Punishments for Health Insurance Fraud

Insurance fraud investigations can be difficult to navigate, especially for someone who is inexperienced. This, in many cases, leads to mistakes along that way that can be very costly. The best way to protect your rights if you have been accused of insurance benefit fraud is to hire experienced legal counsel to negotiate on your behalf.

An individual may become involved in an insurance investigation in a few different ways. One of the most common ways insurance providers begin investigating someone is through random audits. All large employment insurance benefit providers like Sunlife Financial and Manulife Financial conduct random audits on employees using their benefits. During these audits, benefit providers will review employee benefit files to ensure they received only the funds they were entitled to. They may also verify receipts provided by contacting the service provider to confirm the client received services there as indicated in their claim. The Firm has been involved in many insurance fraud investigations which are often are investigated and prosecuted by local police, which are referred by employers and insurance companies. Regulated professionals such as Teachers, Accountants, Nurses and Financial Service workers are all being aggressively investigated and being reported in caselaw.

In other situations, plan benefit holders may be audited if they have received services from a service provider that has been delisted. Insurance companies will delist any service provider who fails to abide by the terms and conditions of the benefit plan. They will also delist service providers who commit fraud. After delisting a service provider, the insurance company may then audit any individuals who claimed benefits from that particular service provider. This strategy has become more popular in recent years after sophisticated employee benefit fraud schemes

In 2014, the TTC received a tip that its employees were defrauding Manulife Financial out of employee benefits. During the investigation it was discovered that hundreds of TTC employees had been receiving false or inflated receipts for services from a provider called Healthy Fit. The employees submitted the false claims to Manulife and then paid a kickback to Healthy Fit. This sophisticated scheme resulted in thousands of dollars in losses for Manulife. Ten employees and the proprietor of Healthy Fit were ultimately charged criminally with fraud. Regardless of how an investigation begins, once an insurance company has launched a joint investigation with a plan member’s employer, it is almost impossible to stop and can result in serious consequences for those who are found to have abused their benefits plan.

The Firm has represented plan members from across Canada including British Columbia, Alberta and Newfoundland. Investigations often start in Ontario where the headquarters of large insurance companies are located. In the Firm’s File No. 34****2 it recently represented a nurse in Toronto alleged to have committed $3500 in false physiotherapy, massage, naturopath and other related claims in September 2023. The plan member did not have receipts for the claims and was under audit. The Firm was able to resolve the matter secretly without her being terminated, charged or reported to the College of Nurses.

The Firm has also represented several plan members who have resigned, only to have insurance companies, their employer and law enforcement contact them later. In the Firm’s File No. 23****1, it defended the accused alleged to have defrauded $2500 in false benefits claims when she was contacted by investigators months after resigning from her employment in May, 2023. The matter was swiftly resolved prior to reporting to law enforcement in Durham Region. In the Firm’s File No. 64****2 it defended another employee who resigned 6 months prior, he was contacted by Durham Region Police when he retained the Firm. We were able to raise evidentiary problems with the prosecution and negotiated a resolution with the Officer in Charge to avoid charges, fingerprints and photos. This is an aggressive and risky strategy because it can involve the defence providing evidence which could be used against the accused.

The Firm was able to do the same in Airdrie, Alberta with local RCMP in August, 2022 where the the investigating officer wanted to meet both husband and wife in an alleged benefits fraud investigation. The officer was going to lay charges after they resigned months prior in an attempt to flee. The Firm was able to quickly halt the investigation with defence evidence, changing the officer’s grounds for arrest and saving the clients from being charged in its File No. 99****2.

1. Getting Legal Help Too Late

One of the most common errors people make when facing an insurance fraud investigation is failing to consult with legal counsel at the outset of the case. Many people have false hope that the problem will go away, or that the consequences will be minor. In reality, once an investigation is open, the problem will not simply go away. Similarly, the consequences associated with health insurance fraud can be significant, including being reported to a professional regulatory body, or being arrested and charged by the police.

