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Workers’ compensation fraud is a serious and costly problem that hurts insurers and society. It takes away money that should go toward helping injured workers get back on their feet after a workplace accident or occupational disease.
It can be committed by employees, employers, insurance firms, and medical providers. Understanding how to spot fraud is critical for ensuring prompt and accurate benefits payments.
1. Identifying Fraudulent Claims
Workers’ compensation fraud costs businesses $30 billion a year. Although you, as a business owner, have little control over how your employees behave, you can take measures to guard against fraudulent workers’ compensation claims at your place of employment.
Employees commit workers’ comp fraud in a variety of ways. For example, they might report a work-related injury that didn’t happen or make up an illness to get benefits. It’s essential to listen to your employees when they report an injury or sickness and to check security cameras at the business. An honest employee will tell a consistent story about what happened. If the story changes multiple times or sounds suspicious, that’s a red flag.
Employers can also commit workers’ comp fraud by falsifying employment records to lower premiums. They may misstate the number of employees to reduce their insurance rate or falsely classify employees as contractors when they should be employees. These violations can lead to severe penalties, including back taxes and fines.
Healthcare providers can also commit workers’ comp fraud by exaggerating an employee’s injuries or illnesses. They may charge more than necessary for treatment or even make up a claim entirely. It is a crime in all states and can result in civil liability, criminal prosecution, or both. It is also a crime to knowingly aid, abet, or conspire with anyone engaged in workers’ compensation fraud.
2. Detecting Fraudulent Claims
Workers’ compensation fraud costs businesses billions annually, and the financial fallout can be devastating. Business owners can lower the chance of fraud by implementing return-to-work programs, safe work practices, training, and zero-tolerance standards. In addition, you can help employees understand the risks and recognize red flags by educating them on typical workers’ comp fraud schemes.
Employee fraud can be as simple as lying to obtain benefits. For example, an employee might pretend that a skiing injury caused back pain and then file for workers’ comp benefits. An employee may exaggerate the severity of a workplace injury or illness to get higher benefits. In extreme cases, employees might lie about a non-work-related injury or illness to collect benefits.
Medical or health care providers can also commit workers’ comp fraud by inflating the cost of treatment and making up medical bills. They can also fraudulently refer patients to clinics and law firms specializing in filing phony workers’ compensation claims. In some cases, organized crime rings recruit people to file bogus claims and funnel them to doctors or lawyers involved in the scheme.
Employers can also commit workers’ comp fraud by misclassifying employees to reduce premiums. Depending on the state laws where your company is based, this fraud may result in high fines or even jail time.
3. Investigating Fraudulent Claims
A workers’ compensation fraud investigation involves many different aspects. For example, an employer may misstate the number of employees or the nature of their work to reduce insurance premiums. This type of fraud can be prosecuted as a criminal offense.
Workers also commit workers’ comp fraud by faking an injury or illness to gain benefits. It can be as simple as slipping on a wet floor at the workplace and saying that it caused their back injury. It can also be more elaborate, such as an employee who fakes a severe injury to get a higher disability payout.
The New York State Workers’ Compensation Fraud Inspector General’s Office (WCFIG) investigates all alleged violations of the law and rules that pertain to the operation of the workers’ compensation system, including identifying, investigating, and preventing workers’ compensation fraud. Investigators are trained to use various investigative tools, including undercover operations, informants, and entrapment.
Business owners need to understand how to recognize fraud and take steps to prevent it from happening. It can include training employees on the workers’ compensation process, return-to-work programs, and deadlines for filing claims. It can also help to have a zero-tolerance policy and be proactive about reporting suspected incidents of workers’ comp fraud. It will ensure that employees know they can’t get away with committing this type of crime against the company.
4. Fighting Fraudulent Claims
Fraudulent claims can cost businesses millions in the United States each year. They drain insurers’ resources and deprive legitimate workers of the money they need to cover medical bills, lost wages, and other expenses. The National Insurance Crime Bureau estimates workers’ comp fraud costs US businesses $30 billion annually. It is a significant financial burden that small business owners can’t afford.
Managers must adopt a zero-tolerance policy against workers’ compensation fraud. They should take all suspicious incidents seriously and report them to their insurer or state officials. It’s also vital for employers to educate their employees about the different types of fraud schemes and the red flags associated with them.
In addition to the financial losses that result from fraud, it can harm workplace safety and quality of work. It can also discourage employees from reporting an injury or illness if they believe their company will not investigate the claim.
Employers can commit premium fraud by misreporting the number of employees, classifying employees as independent contractors, or falsely describing job duties to reduce the workers’ comp premium. It’s also a felony to fail to maintain required workers’ compensation insurance. It puts workers at risk of not receiving adequate coverage if injured or sick and can put businesses at a competitive disadvantage.