Employees Get a Bad Rap for Workers’ Compensation Fraud

Nov 17, 2016 | Claims Process

Employees Get a Bad Rap for Workers’ Compensation Fraud – Quick! What immediately comes to mind? Is it some guy playing golf, shooting baskets, or mowing the lawn while a PI looks on covertly with a video camera or some other similar scenario? It’s no surprise if that’s the case. Injured employees get a pretty bad rap when it comes to public perception of workers’ comp claims.

Workers’ Compensation Fraud

“Gotcha” videos and concerted efforts by workers’ compensation insurance companies through the 1990s and early 2000s firmly planted a seed in the public’s mind about injured workers. In a bid for reform to lower the costs in workers’ compensation state systems, legislators and insurance companies furthered the myth of the injured worker who’s faking his illness or injury in order to get benefits without working.

For those people who have never suffered a devastating work injury or know someone personally who has, it’s often easy for them to believe that the whole situation can be easily faked. Of course, to workers and family members who have gone through this experience and are still dealing with the aftermath, the idea of perpetuating a long-term fraud seems ridiculous, if not impossible. Moreover, what the facts actually bear out is that a large amount of workers’ compensation fraud is perpetrated by employers or insurers and that this type of fraud is far more costly.

Workers’ Compensation Fraud Facts

Overall, only 1 to 2 percent of workers’ compensation claims are found to be fraudulent. The Colorado Workers’ Compensation Act defines fraud as willfully making false statements or misrepresentations that are material to a claim in order to collect payments, compensation, awards, or benefits. It breaks down this fraud into the following types:

Claimant/Applicant – Includes false claims, fake and exaggerated injuries, unreported income, and claiming injuries that happened outside of work.
Provider/Biller – Over-billing or inflated bills and non-rendered services.
Lawyer – Helping to file a false claim or sending claims to clinics who conspire in the fraud.
Insurance Adjuster – Changing a claim to substantiate a denial and accepting bribes and kickbacks for patient referrals.
Premium – Submitting false information to get a lower workers’ comp rate.
Employer – Misrepresenting facts to avoid claim acceptance and payment, lying to prevent or discourage their workers from pursuing claims, and misclassifying workers and under-reporting their injured worker’s wages.

By the Numbers

Note that Colorado identifies one form of fraud that involves wrongdoing by the worker versus five types that are perpetrated by some party other than the employee. Claimant fraud is typically the least costly since it’s perpetrated by individuals. Each case usually averages around $2,000 or $3,000 obtained fraudulently. A common type of claimant fraud is when the employee double-dips by receiving workers’ comp benefits while earning work income on the side that he doesn’t report.

By contrast, Employer and Insurer workers’ comp fraud runs much higher in cost. In Texas, 2012 saw a loss of approximately $523,451 to claimant fraud versus $2.7 million due to premium fraud. In North Carolina, the state’s 2014-2015 Industrial Commission’s annual report revealed that the form of workers’ comp fraud most heavily investigated was employer fraud, accounting for 90.64 percent of the suspected fraud cases. Alleged employee fraud cases only represented 8.75 percent.

Employer fraud involves misclassifying workers as independent contractors instead of employees and identifying workers in high-risk jobs as holding low-risk jobs. In June 2015, the Economic Policy Institute revealed that between 10 and 20 percent of employers misclassify at least one employee as an independent contractor. Clearly, the picture of the employee as the “face of workers’ compensation fraud” is wrong and costly.

We’re here to help.

Have you or a loved one suffered a workplace injury in Colorado? At Kaplan Morrell, we’re here to support you. Our expert team is just a call or text away at 970-356-9898. You can also easily reach out to a member of our Workers’ Compensation Claim team through our chat feature right here.

Rest assured, every consultation with us is not only free but also held in the strictest confidence. Let Kaplan Morrell guide you toward the peace of mind and benefits you deserve.