Posted on May 19, 2014
Workers compensation fraud is a big concern all over the United States. It increases the cost to everyone in the workers comp system. While many business owners blame the high cost of workers compensation insurance on employee fraud, the evidence suggest that it is employers that often succumb to illegal practices.
In New York one company, Compensation Risk Managers, was accused and sued for $400 million dollars for workers compensation fraud. They were underestimating business liabilities making it appear that companies were saving money; however, in practice, they were actually not reserving enough money for claims so that when employees were injured, there were not enough funds to pay workers. The company acted as a self-insurance administrator for 900 small businesses. When they filed bankruptcy, the state went after CRM's clients to recover underpayments of almost $600 million. To date, $48 million has been recovered and many of the client businesses were forced to shut down.
Employees do file false claims as evidenced in a recent New York State arrest of 18 individuals in thirteen different counties for workers comp fraud. One of these people included an employee who was charged with insurance fraud, larceny and filing a false claim. As a roofer he experienced a back injury that doctors said made him totally disabled. Investigators for the New York State Insurance Fund discovered he was actually working under the table for another contractor while collecting workers compensation benefits. Other causes of arrest included people who faked injuries, falsely claimed disability and even a wife cashing the benefit checks of her deceased husband.
New York businesses can assist with employee fraud by watching for indications such as:
· New employee filing workers compensation injury report - while some people new to a job may have legitimate injuries, often these claims are by those who are already familiar with the system and using it to receive benefits rather than actually work.
· Strikes, layoffs and shutdowns - some injuries are reported when other employees are on strike, have been laid off or a company location closed. These individuals are seeking to collect workers comp benefits when no other options are available.
· Monday morning injury report - some employees will be injured over the weekend and then report first thing Monday morning and file a claim. Often there are no witnesses to substantiate the worker's injury.
· Hard to reach employees - injured workers that are unable to work will usually be reachable during the work day. If an employer tries to contact by phone but is unsuccessful, there is a possibility employee is working another job while collecting benefits.
· Consistently changing medical care - employees that might be trying to game the system will switch care providers frequently. Doing so can help stretch out payments so keeping doctors from catching them better by switching to another physician is necessary.
Ultimately, it is honest workers and employers that are harmed by workers compensation insurance fraud. When dishonest people get away with taking advantage of the system, it can raise rates and affect workers comp benefits for the injured. Ways to minimize effects to your business is to stay in communication with the workers compensation insurance company about claims, and train employees to watch out for safety hazards for injury prevention.