Do you know what your workers compensation carriers philosophy is toward fraud?
Claimants who succeed in abusing the workers compensation system breed more abuse of the system within your company which results into higher future premiums for you. Some companies are seemingly indifferent toward fraud, choosing to pay fraudulent claims rather than fighting them.
One of the many differences of Midwestern Insurance Alliance
Midwestern Insurance Alliance has the distinction of being the first workers compensation administrator to successfully criminally prosecute an individual for workers compensation fraud in Kentucky.
At Midwestern Insurance Alliance, our philosophy is to fight fraud to help keep the costs of your future premiums as low as possible, and to send a message to other employees that fraud will not be tolerated.
Effects of Workers Compensation Fraud
Workers compensation fraud costs industry billions of dollars each year. It is responsible for increased workers compensation premium costs for entire industries, as well as increased premiums for individual companies. However, the effects of workers compensation fraud are not limited to increased premiums. In addition to the direct financial implications, workers compensation fraud creates lost productivity particularly with malingering claimants. Employee morale can also be negatively affected by workers compensation fraud. Honest workers become discouraged when they see coworkers abusing the system at their expense. Furthermore, malingerers and employees who file fabricated claims create an increased workload for other employees.
What Constitutes Workers Compensation Fraud?
Workers compensation fraud is generically defined as making false or misleading claims or statements about an accident or injury for financial gain. Workers compensation is a criminally prosecutable felony offense in most jurisdictions (meaning that it carries a potential prison sentence in excess of 1 year). As demonstrated by the following list, workers compensation fraud is not limited to the blatant fabrication of a claim.
Examples of Workers Compensation Fraud
- The claimant fabricates an injury by claiming an injury that did not occur
- The claimant claims an injury that was not work-related in attempts to have it paid by the companys workers compensation carrier as opposed to personal health insurance, or (in the event that the claimant has no health insurance) to avoid out-of pocket expense.
- The claimant exaggerates the extent of an injury as to sustain indemnity (wage replacement) benefits.
- The claimant exaggerates the extent of an injury as to receive an increased financial settlement.
- The claimant continues to receive workers compensation indemnity benefits while employed by a different company.
- A physician falsely indicates that an injury is work-related, as to ensure payment for medical treatment.
- A physician prescribes unnecessary tests or unnecessary rehabilitation treatment to increase medical costs.
- A physician falsely indicates that a preexisting condition was caused by the work-related injury for which the claimant is seeking treatment.
- A claimants attorney who instructs his client (the claimant) to mask signs of recovery to increase indemnity benefits or the amount of a settlement.
- An employer knowingly and falsely claims that no injury occurred or that it was not work-related
- Although a different realm of workers compensation fraud, employers who submit deflated payroll information or misrepresent the type of work performed by employees in order to obtain a deflated workers compensation premium. This is commonly referred to as premium fraud.
How Prevalent is Workers Compensation Fraud?
Despite the many forms in which workers compensation fraud can manifest itself, evidence supports the claim that the vast majority of workers compensation claims are completely legitimate. Depending on the source, fraud is an element of 5% to 25% of workers compensation claims. However, most studies suggest that some element of workers compensation fraud is involved with approximately 7% of submitted claims. Exaggerated claims and malingering following a legitimate work-related injury are likely the most prevalent form of workers compensation fraud, and are far more prevalent than the reporting of claims that have been fabricated.
Practical Use of this Information
It is recommended that employers use the information in this newsletter to develop a checklist that can be used to assess each workers compensation claim. Claims that are suspect because of the applicability of red flag indicators should be brought to the attention of Midwestern Insurance Alliance immediately.
Red Flags Concerning the Injury
- There was an unexplainable delay in reporting the injury.
- There are no witnesses to the alleged injury-producing incident.
- Details of the injury-producing incident are ambiguous or lack sufficient detail.
- The description of the injury appears to be implausible considering the type of work that the employee performs.
- The injury is not visible, such as a strained back, carpal tunnel syndrome and reflex sympathetic dystrophy.
- The incident allegedly resulted in a significantly more serious disability than would be reasonably be expected.
- Rumors circulate that the injury is not legitimate.
The injury was reported early on a Monday.
- The claimant has recently purchased disability insurance that will pay benefits concurrently with workers compensation benefits.
Red Flags Concerning the Claimant
- The claimant is a recently-hired employee.
- The claimant does not have health insurance.
- The employee has used all of his/her accrued vacation and sick days.
- The claimant is having financial problems.
- The claimant is involved in sports outside of work or physically-demanding second job.
- The claimant objects to management visiting him or her at home.
- The employee has a history of alleging work-related injuries, particularly minor injuries, soft tissue injuries or injuries which have resulted in time off work.
- Close friends or relatives of the claimant have submitted workers compensation claims in the past which have resulted in indemnity benefits or settlements.
- Subsequent descriptions of the injury or how the injury occurred are inconsistent with what was originally reported.
- The claimant is unusually familiar with the workers compensation system and workers compensation legislation.
- The only home address that the company has for the claimant is a post office box.
- While off-work as a result of a workers compensation claim, the claimant is frequently unable to be contacted by telephone at his/her home, or can only be contacted through a friend or relative.
- The claimant specifies that indemnity benefit checks be sent to his home.
- The claimant opposes modified duty assignments.
- The claimant is disgruntle or uncooperative.
- It has been reported that the claimant has been seen working for another employer or engaged in work which he is believed to be unable to perform.
- The claimant obtains legal representation soon after submitting a workers compensation claim or insists upon a rapid financial settlement
- The claimant is the subject of imminent or suspected termination or layoff, or is near the end of a probationary period.
Red Flags Concerning Medical Treatment
- A subsequent medical examination contradicts the original diagnosis.
- The employee is seeking medical treatment from a physician with a reputation of questionable diagnosis and treatment practices. practices
- The employee misses physician visits and/or rehabilitation treatments.
- Injury treatment appears more intensive than the alleged injury deems necessary.
- The treating physician makes referrals to a separate medical provider under common ownership or in close proximity to the referring medical provider.
- The claimant changes medical providers, particularly if the initial physician has released the claimant to return to work