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Employee Benefits Fraud in Canada

Posted on by Immix Group

Employee Benefits Fraud in Canada: Awareness, Impact & Prevention

Lindsay Byrka, CFP® is Vice President at the Immix Group. She partners with employers to source and manage group life and health plans, and group savings and retirement plans, working with Canada’s leading insurers to support transparent pricing and flexible plan design. LinkedIn.

March is Fraud Prevention Month in Canada. Did you know that insurance fraud in Canada is estimated in the billions annually? A portion of that occurs within employer-sponsored group benefits. Industry sources have long suggested that benefits fraud may represent anywhere from 2–10% of total claims (estimates vary and are difficult to measure precisely).

The financial impact is direct. For most benefit plans, premiums are driven directly by claims experience. Every dollar paid out for an invalid claim, is a dollar that ultimately flows back into renewal calculations.

Who is committing benefits fraud?

More frequently than you might believe, we receive one of the dreaded notices: “We’re sorry to inform you that our auditors have discovered fraudulent claiming activities by a plan member.”

Despite how often we learn of fraud, we are always somewhat dumbfounded. It is often who you least expect (i.e. high-income professionals). Usually the amounts are small — $100 here, $150 there — but the behaviour is deliberate and surprisingly casual.

People speak openly about vendors who will “create a receipt.” One classic example? Receiving designer sunglasses (not prescription!) with an eyeglass receipt. Most individuals would never fabricate a receipt themselves — yet they barely blink at accepting what is, in effect, a falsified one. We often learn of this here in Vancouver, but also with clients across all provinces. It’s unfortunately common.

In one recent case in Ontario, a plan member submitted massage therapy claims for appointments that never occurred. The fraud was uncovered when analytics showed the same practitioner had already billed for treating a different patient — under a different employer’s plan — at the exact same time. It was quickly determined that one of the plan members was guilty of submitting false claims.

Why would plan members risk benefits fraud?

If someone believed there was very little chance of getting caught, would they submit a claim for $100 for a service they never received? For some, the answer is yes. Benefits fraud here in Canada is often rationalized as minor — more like speeding or jaywalking than theft. It can feel technical, harmless, even commonplace.

But benefit plan fraud is not minor. The well-known Toronto Transit Commission fraud case led to more than 200 employee dismissals and multiple criminal convictions including jail time.

In this case, an orthotics provider issued receipts to TTC employees for either inflated amounts or without delivering a product or service. The orthotics store then split the insurance payments with the plan member. It was only discovered through a tip to the TTC. The TTC even sued the insurance provider, blaming them for not discovering the fraud. The consequences can be serious and career-altering. So why do people do it?

Common reasons people commit benefits fraud include:

  • They believe they won’t get caught. The amounts seem small and low-risk.
  • They view it as minor, “not a big deal.” It doesn’t feel like real fraud.
  • Others are doing it, and it seems commonplace.
  • They feel entitled. A belief that they are “owed” something from the plan.
  • They misunderstand who pays. Many don’t realize it’s ultimately their employer — not just an insurer — absorbing the cost.
  • Ease of submission. Digital claims processes and providers that don’t require receipts can create a false sense of security and anonymity.

In reality, fraud detection systems are sophisticated, and any claim can trigger an investigation.

Who commits benefits fraud and what does this look like?

Fraud can be committed by plan members, by providers, through collusion between providers and claimants, or by third party bad actors.

Examples of Health, Dental and Disability Fraud

  • Billing for services not rendered- the plan member never received the services, yet they submit a claim using a real practitioner’s details, in order to receive back funds
  • Claims submitted under a licensed provider’s name when services were delivered by someone else (i.e. an unlicensed practitioner).
  • Inflated procedure codes- the dental office bills the insurer for more time than they actually took, or more expensive procedure codes than the actual services.
  • Coverage ‘stacking’- one member of a family has maxed out their annual limit, so the provider now submits the claim under a dependent’s name instead.
  • Dual coverage abuse- submitting the same claim to multiple plans, without acknowledging payment from the other plan (i.e. being reimbursed twice for the same service). Not following COB rules.
  • Ineligible dependents posing as eligible dependents (i.e. listing a niece, nephew as dependent child).
  • Organized provider fraud rings- accessing benefits programs via employees at provider offices (i.e. the TTC incident)
  • For disability claims, misrepresenting your ability to work, the extent of your injuries, or undisclosed employment while receiving disability benefits are all examples of benefits fraud.

