There are, however, some useful guidelines that can help employers -- and HR managers in particular -- understand the claims that are submitted by their employees. In addition, Professional Employer Organizations (PEOs) that work directly with brokers to provide insurance options to businesses can help alleviate the administrative burden by assuming the key responsibility of administering claims and providing useful employee communication tools and expert advice and counsel. One of the most frustrating parts of workers' compensation insurance, aside from the paperwork, is the concern about fraud that all too often accompanies a claim. While the majority of claims are valid and submitted by hard-working employees who have encountered unfortunate injuries on the job, anecdotal and statistical evidence shows that fraud remains widespread. The Insurance Information Institute estimates that all property/casualty insurance fraud costs about $30 billion a year in the United States; the National Insurance Crime Bureau (NICB) suggests that approximately $7 billion of this can be attributed to workers' compensation scams in various forms. Facing difficult economic times and growing financial pressures, employers are quite aware of the impact of workers' compensation insurance on their balance sheets, and they are increasingly mindful of the connection between fabricated claims and rising insurance costs.
While there is a growing desire to root out fraud, doing so is a challenging task. Some experts suggest that fraudulent claims may be on the rise, as employees themselves face mounting financial problems in the wake of the economic downturn.
Detecting and substantiating workers' compensation fraud can be a lengthy and complex process. While states normally have designated fraud divisions, employers should know some key signs of potential fraud. These red flags include:
- The late report of an injury: If an employee submits a claim and reports an injury well after it allegedly occurred, the employer should determine the cause of the delay, while reminding the employee of the proper guidelines for reporting injuries.
- Injuries reported early on a Monday or after time off: In some cases, injuries that occurred off the job over the weekend may be fraudulently reported as work-related incidents. The employer can ask the employee about his weekend activities, and report those findings to the insurance adjustor.
- Cumulative problems: A combination of off-the-job injuries may lead to conditions incorrectly attributed to work-related incidents. In cases of generalized trauma, the employer should determine the date of the onset of symptoms, and ask the employee if there was any delay in reporting.
- News of outside activity: Employers should pay close attention to reports of employees who have filed claims, yet remain active while off the job.
- Report of injury following a disciplinary action: Employers should pay extra attention when an employee who is facing disciplinary action files a claim.
- New employees who have declined medical benefits: In some cases, employees may turn to workers' compensation to take care of medical issues not related to work.
- Inconsistencies in injury reports and medical reports: Injury reports should be checked to make sure the reports match any verbal accounts of the incidents. Inconsistencies warrant further investigation.
- Injured employee cannot be reached at home: When an employee is off the job because of an injury and collecting workers' compensation, he should be recuperating and reachable by phone.
While these red flags can help to detect suspicious cases, they are not in and of themselves evidence of fraud. Employers should be careful not to make unjust assumptions before a thorough investigation is carried out.
Workers' compensation administration can be challenging and the costs of having employees out of work due to a work-related injuries can have a significant financial impact on an organization. However, there are solutions available to help employers become more informed and better able to handle the many associated tasks. Understanding how to spot fraud is an important first step for employers, because it can help reduce overall costs and send the message that fraud and abuse will not be tolerated. By weeding out and discouraging deceptive claims, employers can develop a manageable workers' compensation program that positively impacts their bottom line and creates a more productive workforce.
Sue Tribby is associate vice president of risk management for AlphaStaff Group, Inc., a Ft. Lauderdale-based PEO that works primarily with small and mid-sized businesses. Company information is available at 888-335-9545 or www.alphastaff.com.
