Workers Comp Fraud

Joe hurt his back on the job and is out on leave. Four weeks later, after a rigorous bout of physical therapy, his doctor cleared him to return to work in a modified capacity. The issue is that Joe doesn’t like his job, nor does he want to return to the modified duty position. By staying home from work, is Joe malingering? Is he committing workers’ compensation fraud?

Yes he is.

Of the three types of worker’s compensation fraud – employer, vendor and employee fraud – the latter is the most talked about, comprising 20 percent of annual WC claims paid. Employee fraud can happen in the form of an alleged accident that never actually occurred or when an employee is injured at work and exaggerates his disability and fails to return to work when he is capable.

While it is possible that an employee might stage an accident, it is very rare, and 95 percent of workers’ comp claims involve a real accident at work. By far the largest percentage of employee workers’ compensation fraud claims happen when an employee – like Joe – continues to claim disability and collect weekly benefits while they are in fact capable of returning to work.

Everyone pays for WC Fraud

According to the National Insurance Crime Bureau, workers’ compensation costs $7.2 billion annually and workers’ compensation fraud is said to be the fastest growing segment of insurance fraud in the U.S. And everyone pays for it.

When an employee makes a workers’ compensation claim, the company normally pays for it in the form of a premium increases. Coworkers pay for it because now that Joe’s not there, they’re doing the job of two, and due to increased costs the organization can no longer afford to give raises or bonuses at year’s end.

Minimizing the impact of Fraud

While a contractor may not be able to totally prevent employee fraud, it’s possible to reduce it with a well thought out worker’s compensation program that includes the following:

•Properly screen employees before hiring them. Get a fully completed employment application and check the references and prior employers. Ask contacts in the industry if they know the individual. Although not always practical post-offer, a pre-placement physical exam is very effective in weeding out individuals who are not capable of performing the essential functions of a job.

•Safety Management Program. Keep workers safe on the job with documented visible operating procedures for each job, detailing optimal safety procedures and parameters of work tasks. Train all new employees on their VOPs at onboarding and maintain an ongoing dialogue about safety.

•Post-injury Program. When someone does get hurt on the job, a post-injury program, focusing on high quality care and potential return to work, is a must. Studies show that when another employee or HR representative maintains contact with the employee throughout recovery, the employee returns to work sooner.

•Medical Provider Partners. Forge alliances with the medical providers specializing in treating occupational injuries to help ensure the employees get the treatment they need early in the life of a claim.

•Zero-tolerance Fraud Program. When businesses adopt a zero-tolerance fraud policy, they create accountability among staff members. If an employee is taking advantage of the system, work with the insurer to make sure they are doing everything possible to prevent the employee from committing fraud.

•Treating injured employees with respect. If an employee is legitimately injured at work, treat him like family. Work to make sure he gets good, quality care.

•Training. Policies can’t be impactful when employees aren’t regularly reminded of them, and studies show that training employees on the purpose and benefits of a worker’s compensation program helps decrease its abuse.

Happy employees = fewer claims

Typically, happy employees don’t take advantage of the system, while employees who feel they are unfairly compensated or treated wrongly may rationalize filing a fraudulent claim.

by Michael P. Kelley – Senior Vice President, Director of Claim Operations, Hub International

Michael P. Kelley, AIC, ARM manages an advanced technical team of claim professionals and provides support and technical guidance to a wide variety of employers. He is considered an expert in the area of workers’ compensation claim handling, and is a frequent speaker on the worker’s compensation claim process.


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