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In 2007, health care expenditures in the United States hit approximately $2.6 trillion, according to the Centers for Medicare and Medicaid Services. Estimates put the portion of this outlay that is attributable to health care fraud — payment for nonexistent, exaggerated, or ineligible services — at anywhere from 3% to 10%, according to the National Health Care Anti-Fraud Association (NHCAA). Health care fraud comes in many different shapes and sizes. Perpetrators include patients, providers, as well as individuals or groups with no connection to the health care system. Organizations such as the NHCAA emphasize that, although the vast majority of doctors, hospitals, therapists, etc., are honest and submit valid billings, most cases of health care fraud do originate with providers. The types of health care fraud seen from providers include:

• Billing for services that were never actually provided to the patient.
• Falsifying a diagnosis.
• Upcoding, or billing for a more expensive service, treatment, or procedure than the one that was actually performed.
• Recoding, or billing for a different treatment or procedure than the one actually provided (for example, the service actually provided is a nose job, which is considered a cosmetic procedure and not covered under the plan; but the provider codes it as a repair to the septum, which would be covered).
• Performing unnecessary tests and/or procedures (e.g., diagnostic tests).
• Unbundling services that are part of one procedure and billing for each separately.
• Billing for the entire cost of a service when partial payment (such as a copayment) has been collected from the patient.

Patients commit health care fraud by listing and filing claims for ineligible dependents; sharing health plan identification cards; filing claims for services they never received; altering or forging bills and receipts; and buying and re-selling prescription medications. Health care fraud can also be perpetrated by individuals or groups posing as providers who, using stolen or purchased patient insurance information and provider billing numbers, submit bills for services from a fictional clinic. Or, they might pose as providers in order to obtain other individuals’ legitimate health insurance information, and then use the information for themselves, or even sell it.

Although health care fraud adds to costs, it also carries a price tag that is not financial. Patients undergoing unnecessary procedures, testing, or drug therapies face risks to their health. Phony or inflated diagnoses result in inaccurate patient medical records, which can complicate later treatment. Amounts paid on fraudulent claims might result in an insured reaching a dollar-amount or number-of-visits maximum under a policy when seeking coverage for later, legitimate claims.

Industry groups, insurance companies, and state and federal governments have become increasingly proactive in their efforts to prevent, detect, and punish instances of health care fraud. The Health Insurance Portability and Accountability Act (HIPAA) established health care fraud as a federal criminal offense. HIPAA provides for financial penalties as well as imprisonment for up to 10 years for health care fraud convictions, with longer sentences if the fraud results in patient injury or death. Many state insurance departments require anti-fraud efforts by the insurers or HMOs that operate in their states. Insurers and HMOs staff dedicated investigative units that use computer technology, patient education, and solid communications with other insurers and law enforcement to battle health care fraud. The NHCAA offers a professional certification — the Accredited Health Care Fraud Investigator — to those that complete a training course.

It is in the best interest of every business and individual to do what it can to prevent health care fraud. Not only does fraud contribute to the overall rate of health care cost increases, it affects your rates at renewal. Talk one of our health insurance professionals about anti-fraud efforts, and help your employees become attuned to what they can do to avoid becoming an unwitting participant in a health care fraud scheme (e.g., safeguarding their health insurance ID cards and insurance information; being wary of offers for “free”� services; examining explanation of benefits (EOB) statements for accuracy). These efforts, at a grassroots level, do make a difference.

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act. Along with the Health Care and Education Reconciliation Act of 2010, this legislation will make significant changes to our current health care system.

The Act adds new responsibilities for employers and insurance carriers. Although most of the provisions will start in 2014 or later, some provisions are effective right away or within a short period of time after enactment.

Effective 2010

• Small-Business Tax Credit. A tax credit of up to 35% of the employer’s health care contribution is available for qualified small employers (any employer with no more than 25 full-time employees and average wages of less than $50,000). This tax credit will increase to 50% starting in 2014 once exchanges are operational.
• Early Retirees. A temporary reinsurance program is provided to employers that offer coverage to early retirees between the ages of 55 and 64.
• Health Plan Changes. 1) Plans must offer unlimited lifetime benefits and annual benefit limits will be restricted. 2) Pre-ex conditions will be prohibited for children under 19. 3) Recissions are prohibited except in the case of fraud. 4) Plans must cover certain preventive health services at no cost to the insured. 5) Dependent coverage age limit extended to 26.
• Federal High Risk Pool. Temporary establishment of a high risk Health insurance pool for individuals unable to find insurance elsewhere.

Effective 2011

• W-2 Reporting. Employers must report value of health care benefits provided on employee w-2s, but not as taxable income.
• Higher Penalty Tax on Non-Qualified Health Savings Account (HSA) Withdrawals. Non-qualified withdrawals will be taxed at 20% versus the current 10% penalty.
• Cafeteria Plans. A new Simple Cafeteria Plan is created through which small employers (fewer than 100 employees) can easily provide tax-free benefits to their employees without the administrative burden of sponsoring a cafeteria plan.
• Standardized Definition of Qualified Medical Expenses. Costs for over-the-counter medications obtained without a prescription will no longer be considered a qualified medical expense.