How does benefits fraud negatively impact employee benefit program costs?

At the Immix Group, we spend a lot of time explaining pricing to employers in our Client Community, and coming up with strategies to provide comprehensive benefits, but with sustainable pricing. Our clients understand that claims (relative to premiums paid) are an important factor in pricing for most traditional SMB benefit plans.

In short, when money is paid out to people and practitioners for services and supplies that were not rendered or under other invalid circumstances, it drives program costs.

  • Fraud increases claims costs, which drives the incurred loss ratios on the plan (ratio of the claims paid out, to the premiums collected)
  • Higher incurred loss ratios result in premiums increasing.
  • Less money is available to pay for true expenses. Employers must absorb increases or make plan design changes to reduce costs.
  • The added cost of needing to audit, track, police, invest in technology etc. just to prevent and identify fraud additionally drives administrative costs industry-wide.

Ultimately, employers absorb much of the impact, as they are primary funders of benefit programs. Employees are also impacted if there is cost-sharing for the benefits premiums. Fortunately, the insurance industry has significantly strengthened its detection capabilities.

What are benefits insurance providers doing to prevent and detect fraud?

The good news is that benefits insurers are taking action. Fraud prevention technology has advanced significantly in recent years, with heavy investment in data analytics, artificial intelligence (AI), and collaborative industry initiatives to detect suspicious activity earlier and more accurately.

While digital claims submission may seem like it would make fraud easier, it actually strengthens detection efforts. Electronic claims create centralized, structured data that can be analyzed in real time. This allows insurers to identify unusual patterns, compare activity across providers, and flag concerns much faster than in paper-based systems.

Today’s fraud prevention efforts include:

  • Advanced analytics and predictive modeling to detect unusual claiming patterns
  • AI-based anomaly detection to flag claims that don’t align with typical behaviour
  • Cross-provider and cross-carrier data comparisons to uncover duplication or coordinated activity
  • Provider audits and verification processes to confirm services were actually delivered
  • Collaboration across the industry, including initiatives led by organizations like the CLHIA to pool data and strengthen fraud detection
  • Partnerships with law enforcement when criminal activity is identified

Insurers also monitor for practical warning signs such as:

  • Unusual spikes in claims from a single provider or clinic location
  • High-cost claims clustered in one geographic location
  • Repeated maximum claims submitted early in the benefit year
  • Consistent paramedical claims hitting annual limits
  • Multiple employees at one organization using the same provider

At the same time, insurers recognize that fraudsters are becoming more sophisticated — using digital tools to fabricate receipts or manipulate systems. This is why fraud prevention is an ongoing investment. Overall, the industry’s approach is proactive, collaborative, and increasingly technology-driven — helping protect the long-term sustainability of employee benefit plans while ensuring legitimate claims are paid quickly and efficiently.

What can employers do to prevent benefits fraud?

The good news is employers do not need to initiate their own audits. Insurers are already monitoring plans at multiple levels. The most effective role employers can play is fostering a culture of honesty, awareness, and accountability. Employers can:

  • Clearly communicate that benefits fraud is not victimless. It impacts plan sustainability and future costs
  • Reinforce that fraud is a serious offence that can lead to termination and legal consequences
  • Maintain a written policy outlining expectations and repercussions
  • Educate employees on how benefits work and who ultimately funds the plan
  • Encourage ethical decision-making and speak openly about integrity
  • Ensure employees know how to report suspected fraud

Fraud often begins with the mindset that “everyone does it” or “it’s not a lot of money.” Leadership tone matters. When organizations consistently promote transparency and accountability, it strengthens the long-term health of the benefit plan for everyone.

Want to learn more about what you can do? CLHIA has excellent information, as do many insurance carriers including Pacific Blue Cross, Manulife Financial, SunLife Financial, and Canada Life.

At the Immix Group, we are happy to help employers craft communication pieces to distribute to staff, or to educate HR staff and employees on this topic. As always, please feel free to reach out.

FAQs

  1. How common is benefits fraud in Canada?

    It’s estimated in the billions annually, although it’s difficult to measure.

  2. Who commits benefits fraud?

    Plan members, providers, or both working together — and sometimes third parties.

  3. What are common examples of fraud?

    Claiming services not received, inflating charges, submitting duplicate claims, or misrepresenting eligibility.

  4. How does fraud impact benefit plans?

    It increases claims costs, which can lead to higher premiums (and subsequently, less funds available for legitimate claims).

