How Healthcare Fraud Affects Employer with Ileana Hernandez of Manatt


Employers are always looking for ways to control health care costs, which has become even more complicated in recent years. Many employers have found their benefits budgets increasing by double-digits year over year while the economy has struggled to recover from the Great Recession. And, although many fear healthcare reform will increase costs, it’s too early to predict how this will impact the premiums employers pay. As costs continue to rise, employer-sponsored plans are becoming less generous.

Employers with self-funded health care plans are subject to hundreds of regulations, most under the Department of Labor (DOL) jurisdiction. One of these is the process in which an employer can recoup monies lost due to fraud or abuse. One of the ways employers can recoup this money is by conducting an internal audit that determines whether fraudulent activities have occurred. But, unfortunately, there are companies, such as medical equipment suppliers and home health care agencies, whose only goal is to defraud these plans.

Even though many employers may be unaware of these issues, they are committed to protecting themselves from fraud. For example, according to Ileana Hernandez of Manatt Phelps & Phillips:

“Employers are doing their homework and getting the information necessary to ensure that they are being billed for what is medically necessary.”

Hernandez adds, “Employers have a ‘get tough’ attitude against healthcare fraud and abuse, and they want to send a strong message that it’s unacceptable.”

“Employers can face significant fines and penalties for failing to exercise ordinary care, such as seeking out all necessary information and making sure that the services provided fall within their medical policies,” she explains. “For instance, if an employer is self-funding its health care plan, it can be held liable for coverage of an out-of-network provider and/or a claim processing error. In this case, the employer must pay the medical expenses in addition to a penalty that is usually between $5,000 and $10,000.”

In addition to these penalties, Hernandez says, “The DOL may also charge the employer for its failure to monitor and control plan costs if it can prove that such failures were willful or in reckless disregard of Employee Retirement Income Security Act (ERISA) requirements.”

“Employers should take this very seriously,” she warns. “Although they may not be aware of billing irregularities until it’s too late, you can’t let these issues slip through the cracks. You are responsible for your plan’s expenses, whether you are aware of abuse or not.”

“Employers need to conduct an internal audit about every three years,” she concludes. “It doesn’t have to be a very in-depth audit; just enough to discover whether there any billing inconsistencies and whether the services provided were medically necessary.”

If you are an employer with a self-funded health care plan, it’s important to conduct audits on your claims. Talk to your company about this now before any issues lead to costly penalties. In closing, Hernandez summarizes by saying, “The penalty is too costly to risk funning afoul of. So instead, do your due diligence and make sure you are complying with all of the healthcare rules and regulations.