Double-Dipping in the Lone-Star State

Texas Mutual Insurance Company aggressively "walks the walk" in its zero tolerance for workers' compensation fraud. According to Senior Vice President of Public Affairs Terry Frakes, the insurer has discovered or headed off more than $40 million in workers' compensation fraud committed by employees, employers, health-care providers, and others from 2005 through 2007.

Instrumental in achieving these impressive statistics are the company's three internal teams of fraud investigators. Each three-to-five person team focuses on a specific area: claimant fraud, premium fraud, or health-care provider fraud.

"Numbers-wise, most of our cases are claimant fraud," he reports. "A typical investigation from start to finish is maybe a couple of months. Provider fraud investigations are a longer process, a year or more. We normally won't catch that type of thing until we do a premium audit or until a loss control specialist sees something during an on-site visit that doesn't correlate with written reports. Health-care fraud has the longest investigatory time, and we might be working with the FBI, post office, or other agencies."

Not all claimants are faking their injuries or trying to get out of working. Rather, Frakes says, some claimants who originally may have been awarded legitimate benefits get into trouble when they work too much and get caught "double-dipping." In double-dipping, the injured worker continues to collect benefits from the original employer, claiming he remains too injured to work, while actually being employed at another company. Texas law requires claimants to contact their workers' compensation carrier when they return to work.

In the past six months, Texas Mutual investigators have uncovered a number of "double-dippers."

In June, a Los Fresnos, Texas, man pleaded guilty to double-dipping. Hector Cuellar, a sign installer, reported suffering multiple injuries from a job-related incident. He claimed the injuries left him unable to work, and Texas Mutual began paying him income benefits. However, the carrier's investigative team discovered that Cuellar was working as a journeyman sign installer for another sign company in Harlingen, Texas, while continuing to receive disability income benefits. The court sentenced Cuellar to two years' deferred adjudication, and ordered him to pay $2,775 in restitution to Texas Mutual and to complete 100 hours of community service.

In July, Texas Mutual scored a triple-pay of double-dippers. In separate and unrelated cases, a Travis County grand jury indicted three individuals on workers' compensation fraud-related charges. The scammers allegedly collected a combined $27,113 in fraudulent workers' compensation benefits from Texas Mutual.

August was another triple-play month for Texas Mutual. A Washington County Court sentenced Richard Supak of Brenham, Texas, to 12 months' probation and ordered him to pay $1,485 in restitution to the carrier, and imposed a $500 fine and court costs. Supak had reported a job-related injury while working as a truck driver for Brenham Wholesale Grocery. He claimed the injuries left him unable to work, and he began collecting income benefits from Texas Mutual. Investigators uncovered evidence that Supak was working as a construction helper for a Burton, Texas, company.

That same month, a Travis County grand jury indicted David Beatty of Flower Mound, Texas, and Michael Mora of Brownsville, Texas, on separate double-dipping charges. The men allegedly collected a combined $11,244 in workers' compensation benefits, obtained while double-dipping.

Texas Mutual is the state's leading provider of workers' compensation insurance. Its 2007 annual report tallied gross written premiums of more than $760 million, with 47,508 policies covering 873,645 employees. Frakes says the company is on track to top that premium number in 2008.

Originally created in 1991 as a state fund and the "insurer of last resort," it now operates as a domestic mutual insurance company with continued oversight by the state and a nine-member board of directors. "Technically, we are still a 'state fund'," Frakes says. "But we are not state employees; we have no state money. We write in both the competitive and residual markets." Texas Mutual's enabling legislation mandates that it remain a competitive force in the marketplace.

Texas is the only state in the union where workers' compensation insurance is not compulsory.