  5. What can employers do to help prevent fraud?

    Promote a culture of honesty, clearly communicate that fraud has serious consequences, educate employees on how plans are funded, and encourage ethical decision-making.

Key Takeaways

  • Benefits fraud is more common than many realize, can have a meaningful financial impact on employer-sponsored group benefit plans, and can be detected.
  • Fraud is not “victimless.” Increased claims costs ultimately affect employers and employees through higher premiums.
  • Detection systems are sophisticated and increasingly powered by data analytics and AI — suspicious activity is often identified quickly, with insurers and other organization coordinating prevention and detection efforts.
  • Fraud can involve plan members, providers, or organized activity, and the consequences can be serious and career-altering.
  • Employers play an important role by reinforcing clear expectations, promoting integrity, and building awareness around responsible use of benefit plans.

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Lindsay Byrka

Lindsay Byrka, CFP® BA, BEd

Vice President, Immix Group: An Employee Benefits Company
A Suite 450 – 888 Dunsmuir St. Vancouver V6C 3K4
O  604-688-5262 

E lindsay@immixgroup.ca
W www.immixgroup.ca

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Your Benefits, Your Way: The “101” on Health & Wellness Spending Accounts

Posted on by Immix Group

by Lindsay Byrka | B.A., B.Ed, CFP | Vice President

If you’re a Canadian business owner looking to offer flexible, tax-effective coverage that empowers your team, an HSA could be the missing piece of your benefits offering.

In this guide, we’ll break down what an HSA is, how it works, and why businesses like yours are making it a staple in their employee benefits package.

Health and Wellness Spending Accounts are Increasing in Popularity

Most people have heard of Health Spending Accounts, which have become increasingly popular over the past decade or so, with around 40% of plans offering some form of HSA.

This is in response to multiple generations in the Canadian workforce and their diverse needs, the increasing desire for flexibility and choice, and the simplicity of offering this predictable-cost benefit.

Most Canadian carriers now facilitate not only Health Spending Accounts (non-taxable, for items on the CRA’s Eligible Medical Expense listing) but also Wellness or Lifestyle Spending Accounts (taxable items that fall outside the CRA listing). In addition, many specialty providers offer robust, low-cost, user-friendly platforms for Health and Wellness Spending Accounts with many customizations available.

What is a Health Spending Account? 

A Health Spending Account is set up by an Employer and provides a pre-determined annual allocation to an Employee, to be used for CRA-eligible medical expenses. Employees have the flexibility to choose which expenses are submitted through the Health Spending Account. Employees receive reimbursement for eligible claims on a tax-free basis. As the Employee uses their account, their available balance reduces.

Employers pay for the amount of the expense, plus an administrative charge for adjudication, and any applicable taxes on the admin fee. The total expense is tax-deductible to the Employer. To be CRA-compliant, Health Spending Accounts need to be facilitated via a third-party provider.

What is a Wellness Spending Account (WSA)?

Also known as a Lifestyle Spending Account (LSA), the primary difference from a Health Spending Account is WSAs/ LSAs are for taxable expenses (i.e. those not found under the CRA listing). The funding and cost for the Employers are the same as with a HSA, and Employers can also deduct the expense. The main difference is that expenses reimbursed through a Wellness/ Lifestyle Spending Account are a taxable benefit to Employees.

What is a Flexible Spending Account?

This simply refers to an account where the employee has both HSA and WSA reimbursement available. Typically, they can choose what percentage of the total allocation falls into each of the buckets (taxable or non-taxable) as described.

health spending account vs. wellness spending account Canada chart by Immix Group

Collectively, many people refer to these accounts as “Health Spending Accounts” or “Health Care Spending Accounts” or by the American term “Health Savings Accounts,” although they may offer the ability to remit expenses under each tax bucket.

The Benefits: Why More Employers are Implementing Health Spending Accounts

From our perspective as benefits advisors, the answer to this is twofold: employees love Health Spending Accounts for the flexibility and choice, and employers find them cost-effective, simple and practical. The benefits are vast:

  • Provides employees with choice and flexibility as to how benefit dollars are spent.
  • Supplements insured benefits program reimbursement for example topping up an insured benefit item where a dollar limit has been reached.
  • Cost control for employers; there is an upper limit per year and a defined admin fee, so no surprises!
  • Ability to highly customize including with classes of coverage with varying levels of allocation.
  • High value to invest in wellness programs, with research indicating 300-400% ROI.
  • Tax advantaged as a fully deductible expense for employers.

