More and more cases are being publicized for successful prosecution of workers compensation fraud. The more prominent cases are usually publicized due to their large monetary values. However, fraud can occur at any level with it all adding up to a significant loss in dollar amounts. Additionally, there appear to be more findings against employers than employees which means success rates may be woefully low in actual employee values.
It’s almost impossible to find accurate records of defrauded amounts, cases reported, prosecutions, or convictions. Few organizations actually keep record and there is no federal central bureau or governmental entity compiling data. Restitution recovery amounts (when reported) are dismal. Most recovery amounts are less than 1% of the amounts ordered. Many employees are unable to repay and others simply ignore the order considering recovery punishment is seldom enforced.
Workers’ Comp Fraud Drives Up Premiums
Since recovery dollar amounts are low, insurance premiums are increased. The lack of restitution translates into claims impact by increasing experience and retro modifications. The employer always ends up paying more. Self-insured parties must retain more money for claims. State guaranty funds lose out and pass this on to employers left in the system.
It is in every employer’s best interest to prevent workers comp claims to help stop the whole potential fraud spiral from starting in the first place. There are several things an employer should do in order to keep claims at bay and protect their business from fraud:
- Hire the right employees. Contact previous employers. Check the references listed on their application. Complete a through pre-employment background investigation.
- Report all claims immediately. Make sure the injured employee is receiving proper treatment, benefits, and is compliant.
- Keep in contact with both the employee and the adjuster during the duration of the claim and push for a speedy recovery and return to work. Intercede if the injured employee has problems, and conversely cooperate with the adjuster if any suspicions arise.
- Investigate the claim. Visit the employee’s work environment/accident site. Talk with witnesses. Check all equipment involved. Address and correct any and all safety issues in the workplace to prevent further injuries.
- Train all managers and supervisors in proper policy and procedure for handling injuries.
- Be alert for common fraudulent claim filing: Monday morning, pre-layoff, pre-vacation, pre-holiday, unwitnessed claims should all send up red flags.
- Be sure all employees fully understand the workings of the compensation act. Explain their rights, benefits, and obligations as well as your own as an employer.
- Gain knowledge of traumatic injury and occupational disease. Learn normal recovery times, medical treatments, and average fees.
- Pull loss runs and review periodically for accuracy, proper payment, disability compliance, and injuries casually related to the current claim. Contact the adjuster for clarification of any discrepancies or issues.
- Obtain interface with unions or employee organizations for input and cooperation in preparing policy and procedure.
Preventing workers comp fraud starts with preventing claims. Gain more insight from insurance agents, loss control experts, lawyers, and adjusters.
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Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%. He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder of COMPClub, an exclusive member training program on workers compensation cost containment best practices.
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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.