When you think of workers’ comp fraud, what comes to mind? Perhaps you think of someone falsely claiming a workplace injury or staying out of work longer than necessary.
The textbook definition of fraud is “to lie for an intentional gain,” and it is not unique to employees. Every party in the workers’ comp system can commit fraud.
Employers buy workers’ compensation insurance for their employees at rates based largely on “class codes.” Class codes correspond to different occupations and indicate each employee’s degree of risk in the workplace. For example, clerical workers, who have a low degree of risk, have a different class code than lumber workers, who climb and cut trees and therefore have a much higher degree of risk.
When employers purchase insurance, they pay higher premiums for higher risk employees. Employers commit premium fraud when they lie about employee class codes in order to pay lower premiums. For example, a lumber company with ten clerical workers and 200 lumber workers might report that they have 200 clerical workers and only ten lumber workers, resulting in lower premiums.
Employees can commit workers’ comp fraud in various ways. They can claim an injury happened at work when it didn’t. For example, an employee might show up to work on Monday and pretend to fall in the staircase and twist his knee, when in reality he twisted his knee the day before in a skiing accident.
Another potential form of employee fraud is staying off work longer than necessary. In this case, an employee has actually suffered a work injury, but is delaying his return to work. It can be tough to classify this as fraud, because the injury is real – but it is certainly abuse of the workers’ comp system.
This situation becomes true fraud when the employee delays returning to work but works for another employer. If an employee is injured at Employer A and is receiving workers’ comp benefits for the injury and begins to work for Employer B while still receiving those benefits, the situation becomes a clear case of fraud.
Healthcare providers commit insurance fraud when they bill for treatments that never occurred. For example, a doctor might perform one x-ray of a patient but bill the insurance company for three x-rays. Similarly, a doctor might perform only blood work on a patient, but bill the insurance company for blood work plus x-rays.
Medical fraud also occurs when healthcare providers bill for patients who did not attend appointments, or bill for additional appointments when the patient only came for one.
In most medical fraud cases, the patients and their injuries are real but the services are not real or are exaggerated.
Workers’ comp fraud comes at a significant cost, not only to insurance companies, but to all parties in the system. Utilization review by expert review companies may be the best defense against medical and injured worker fraud.
What opportunities are there to minimize workers’ comp fraud? Share your thoughts in the comments section below.