What sorts of items can be covered through a Health Spending Account?

HSAs can cover a wide range of expenses as determined by the CRA Eligible Medical Expense Listing similar to traditional health benefits, including:

  • Dental treatments and orthodontics
  • Prescription drugs and medical devices
  • Paramedical services like massage therapy, physiotherapy, and acupuncture
  • Vision care, including glasses and laser eye surgery
  • Medical equipment, supplies or surgeries
  • Mental health practitioners
  • Insurance premiums, deductibles and coinsurance from insured plans

Wellness Spending Accounts can cover nearly anything the employer desires! Common expenses include:

  • Gym memberships, fitness classes
  • Activity passes such as ski passes
  • Children’s sports
  • Childcare expenses
  • Vitamins and supplements
  • Fitness equipment
  • Contributions to RRSPs
  • Medical practitioners excluded by the CRA such as alternative health practitioners

Health Spending Accounts vs. Traditional Insured Benefits

At the Immix Group, we firmly believe that Health & Wellness Spending Accounts should be considered as a supplement to a more robust insurance program that offers coverage for prescription drugs, emergency out-of-country travel, dental, and other more catastrophic insurance coverage such as life, critical illness and disability.

With the defined dollar limit provided via a Health Spending Account, it works best as a supplement to provide flexibility and choice to a base insurance plan. In short:

Traditional Insured Plans:

  • Pre-defined coverage with limits on certain services but typically covers catastrophic expenses at first dollar.
  • Best for drugs, travel, disability, and items where true “insurance” is needed to guard against the unknown.

Health & Wellness Spending Accounts:

  • Top-up insured programs where limits are in place, or cover un-insured items.
  • Flexible spending based on individual needs.
  • Allow reimbursement for wellness and lifestyle expenses not included through traditional insured benefits programs.

Key Features: With a Health Spending Account you can:

  • Implement classes with different allocations available for different employee classifications.
  • Allow one-year carry forward of unused balances (one year only, per CRA).
  • Implement coinsurance (i.e. 50% reimbursement up to a total limit).
  • Define the items covered within a Wellness Spending Account.
  • Implement dedicated accounts to target specific areas (i.e. PPE account, Mental Health account, Childcare account).
  • Easily pull reporting for tax purposes.
  • Make changes to the allocation you provide at the start of each year.

A Predictable, Low-Cost Benefit for Employers

One of the main reasons employers are drawn to Health Spending Accounts is the cost predictability and transparency.  

  • Low administration cost, usually ranging from 3-10% on submitted expenses (plus applicable taxes on the admin charge only).
  • Ability to change the offering each year, to adjust to budget constraints.
  • Ability to implement ‘use it or lose’ rather than the ability to carry forward unused balances in order to have even greater cost predictability in a given period.

On average, employees typically spend around 60-70% of their allocated amount, making this a good estimate for employers looking to budget. Ultimately, the ‘worst case scenario’ (or best case scenario, depending on how you think about it!) is that all employees use 100% of their allocation.

A Hidden Perk: The Tax Advantage

Health & Wellness Spending Accounts aren’t just flexible — they’re smart.

  • For Employers: Contributions are 100% tax-deductible
  • For Employees: Reimbursements are tax-free for Health Spending Accounts

Although Wellness Spending Account reimbursements are a taxable benefit, most employees still see this as a huge perk as the cost of paying the tax on an expense is of course a small amount relative to paying out-of-pocket for the same item. For employers, providing funds via an HSA is less costly than the equivalent in salary.

HSA vs WSA

What kind of Employer should implement a Health Spending Account?

The short answer? Every size of business, even a one-person incorporated company. While we do believe in providing a base insurance program to ensure proper protection against major expenses, there is a place for a Health Spending Account whether you are a two-person tech start-up in Vancouver British Columbia or a larger, established employer in Ontario.

Implementing a Health Spending Account can be a game-changer for:

  • Small businesses that want flexible coverage and don’t yet have the budget for a traditional insured plan.
  • Growing teams looking to offer competitive benefits.
  • Companies with diverse needs where one-size-fits-all plans don’t cut it.
  • Companies that want to customize their offering through targeted Health Spending Accounts.

 

How to Set Up a Health and Wellness Spending Account

First, you can set up a Health Spending Account with either a dedicated specialty provider (such as myHSA) or as an add-on to your program with your insured benefits provider.  

