the high-minded principles in the Mission Statement.

So what do we do about it? Fortunately, most workplaces will never see anything like the huge fraud schemes we’re talking about. And I think we will see fewer such cases in the future, thanks to big-data analysis of claims (as we have discussed in a previous blog)and aggressive action by insurance providers to de-list questionable suppliers. (Here are the suppliers de-listed by Equitable Life, for example.) Still, we need to be mindful of what can happen in the worst-case scenario.

If a large-scale benefits fraud is the first sign that something is badly wrong with our workplace culture then, well, all I can say is we haven’t been paying attention. And if it is, and we want to fix it, we’re going to have to start much higher up the food chain to start to turn it around.

I think – I firmly believe – that it all comes down to building a healthy workplace. (At least half of my blogs have been about different aspects of workplace wellness.) Benefits management is playing an ever larger role in that overall picture of the healthy workplace. What it really boils down to is a workplace whose employees get up in the morning and – most days – look forward to going to work. They feel that they’re doing useful work, that their contribution is valued and recognized, that they are supported by management and their co-workers, that they are part of a community, and that they share fairly in the benefits of their contribution.

Oh, and when some bad apple comes to them in the break room and says, “Hey buddy, would you like to make a few bucks ripping off our benefits plan?” the answer is, “Not in a million years!” and their next call is to their boss, or HR or the anonymous tip line.

Penmore Callery Group Nominated For Ajax-Pickering Board Of Trade Business Excellence Award

In some exciting news, I'm pleased to announce that our firm has been nominated for a business excellece award from the Ajax-Pickering Board of Trade

It's certainly an honour to be nominated. Please find some letters of support for our nomination from some key partners in the community.

Ontario Shores

Mainstay Insurance

If there is a topic that you would like me to write about, please email me at bill@penmore.com

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