Workplace injuries and illnesses are in the majority of cases genuine, though sometimes employees file false or exaggerated claims and thereby misuse the system. The legitimacy of the claim is established through a detailed medical records review. A medical peer review and utilization review may also be requested by insurers to rule out foul play. Nevertheless, workers’ compensation fraud takes place. Workers’ comp fraud is a major contributor to the United States’ annual $30 billion insurance fraud problem(National Insurance Crime Bureau statistics). Apart from being illegal, a claim-related fraud injures an organization’s smooth operation, increases insurance costs, and throws a shadow even on honest workers who are genuinely injured at the workplace.
Workers’ compensation fraud can come down with a negative impact on all stakeholders.
- The premiums that the employer pays will increase
- To balance this increase, customers will have to pay more
- Employees could face pay cuts and lose out on bonuses and other benefits
- Jobs may be cut as well.
Workers committing fraud either exaggerate their injuries or fake an injury or illness. According to the National Insurance Crime Bureau, employees may even conspire with dishonest doctors and attorneys to support their fraudulent claims especially those that are hard to refute, such as soft tissue injuries, headache, strained muscles, cumulative stress, and whiplash.
Why do employees engage in fraud?
A no-fault system that pays workers for medical expenses and lost wages due to a workplace injury, workers’ comp is highly beneficial for employees. Most states require 100% reimbursement for medical and rehabilitation expenses due to on-the-job injuries/illnesses. In addition, workers are also eligible for up to two-thirds of wage loss benefits while they are unable to work. These benefits being mandatory, injured workers receive a generous amount of money. This is what makes workers’ comp fraud an attractive proposal for fraudsters.
To contain costs and enable smooth and flawless functioning, employers need to watch out for the following warning signs of fraud.
- No witnesses: There are no witnesses to the incident. Moreover, the employee’s description of the incident does not reasonably support the injury cause. In such a case, consider whether the worker was in an area where he/she was not supposed to be. Find out who first saw the worker after the injury and talk to them to understand the facts of the injury.
- Employee refuses treatment: The claimant refuses a diagnostic procedure that can confirm the nature and extent of the injury. Employers should ensure that claimants who complain of a back or neck injury get treatment at a facility that can perform immediate testing.
- Inconsistent, suspicious, or vague description of the incident: When faking an injury or illness, the description tends to be incoherent, vague or suspicious.
- Undue delay in reporting the incident: All employees are aware that a workplace injury must be reported at once. Fraudsters delay reporting the incident and do not provide any valid explanation for the delay. Claims reported more than seven days following the injury tend to be much more expensive and have a much higher litigation rate.
- Claims reported on Monday morning: These claims are often accepted at face value. Find out the hobbies of the worker and enquire whether they mentioned anything to their co-workers on Friday regarding their weekend activities. The injury may even have occurred on Friday and is not reported until Monday. Employers can also ask the workers directly whether anything had happened over the weekend and pay attention to their body language. It is easy to detect if they are lying.
- Suspicious healthcare providers: The employee’s medical providers or legal consultants have a history of handling suspicious claims. Or groups of claimants may have used the same doctors and lawyers.
- The incident happened just before a termination/expiring contract: This is a possible sign of fraud with the worker attempting to embezzle the system.
- History of claims: The injured employee has a history of filing workers’ compensation claims.
- History of changing jobs or medical providers often: The employee has a history of frequently jumping jobs or changing medical providers.
- Malingering: There is evidence of the worker doing activities that would not be possible with his/her claimed illness/injury.
- The employee is hard to reach: It is difficult to establish contact with the injured worker at home.
The large majority of workers’ compensation claims are valid. However, estimates indicate that 1 – 2% of claims may be fraudulent in spite of having in place processes such as medical record analysis to establish validity. It is important therefore for employers to pay attention to the above mentioned signs of possible fraud, and work closely with their claims adjuster, giving them all the facts. Any suspected fraud must be reported immediately to the carrier or the appropriate law enforcement authority. To support your observation, collect as much information as possible including identifying witnesses and any misstatements. Business owners should also ensure that all employees are aware of your commitment to workplace safety and your zero-tolerance policy for workers’ compensation fraud. Also, inform employees about the adverse impact any kind of fraud can have on the business.