As benefit accounts continue to evolve, so does the responsibility that comes with administering them. At its core, this industry centers on the movement of participant funds within a structured and regulated environment. And wherever money moves, safeguards naturally need to follow.

What’s changing isn’t that fraud has suddenly appeared, but that the ecosystem has grown in scale and complexity. With more account types, more dollars in play — especially in maturing vehicles like HSAs — and more digital access points, the space is drawing increased attention. That shift simply means fraud prevention is becoming a more visible and necessary part of running a modern benefits program.

Understanding the points where fraud enters the process makes it much easier to take practical, effective action.

Healthcare payment fraud is estimated to range anywhere from $17 billion to $107 billion annually.¹ Even when narrowed to consumer-directed healthcare, the financial and emotional impact remains significant.

What has changed most is not just the scale, but the nature of the threat. Fraud today is often carried out by organized groups that operate with structure and intent. These groups invest in tools, purchase stolen data, and use tested scripts to target individuals and organizations. In many cases, fraud isn’t improvised; it’s planned, repeatable, and designed to scale.

That shift makes it important to think less about isolated incidents and more about how fraud moves through the system.

Across the benefits ecosystem, fraud most often enters through four areas:

• The participant
• The platform
• The administrator
• The broker or employer

A single weakness in any one of these areas can be enough. That’s why a broad, coordinated approach is necessary.

Participants are a frequent target because their accounts combine several attractive characteristics. HSA and FSA balances represent real, accessible funds. At the same time, these accounts may be reviewed less frequently than traditional bank accounts, which can extend the time it takes to detect an issue.

The broader ecosystem also holds a large amount of sensitive data and relies heavily on trust. Participants are more likely to respond to communications that appear to come from a healthcare provider, employer, or benefits administrator.

Fraud tactics in this area commonly include phishing, social engineering, SIM swapping, and credential theft — all of which can lead to account takeover.

Practical steps that help reduce risk include ongoing education, encouraging regular account monitoring, enabling multifactor authentication, and providing clear alerts when account details change or transactions occur.

Platform-level risk often centers on account access. Once credentials are compromised, fraudsters can move quickly to change account details and extract funds.

As new technologies such as IVR systems and AI-driven tools become more common, they can introduce additional exposure if safeguards are not built in. Reducing platform risk depends on a combination of controls. Multifactor authentication is foundational, but it is most effective when paired with monitoring of device and behavioral patterns, alerts for key changes, and added verification at higher-risk moments.

At the administrator level, fraud often doesn’t involve breaking into a system; instead, it works through existing processes. Gaps such as inconsistent procedures, unclear thresholds for review, over-reliance on automation, or insufficient training can all create opportunities.

Because benefits administration involves the movement of funds, onboarding of new groups, and management of sensitive data, strong operational controls are essential. Fraud prevention at this level depends on maintaining disciplined, repeatable processes and continuously evaluating where vulnerabilities may exist as the environment changes.

Mitigating risk requires a layered operational approach. Standardized workflows, defined escalation paths, oversight of unusual activity, and regular staff training help strengthen the administrator’s ability to identify and respond to suspicious behavior early. Independent verification practices, ongoing monitoring, and periodic review of internal controls are equally important in helping administrators adapt as fraud risks continue to evolve.

Brokers and employers influence who enters the ecosystem and how much scrutiny is applied during onboarding. That makes this another important control point.

Bad actors may exploit gaps in oversight, reliance on assumed trust, and inconsistent onboarding processes. Unusual account activity or inconsistencies in employer or participant information can be early indicators that additional review is warranted.

Effective controls in this area include thorough employer and banking verification, clear expectations for broker due diligence, and early monitoring of account behavior. Even simple checks, such as validating business information against independent sources, can help identify issues before they escalate.

No single control is sufficient on its own. Organizations that mitigate fraud rely on multiple layers that work together. These layers typically include data, technology, processes, people, and education, all aligned around the ability to prevent, detect, recover, and remediate fraud events.

This approach also requires ongoing attention. Fraud prevention is not a one-time effort. It depends on regularly reassessing controls, testing assumptions, and adapting to new tactics.

There’s always a tradeoff between security and user experience. Additional controls can introduce friction with the participant, while fewer controls can increase exposure.

For that reason, it’s important for organizations to define their tolerance for fraud risk and make deliberate decisions about where to add safeguards. Clear communication with participants and employers can help maintain trust, especially when additional verification steps are required.

Fraud in the benefits ecosystem is increasing, but it’s not unpredictable. It follows patterns and tends to exploit known gaps. For benefits administrators, that creates an opportunity: By focusing on the areas where fraud is most likely to enter and strengthening controls in those areas, it’s possible to mitigate risk.

For participants, that reduction in risk means fewer account takeovers, faster detection when something does go wrong, and greater confidence that their healthcare dollars are protected. It also reduces the disruption and stress that come with resolving fraud after the fact.

For employers, it translates to lower financial exposure, fewer costly recoupment issues, and stronger trust in the benefits program they are offering to employees. It also helps protect brand reputation and reduces the operational burden of managing fraud incidents.

Even incremental improvements — such as better verification at onboarding, clearer escalation paths, or more consistent monitoring — can shorten the window in which fraud can occur. Over time, those improvements compound, making your ecosystem a harder target and a more secure environment for everyone involved.

Sources:

¹Sift, 2025; TransUnion, 2025. Estimated global ATO fraud value of ~$17B-$107B annually; range reflects different measurement approaches, with the upper bound inferred as 20% of $534B in annual global business fraud losses. Directional only.