Workers’ compensation fraud continues to be a problem. Members of the claim management team need to be aware of this problem and develop a plan for its prevention. They also need to create a plan to remedy the situation. By taking steps to stamp out workers’ compensation fraud, programs will become more efficient and ultimately reduce costs program-wide.
Defining the Issue – What is Workers’ Compensation Fraud?
Malingering or showing signs of pain magnification is not workers’ compensation fraud. Instead, it is defined by state law, and investigated and prosecuted by a state agency. Other civil ramifications can also apply.
According to Webster’s Dictionary, “fraud,” occurs “when a person knowingly or intentionally conceals, misrepresents, or makes a false statement to obtain” workers’ compensation benefits or coverage, “or otherwise profit from the deceit.”
Workers’ Compensation fraud is not limited to injured employees. Employers can commit acts of fraud by:
- Misrepresenting company payroll on underwriting forms;
- Paying an employee cash or not accurately reporting wages;
- Not accurately reporting their payroll staff; and
- Intentionally not reporting proper employee work classifications.
In sum, an employer commits fraud anytime it intentionally undertakes an action to reduce the cost of its workers’ compensation insurance premium.
Common Examples of Workers’ Compensation Fraud by Injured Employee’s
There are numerous examples of workers’ compensation fraud committed by an employee in the context of a claim. Some of the more common examples include:
- Filing a claim for an injury that never occurred, or occurred outside the workplace;
- Delays in reporting a work injury with no explanation;
- Reporting an injury that occurred during another activity, such and an employee intentionally inflicting an injury and making a claim for benefits;
- Misrepresenting the nature/extent of a work injury to a medical provider; and
- Making a claim related to an injury that occurred following a job termination, layoff, or end of seasonal work.
Danger Ahead – Common Red Flags of Workers’ Compensation Fraud
There are numerous red flags members of the claim management team should look out for when investigating a claim. It is important to work as a team and share information to help less experienced claim handlers detect it and avoid paying unnecessarily on a claim.
- Employment changes and terminations: Be mindful of claims that arise at the same time an employee changes positions within an employer or is terminated/seasonally laid off. A complete review of whether the injury/incident was reported prior to termination or whether the employee was near the end of their unemployment benefits prior to reporting a claim is key.
- Beginning of week injuries: It is often not a coincidence an employee is injured first thing Monday morning after arriving at the workplace. This should make anyone scrutinize a claim to determine if it in fact occurred over the weekend.
- Unwitnessed incidents: This should be an area of concern when the claim is made by someone who would typically not be working in a particular area or performing a certain activity. A review of security video should be a part of any investigation to monitor the activities of the employee immediately prior to the incident.
- Experienced claimants: These are individuals with a long and well-documented history of work injuries and other insurance claims. A review of an insurance bureau index can track claims histories of a person and be a part of an investigation.
Other red flags include employee’s who give differing stories, work other side jobs (often as independent contractors), or may be experiencing financial difficulties. It is also important to understand what hobbies or recreational activities an injured employee partakes in away from the workplace. This can include someone playing in a sports league or enjoys “extreme sports.” Proactive claim teams should have a plan in place to identify potential fraud issues and undertake a more exacting investigation.
Members of the claim management team need to be mindful of workers’ compensation fraud in all claims. In addressing this issue, there are many red flags a claim handler must be aware of before accepting a claim and paying benefits. By doing this, one can ensure that all valid claims are paid in a timely and correct manner. It can also improve program performance and efficiency.
Author Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%. He works as a consultant to large and mid-market clients, is a 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 & lead trainer of Amaxx Workers’ Comp Training Center.
Workers’ Comp Roundup Blog: https://blog.reduceyourworkerscomp.com/
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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.