Why Fixing Fraud Has to Come First for Employee Health Plans

This video provides an urgent strategic argument for prioritizing the reduction and elimination of fraud within commercial employee health plans. Dr. Eric Bricker asserts that healthcare fraud, estimated to account for up to 10% of employee health plan spending (citing reporting by Marshall Allen of ProPublica), represents the single most critical area for employers, HR professionals, and benefits consultants to address first. The central thesis is that fixing internal financial leakage due to fraud is a prerequisite for gaining the necessary credibility to implement future, more complex cost-saving measures.

The speaker outlines three core reasons why fraud must be addressed before any other initiative. First, reducing fraud does not require difficult-to-achieve employee behavior change, which often derails wellness programs or point solutions. Second, it similarly avoids the challenge of requiring provider behavior change, sidestepping issues like overutilization, over-testing, or over-prescription. By focusing on fraudulent claims, the employer targets bad actors and systemic weaknesses rather than legitimate clinical practice or employee choices.

Crucially, the third and most strategic point is that eliminating fraud grants the employer the necessary credibility to ask for future changes from all constituents—employees, dependents, doctors, and hospitals. Initiatives like implementing near-site clinics, utilizing Centers of Excellence for complex procedures (e.g., spine surgery), or shifting to value-based payment models all require significant behavioral shifts. The speaker argues that smart employees are aware of public reporting on health plan fraud and will use the employer’s failure to address it as leverage to resist new mandates.

The video briefly touches upon the operational methods for addressing fraud. Ideally, fraud should be caught beforehand, allowing for payment stoppage. If fraud is detected after payment, the employer has two primary recourse options: withholding future payments owed to the fraudulent provider or hospital system to recoup losses, or initiating legal action (filing suit) to recover the money. The core message remains that regardless of whether the fraud rate is 10% or even 1%, the health plan must "clean its side of the street first" to establish an ethical and financially responsible foundation before demanding compliance or change from external stakeholders.

Key Takeaways: • Fraud as a Primary Cost Driver: Healthcare fraud is a massive financial drain on commercial health plans, estimated to be as high as 10% of total spending, making it a critical, non-clinical operational inefficiency that must be prioritized. • Behavioral Change Bypass: Addressing fraud is a strategic "low-hanging fruit" because, unlike wellness programs or utilization management initiatives, it does not require the difficult and often unsuccessful task of changing employee or healthcare provider behavior. • Credibility is Currency: Eliminating fraud is essential for building credibility, which is the foundational requirement for successfully implementing future, high-value health plan changes, such as adopting Centers of Excellence programs or shifting to value-based care models. • Employee Awareness: Employers must recognize that employees are often aware of systemic fraud issues (through sources like ProPublica) and will use the employer’s failure to address this internal problem as justification to resist new cost-saving measures or mandates. • Pre-Payment Stoppage: The ideal operational strategy is to implement systems capable of catching and stopping fraudulent claims before payment is issued, preventing financial loss and the complexity of post-payment recovery. • Post-Payment Recoupment Strategy: If fraud is detected after payment, employers have two primary recourse mechanisms: withholding future payments to the fraudulent entity (offsetting the loss) or initiating litigation to recover the funds. • Strategic Imperative of Internal Cleanup: The health plan must "clean its side of the street first." This means fixing internal process failures and financial leakage before asking employees, dependents, doctors, or hospitals to alter their behavior or accept new contractual terms. • Focus on Systemic Integrity: Even if the fraud rate is low (e.g., 1%), the principle of addressing fraud remains paramount for demonstrating financial stewardship and integrity to all stakeholders. • Target Audience Alignment: The content is specifically directed at Directors of Benefits, HR, CFOs, and Pharma/Med Device Professionals—key decision-makers responsible for managing large corporate healthcare expenditures and operational efficiency.

Tools/Resources Mentioned:

• ProPublica (Specifically citing articles by Marshall Allen regarding fraud on employee health plans).

Key Concepts:

• Employee Health Plan Fraud: Fraudulent billing and claims submitted against commercial insurance plans sponsored by employers, distinct from Medicare or Medicaid fraud.
• Behavior Change: The difficult process of altering established habits or practices of employees (e.g., participation in wellness) or providers (e.g., reducing overutilization).
• Centers of Excellence (COE): Specialized healthcare facilities recognized for high quality and efficiency in specific procedures (e.g., spine surgery), often used by employers to direct care and reduce costs.
• Value-Based Payments: Payment models that reward healthcare providers for quality and outcomes rather than simply the volume of services provided, requiring significant provider behavior change.

Examples/Case Studies:

• The video references the investigative journalism of Marshall Allen from ProPublica as the source for the estimated 10% fraud rate in commercial health plans.