In situations where an individual fails to get legal advice and takes steps to resolve the matter on their own, they risk making the matter much worse. This may include providing incriminating information to the insurance company. Once these steps have been taken by the accused individual, the case becomes much more difficult to resolve. Simply put, if counsel is retained too late in the investigation, there may be less that can be done to resolve the matter in a favourable manner. It is much more difficult to redo work than to do it correctly in the first place.

Let’s consider taxes. Where an individual attempts to avoid paying taxes without first consulting a tax lawyer they may end up committing tax fraud and finding themselves in trouble with the CRA. Once the CRA has discovered the fraud, it is much more difficult to resolve the issue. A tax lawyer can only do so much once fraud has already been committed and proven. Attempting to fix the issue oneself without professional assistance can lead to even bigger problems and legal fees. Once the CRA is aware of misconduct, there may be little a lawyer can do to help, as the damage has already been done. By consulting with a tax lawyer prior to making any decisions about an investigation, the individual can ensure they protect their rights prior. Similarly, with insurance fraud cases, it is important to consult with legal counsel prior to communicating with the insurance company to ensure the matter is not made worse by poor and emotional decision making.

2. Running Away Won’t Save You

Insurance fraud investigations take a long time. In some cases, the long periods between contact from the insurance company can lull people into a false sense of security. Many individuals believe that if the insurance company has not reached out for several months the matter must have resolved itself and gone away. This is almost never the case. The insurance company will never just “go away” when it comes to potentially fraudulent behaviour. While they may not contact you for several months at a time, this does not mean they are not still investigating.

Similarly, running away from the insurance company will not stop an investigation. Some individuals believe that if they leave their job the insurance company will not be able to find them or won’t bother going after them. This is untrue. It is not relevant whether you are still working for that employer, the insurance company will still attempt to collect on their losses.

Furthermore, for professionals such as nurses, doctors and teachers who are regulated by a College, being accused of defrauding your employee benefit plan may also trigger an investigation from the appropriate College. This, in turn, can impact an individual’s ability to practice in their given profession. In situations where an employee refuses to participate in the investigation in any way, the insurer will proceed without evidence from the accused individual, deciding in their absence.

3. You Could be Criminally Charged and/or Sued

A common misconception many people hold when dealing with an insurance fraud investigation is that the consequences will only impact their job. Many people believe the worst that can happen if they get caught defrauding their employee benefits is that they may face employment consequences. While it is likely that an individual caught defrauding their insurance benefits will face employment consequences, it is also possible for the individual to be criminally charged with fraud and/or be sued in civil court.

If an individual’s employer or the insurance benefit provider decide to report the alleged fraud to police, a benefit holder could be charged with either fraud under $5,000 or fraud over $5,000 depending on the value of the fraud. An individual who is convicted of either of these offences will have a criminal record which can have many negative implications on an individual’s life. Further, those who are convicted of fraud may face a period of incarceration.

Fraud Under $5,000

Where the Crown proceeds by summary conviction, an accused who is convicted will face a maximum of two years less a day in prison and/or up to a $5,000 fine. Where the Crown proceeds by indictment an accused will face a maximum of two years in prison upon conviction.

Fraud Over $5,000

Fraud over $5,000 is a straight indictable offence. Those who are convicted will face a maximum of fourteen years in prison.

It is also important to note that there is no limitation period on when an individual can be charged for fraud if the Crown elects to proceed by indictment. This means that an individual may be charged and convicted of a fraud offence years, or even decades after the offence is committed.

4. Forgoing Documents will make things Worse

In some situations, individuals may attempt to create receipts for services they did not receive or alter receipts for services they did receive. This is a big mistake. Not only will this not help your case, but it may lead to additional criminal charges being laid if law enforcement gets involved.

When receipts are provided to the insurance company in the course of a fraud investigation, they will be diligently verified with the service provider, confirming that the client attended the service provider on the date on the claim and paid the amount listed on the claim. If any of the details do not match, the insurer will deem the claim fraudulent.

Since insurers verify all receipts, it is very likely that an individual who submits fraudulent receipts will get caught. This may make the insurer more willing to contact law enforcement. If law enforcement is contacted as a result, the individual may face charges for fraud as well as charges for forgery and/or use, trafficking, or possession of a forged document