Fraud and Consumer Benefit Accounts: Expert Tips, Trends, and Tech Advancements

Consumer benefit accounts have gained widespread popularity, giving employees greater control over their healthcare expenses and employers a tax-advantaged way to expand benefits. However, the rise of these accounts also attracted the attention of people looking to exploit these financial resources. 

The great news - there are controls in place for limiting fraud before it even starts, and there are more advancements to come. Let’s look at challenges and solutions related to fraud in consumer accounts while highlighting the latest technology that helps companies—and consumers—become more secure.

Fraud problems and solutions

Consumer benefit accounts, including health savings accounts (HSAs), flexible spending accounts (FSAs), health reimbursement arrangements (HRAs),  let workers use pre-tax dollars for qualified medical expenses. These accounts, like any financial account, also create opportunities for fraud, especially among older, retired populations who are frequently at risk. Common types of fraud in consumer accounts include identity theft, phantom claims, and fraudulent receipts, which can cause losses for account holders, employers, and healthcare providers.

The following practices help keep accounts secure. Elevate builds these best practices into each and every account. 

• MCC Code Restrictions: Implementing Merchant Category Code (MCC) restrictions is a valuable technique. By limiting consumer account usage to healthcare-related MCCs, such as medical providers, pharmacies, and clinics, the potential for unauthorized spending at non-healthcare locations is minimized.‍
• Receipt Validation: Using technology to validate and cross-reference digital receipts can be effective in combating fraud. AI and optical character recognition (OCR) technology can quickly verify the legitimacy of receipts submitted by account holders.‍
• Authentication Protocols: Using authentication processes for CDH account holders helps deter fraud. Implementing strong, multi-factor authentication methods can significantly reduce the risk of unauthorized access.‍
• Real-Time Transaction Monitoring: The ability to monitor account transactions in real-time is helpful for identifying suspicious activities. This involves tracking the types of expenses, transaction amounts, and the locations where the funds are used. Deviations from typical spending patterns can trigger alerts for an investigation.

Advanced technology solutions add security

In addition to Elevate’s dedication to combatting fraud through traditional methods, our modern administration platform specifically combats fraud in consumer accounts by using the latest innovations in technology. 

1. AI and machine learning: Elevate uses AI and machine learning algorithms within our system to continuously analyze transaction data, identifying suspicious patterns and anomalies. This allows for early detection of fraudulent activities and triggers alerts for further investigation.

2. Chipped cards, mobile apps, and digital wallets:  Elevate’s solution includes chipped cards for greater security, as well as advanced security features and real-time transaction updates through push notifications to keep consumers aware of account activity. Digital wallets, while often touted as a convenience feature, also enhance security. Digital wallets are validated with the wallet provider (Apple or Google), providing an added layer of security 

3. Data encryption: Data encryption protocols safeguard sensitive account information. Elevate encrypts and ensures secure data storage and transmission, reducing the risk of data breaches.

The Elevate advantage

Not only does Elevate use the latest technology to prevent and protect our members, but we also have an excellent record of detecting and fighting fraud within our (virtual) four walls. Why? Because we’re experts in the consumer benefits industry, with an average of over 15 years’ experience across our team. Armed with this expertise, we have a track record of proactively controlling numerous exploits, and we’ve built out processes and controls to prevent fraud before it starts.

• One prevalent fraud tactic within the industry involves individuals registering on behalf of users using data obtained from the dark web. To counteract this, Elevate requires card information during registration to enhance security. 
• Another common issue is ACH kiting, where individuals attempt to exploit funds availability timing with ACH contributions. Elevate’s response to this challenge includes implementing smart delays in funds availability and placing holds on outgoing transactions. 
• Additionally, to combat any potential fraud from clients’ service teams, Elevate has built operational best practices and controls, including the separation of duties, to prevent opportunities for incidents.

“The number of fraudulent transactions we have seen is less than one percent – actually 0.045%,” said Elevate COO Scott Rose. “It’s an extremely low incident rate.”

Fighting fraud: Elevate in action

Elevate’s fraud team is always on alert. Crista Geitzenauer, Elevate’s Senior Director of Card Operations, recently spotted a fraud event when an unauthorized individual quickly and repeatedly tried to withdraw HSA money from an ATM. Geitzenauer immediately noticed the inconsistency during one of her systematic reviews of card transactions and declines.

“We noticed that a particular cardholder had a number of declines, it appeared that he was trying to swipe and get money but kept going over the limit of what the card had available,” said Geitzenauer.

Elevate immediately locked the card to prevent losses and contacted the cardholder’s employer.

“The cardholder hadn't even seen this activity yet,” said Geitzenauer. “We saw the activity, took action to prevent any further fraud, and initiated contact with the participant via our client. We were able to remove the onus from the member and help make sure he didn’t experience any final financial hardships.”

With a sharp, automated and tech-enabled focus on fraud prevention, Elevate keeps fraudulent transactions extremely low. As technology continues to advance, Elevate will leverage it to safeguard the financial well-being of our account holders.

Want to learn more about how Elevate can increase the security of your program? Let’s chat.