I recently participated in a webinar with one of the top worker's compensation carriers in the country and wanted to pass this information along to you!
1. What is Worker's Compensation Fraud?
M - Material to a Claim
I - Intent
L - Lie
K - Knowledge of the Lie
The first answer to this is simple, "It is a crime!" It is illegal to commit worker's compensation fraud and if proven can be prosecuted by law enforcement.
Remember the acronym M.I.L.K! This is an important 4 step process to understand what fraud is. First off, fraud is simply involving and material to a worker's compensation claim. Then, there must be intent to fraudulently effect the claim to benefit an individual, most often times financially. The last two steps are hand in hand, there must be a lie in effect that is fraudulent in some way, and the "suspect" in this hypothetical case must have knowledge of the lie. "
While this may seem simple, it's not always the case, not all lies are fraudulent, if a ""suspect" is misinformed, or being manipulated by outside forces, it's possible for them to lie without having knowledge of the lie. Also, a "suspect" may not understand worker's compensation at all, and while they are acting on information material to the claim, there is no intent of fraud because they simply don't understand their worker's compensation rights. The possibilities are endless, so remember, M.I.L.K!
2. Three Majors Types of Fraud
-Claimant Fraud - An individual files claim for an injury that doesn't exist, or a worker claims to be injured on the job when he was not, or takes another job while continuing to seek/receive worker's compensation benefits, or a claimant makes misstatements to a doctor to obtain medical benefits.
-Employer/Premium Fraud - An employer misrepresents the nature, size, ownership, experience, details, etc. of their business to avoid paying the proper premium, or an employer understates payroll or classifies employees.
-Provider Fraud - Fraud from healthcare providers directly in the form of billing for unperformed services, misrepresenting charges, etc.
-Attorney Fraud - An attorney recruits susceptible clients and manufactures fraudulent worker's compensation claims for profit.
3. How to Prevent Worker's Compensation Fraud
As you can imagine there are endless answers to this question, so let me try to put this simply, NEVER UNDERESTIMATE PEOPLE. Always do everything you can to protect yourself, that is the best way to prevent fraud, once a fraudulent claim is already happening and no protection is in place, you're in trouble.
-Always document all injuries! - Enough said, always document them!
-Hiring Practices - Always perform and utilize all legal avenues in the form of background checks, don't be shy and always call their references, and always have proper hiring & firing protocols in place for ownership, management, etc. If an employee is unwilling to perform a background check or does not offer references, that is on OBVIOUS red flag. Also, second chances are nice in story books, but let's not hire a problem employee who supposedly found the light. Remember, don't underestimate people, the odds that the employee wants "revenge" are high.
-Recordings, Reports, Rumors - For worker's compensation coverage to apply, an employee must be injured at work, driving to or from work or performing work directly related to his employer. That is a general statement, but simple terms are often better for these purposes. The point here is DON'T BE AFRAID to record work premises, video cameras and technology are much cheaper than ever before, and this investment could truly pay for itself. Imagine an employee hurt his knee playing basketball, but reported it as a work injury due to a fall while moving boxes in the office. Well, if you have a recording showing he never fell, that will help your cause greatly! Video can help law enforcement and your carrier mitigate your claim and prosecute the fraudulent employee.
Reports can be anonymous! Your carrier, if acting effectively, will work with you to allow other employees to report to them anonymously. Odds are this fraudulent claim was caused by something other than greed, and your employees are your direct connection to rumors or even facts that everyone knows but aren't willing to share publicly. If an employee reports a worker's compensation claim for a torn ACL in his knee, but he played basketball with a co-worker while supposedly injured, that co-worker's report could mitigate your claim and again help law enforcement with this crime.
4. How to spot Worker's Compensation Fraud Potential?
-There are multiple factors I will list here: Strange or late timing of a claim, Injury that is witnessed by nobody (recordings help a lot here), conflicting statements, vague details, strange rumors, hearing about claim from lawyer not employee.
-In reality, your carrier will investigate to the best of their abilities, you have to be realistic. Some of these carriers are immersed in multi-billion dollar industries, there's a chance your $5,000 claim won't be processed as quickly at the $2,000,000 claim they're currently working on. Be patient, be honest, be helpful, let them do their jobs, let them be the bad guys.
5. What do you do when you suspect fraud?
-Report it to your carrier promptly
-Avoid paying for the employee's medical treatment
-Don't question the employee!! Let the carrier do that
-Have employee sign injury paperwork and statement
-Save ALL evidence!
-Do NOT do a personal investigation, no private investigators, etc. Your carrier will do that. Communicate with them!
Derek I. Jimenez
Lic. # 0K18952
Caldwell Insurance Agency Inc.