Fraud has always been a significant driver in workers’ compensation program costs. It is estimated that annually $30 billion is wasted in the system due to employees and other collaborators who perpetuate schemes that otherwise should not have been paid. Now is the time for all interested stakeholders to review their files and take steps to reduce fraud in workers’ compensation.
Discovering Types of Fraud in Work Comp
It is important to remember that an employee who is malingering is always committing fraud. According to Webster’s Dictionary, “fraud” is the following:
- The intentional perversion of truth to induce another to part with something of value or to surrender a legal right was accused of credit card fraud; or
- Any act of deceiving or misrepresenting.
Fraud in workers’ compensation comes in many different forms. Common forms of fraud in workers’ compensation include:
- Personal Time Fraud: This occurs when the employee sustains an unexplained work injury during time off, such as a weekend, and then reports it shortly after returning to work. When investigating injuries when there is a suspicious event resulting in a work injury to identify witnesses and personal activities;
- Double Dipping: This can occur when the employee receives workers’ compensation benefits such as temporary total disability (TTD) benefits and payment from their employer. Insurance carriers and members of the claiming team should reinforce with their insureds that all wage loss and medical benefits should be paid under the insurance contract;
- Medical Provider Fraud: This fraud is assisted by a medical provider and comes in the form of excessive medical care, duplicative care, or multiple office visits on a single day. Common examples include chiropractors that share a building space or a common entryway with physical therapists. It is vital to scrutinize medical records and determine when the employee is receiving care and the location it is received; and
- Symptom Magnification: This occurs when the employee has subjective complaints and lacks objective medical findings. Common occurrences occur when there is a report of radicular symptoms but no findings on diagnostic studies such as an EMG, CT scan, or MRI.
Identifying fraud takes time and a willingness to demand an explanation. Never dismiss coincidences. Leave no stone unturned.
Tips and Tools to Prevent and Detect Fraud
There are several ways insurance carriers and interested stakeholders can reduce fraud and make a positive impact on their workers’ compensation programs. Now is the time to become active in fraud prevention.
- Have a zero-tolerance policy related to fraud. Suspected fraud should be reported to the insurance carrier and responsible state agency immediately. People who participate in fraud should be referred to the police for criminal prosecution.
- Demand proper classification of employees. Insurance carriers underwrite workers’ compensation insurance policies based on wages earned and job classifications. Education should be given to employers on how to classify employees correctly and the importance of reporting information. Audits should be conducted regularly to confirm the information received.
- Base all relationships on trust. People do business with people they like – and trust. Insurance carriers should only do business with companies they trust. Employers should have the same philosophy in their hiring practices.
- Educate all employees on how fraud impacts them. Insurance carriers, employers, and other interested stakeholders must educate everyone on how fraud is not a victimless crime. Along with education, there must be tools to use when reporting fraud. This should include receiving reports of fraud anonymously.
Some countless tips and tools are easy to implement when reporting and combating fraud. Implementing an easy-to-use and anonymous reporting portal can reduce costs by driving down the frequency and scale of fraud.
There is a significant cost to fraud in the workers’ compensation system. Money spent on these claims has a negative opportunity cost that prevents the settlement of claims. There are many types of fraud, not limited to wrongful acts perpetrated by employees. Fraud can also include actions by employers. Some tips and tools can be used to identify fraud, allow employees and other stakeholders to report it, and shut it down. Now is the time to consider fraud reduction as part of your workers’ compensation claim program.
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 the founder & lead trainer of Amaxx Workers’ Comp Training Center, which offers the Certified Master of Workers’ Compensation national designation.
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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.