Effective 2013

• Flexible Spending Account Limits. Annual contribution limits are reduced to $2,500 per year, with CPI increases available in future years.
• Itemized Deduction for Medical Expenses. The Act increases the income threshold for claiming the itemized deduction for medical expenses from 7.5% to 10%. Individuals over age 65 would be able to claim the itemized deduction for medical expenses at 7.5% of adjusted gross income through 2016.
• Higher Payroll Taxes for High Income Earners. The hospital insurance tax rate will be increased 0.9 percentage points for wages over $200,000 for individuals and $250,000 for those filing jointly.

Effective 2014

• Employer Coverage Mandates. Employers with 50 or more employees who do not offer employee health coverage will pay $2,000 annually for each full-time employee, excluding the first 30 full-time employees. The penalty is increased to $3,000 for any full-time employee receiving a federal tax credit for coverage, because his or her employer health coverage is considered “unaffordable.” Coverage is considered “unaffordable” where the employee contributes more than 9.8% of his or her income, or the employer contributes less than 60% of the actuarial value of the plan.
• Insurance Exchanges. Exchanges are created at the state level starting in 2014, where individuals and small employers can shop for health coverage. Initially, the exchanges would be available to individuals and small groups (less than 100 employees), unless the state opts to cover only groups with up to 50 employees. Starting in 2017, states could open the exchanges to larger groups.
• Wellness Programs. Employers can offer larger rewards, up to 30% of the cost of coverage, to employees for participation in a wellness program or for meeting certain health-related goals.
• Individual Tax Credits. Credits are available for people with incomes up to 400% of the poverty level for insurance purchased through an exchange.
• Health Plan Changes. 1) Insurers cannot refuse to issue coverage on any individual due to pre-existing conditions. 2) Higher rates cannot be charged to any individual based on health status, gender or other demographic factors. 3) Coverage cannot be non-renewed or dropped because an individual participates in a clinical trial.

Effective 2018

• High Value Plan Excise Tax. A nondeductible excise tax of 40% is imposed on any health insurance plan with combined annual employer/employee premiums exceeding $10,200 for individual coverage and $27,500 for family coverage. The tax would only apply to premiums in excess of the threshold.

More than half (58%) of employers that offer health benefits also offer wellness programs, according to Kaiser Family Foundation’s 2009 Employer Health Benefits Survey. Many of these say their primary reason for doing so is to help improve employees’ health, reduce absenteeism, and lower health care costs. These goals, if achieved, can represent significant cost savings for a company — but this can happen only if employees participate. Frequently, participation in wellness initiatives falls short of expectations. Creative and consistent marketing, together with a careful use of incentives, can positively impact wellness program participation and help these programs bring cost-savings results.

Wellness initiatives run the gamut from simple workplace walking clubs to onsite fitness centers. The most common include health risk assessments; screenings for high blood pressure, cholesterol and diabetes; exercise incentives, such as discounts to local gyms; weight management and nutrition programs; smoking cessation programs; and disease management programs. According to a survey from Health2 Resources, a health care and e-health public relations and communications firm, 73% of employers measured the return on investment from their wellness programs, and 83% of these employers saw a return of better than dollar for dollar on their investment.

With such a return on investment being possible, increasing employee participation in wellness programs becomes a priority. Here are some ideas to engage employees in wellness initiatives:

Offer the types of programs in which your employees would be interested. A key element of successful marketing is to offer consumers the products they want. Bring this perspective to your wellness initiatives, and survey employees or talk with them informally about various wellness activities that your company would be willing to bring into the workplace, to see where employee interest lies.

Build interest in the program by using a variety of media, beginning several weeks before the program launch date. Remember that individuals learn in many different ways, so employ all means of communication at your disposal: articles in the company newsletter; paycheck stuffers; lunchroom posters and table toppers; e-mails; a letter from top management; employee meetings; DVDs/videos with program highlights; presentations by the wellness program vendor. Furthermore, build excitement for a program launch by dispensing communications strategically and structuring them in a way that enables employees to personalize the experience.

Make it as easy as possible for employees to participate. For example, if your company’s wellness initiatives include onsite screenings, make it easy to sign up for them, schedule them throughout the day, and let employees know they are permitted to take a work break to have the screening done. To encourage spouse participation, include early morning and evening times. If your company’s wellness initiatives include a health risk assessment, offer paper and electronic ways of completing it, and keep it as short and simple as possible.

Make participation fun. Incorporate contests, party-atmosphere health fairs, and club/team based activities that get employees moving (like lunchtime walking clubs, or a softball or bowling team).

Since some employees hesitate to provide health information through a wellness initiative, suspecting that the employer will be privy to it, take steps to overcome this barrier. Clearly communicate the company’s confidentiality policy and the confidentiality guaranteed by HIPAA, as well as the steps taken to ensure that participant confidentiality indeed is maintained.

Offer financial incentives, which are thought by many to be the most effective motivator toward wellness program participation. Common financial incentives include a health plan discount or premium differential, contributions to a health savings account, cash or payroll credits, or copay reductions. The Health2 Resources survey found that two-thirds of surveyed firms that offered wellness programs used incentives to motivate participation. The value of incentives in 2009 averaged $329 and ranged from $1 per pound of weight lost to annual premium reductions valued at more than $1,500.

Most important of all, make sure employees know the value of improving their health, both in terms of disease prevention/longevity and dollars and cents. On some basic level everyone knows it is better to be healthy than not, but drive this point home with accurate data on, for example, the impact being overweight has on all aspects of a person’s health, and how this can translate to an individual’s personal health care spending. The bottom line of well-used wellness programs is significant potential savings for both the employer and program participants.