An advantage of implementing a program with your insurance provider (for example Manulife, Sunlife, Pacific Blue Cross) is the ability to more seamlessly direct unpaid claim balances towards the Health Spending Account. However, insurance providers tend to be more costly and less flexible with account parameters.

Our preference is to work with a dedicated HSA provider.

HSA 9

Getting started is easier than you might think.

At the Immix Group, we help businesses build benefits plans that are clear, custom, and transparent — and that includes HSAs.

We help you to:

  • Set a Budget: Choose how much you’ll contribute per employee on an annual basis.
  • Establish Rules: Decide what expenses are eligible, and features such as whether to include the ability to carry forward unused balances, whether to allow employees to include expenses for dependents etc.
  • Communicate Clearly: Educate your team on how to use their HSA effectively, in conjunction with any other benefits programs in place.
  • Adjust as Need: Employees will submit expenses and be reimbursed, thereby reducing their available balance. The plan sponsor will have the ability to review the overall usage and make any changes to allocations or customizations, as needed (typically after the plan has been in place for one year).

 

Is an HSA Right for Your Business? Let’s Chat!

If you’re ready to explore how a Health & Wellness Spending Account can help you control costs while giving your team greater flexibility, we’re here to guide you. Reach out to us at info@immixgroup.ca or (604) 688-5559  – we love to hear from you!

Top 10 FAQs

An HSA is an employer-funded account that allows employees to be reimbursed for CRA-eligible medical expenses on a tax-free basis.

Employers allocate a set amount per year to employees, who then use it to cover eligible health expenses. Employers only pay for actual claims submitted, plus administrative fees.

A WSA (or LSA) covers taxable expenses such as gym memberships and wellness programs. Unlike an HSA, reimbursements are considered taxable income for employees.

While possible, HSAs are best used as a supplement to traditional benefits to provide more flexibility and customization.

Minimum amounts typically start at $250 per employee, with executive-level accounts often reaching tens of thousands per year.

Yes, all employer contributions to an HSA are 100% tax-deductible, making them a cost-effective way to provide benefits.

Employers can allow a one-year carry forward of unused balances, but beyond that, the funds expire as per CRA rules.

Any incorporated business can set up an HSA, including small businesses, self-employed individuals, and large companies. An HSA can be set up for just one person, but the business must be incorporated, and the individual must receive T4 income. Shareholders typically cannot participate.

Eligible expenses include dental treatments, prescription drugs, paramedical services, vision care, and medical equipment, among others.

Employers can set up an HSA through an insured benefits provider or a specialty provider, customizing rules and contribution levels as needed.

This restriction is due to compliance with CRA regulations, which require allocations to be determined in advance.

Key Takeaways

  1. HSAs Offer Flexibility & Choice
    Employees can use HSAs for a wide range of medical expenses based on their individual needs, making them more adaptable than traditional one-size-fits-all benefits plans.
  2. Cost Control & Predictability for Employers
    Employers can set defined contribution limits, ensuring there are no surprise costs. The ability to adjust annual allocations or enforce a “use-it-or-lose-it” policy adds further financial control.
  3. HSAs Are a Tax-Effective Way to Provide Benefits
    Contributions are fully tax-deductible for employers, and reimbursements are tax-free for employees—making HSAs a more cost-efficient alternative to salary increases.
  4. WSAs Can Boost Employee Engagement & Wellness
    By covering wellness-related expenses like fitness memberships, mental health services, and even childcare, WSAs help promote employee well-being and work-life balance.
  5. Combining HSAs & WSAs Maximizes Employee Satisfaction
    Offering both allows employees to balance healthcare needs with lifestyle benefits, increasing overall satisfaction and retention. Employers can customize coverage to align with company culture.
  6. Ideal for Small Businesses & Large Enterprises Alike
    HSAs and WSAs are scalable solutions, benefiting businesses of all sizes—from startups looking for an alternative to traditional insurance to large corporations adding customization to their benefits package.
  7. Implementation is Simple with the Right Provider
    Employers can integrate an HSA/WSA into their benefits program seamlessly through an insurer or third-party provider, with many offering user-friendly digital platforms for easy claims processing. Using a third party ensures compliance with tax regulations, simplifies administration, and helps maintain proper documentation for CRA purposes.

Read more

 

Lindsay Byrka

Lindsay Byrka, CFP® BA, BEd

Vice President, Immix Group: An Employee Benefits Company
A Suite 450 – 888 Dunsmuir St. Vancouver V6C 3K4
O  604-688-5262 

E lindsay@immixgroup.ca
W www.immixgroup.ca

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