Workers Comp Fraud Fastest Growing Insurance Scam in the U.S.

For the year 2000, the National Insurance Crime Bureau estimated workers compensation fraud was the fastest growing insurance scam in the U.S. and was costing the industry $5 BILLION PER YEAR. Yes, that’s billion, with a B.

As a point of comparison, in spring of 2010, Giorgio Armani was estimated to be worth $5.3 billion. Richard Branson of Virgin Airlines fame? A mere $4 billion.

In Pennsylvania, the Insurance Fraud Prevention Authority (IFPA) provides some astounding data. In 1997, Pennsylvania ranked second-highest in the incidence of workers comp fraud, at a cost of $180 MILLION PER YEAR. (WCxKit)

And — are you ready for this? –in 2008, 69% of arrests for workers comp insurance fraud were against the EMPLOYERS for failing to carry the required insurance. Didn’t see that one coming, did you?

The most common types of fraud, as per the Pennsylvania IFPA are:

Individual

1. faking an injury at work to get paid time off

2. exaggerating the severity of a legitimate injury to get additional time off work with benefits

3. reporting an injury as work-related when it actually occurred elsewhere

4. accepting alternate employment and not reporting it to the insurance company, concealing income from another job, or lying about being able to return to work

Employer

1. understating the company payroll to reduce insurance premiums

2. claiming employees as independent contractors

3. lying about employee classification codes to lower premiums

4. failure to carry workers’ compensation insurance

Some prevention guidelines

To decrease individual fraud, the employer should follow the following procedures:

1. Report ALL injuries as soon as possible

2. Provide information to all injured workers specifying their rights and responsibilities in the workers compensation process and advise them every claim will be investigated

3. Follow your established reporting procedure, including reporting all claims to the carrier within ONE business day and to your state workers comp authority

4. Refer all claims to medical case management for nurse triage and recommendations

5. Obtain statements from any witnesses

6. Check to see if the injury was caught on your surveillance devices, if appropriate

7. Take pictures of damaged equipment, e.g., vehicle involved in a collision

8. Make sure your claims handler investigates ALL claims

To avoid employer fraud, all employers must:

1. Carry the required workers compensation insurance. Check with your insurance broker, state workers compensation bureau and/or attorney if you’re unclear.

2. If your employees cross state lines, make sure your workers comp insurance does, too!

3. Periodically review your employee class codes, employment status and company payroll so that you are providing accurate information (WCxKit)

Overall, all parties involved with workers compensation claims need to recognize that any time they provide false information, they are committing an act of insurance fraud, and that the states are taking action against these cases. Ignorance is not a defense, especially for the employer or insurer.

Author: Kelly Haile, RN, CCM, WCCM is an experienced Nurse Case Manager who advocates working closely with each employer to refine their Workers' Comp program to provide better post-injury care, excellent medical case management and timely communication. We provide services primarily in the PA, NJ, DE and MD areas. You can reach Kelly in her role as Director of Case Management at NursePartners, LLC, by phone at 610-323-9800, fax 610-323-8018, Email: khaile@nptrs.com. or www.nursepartners.org/medical-case-managemen.

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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.