Filed Under:Agent Broker, Coverage Issues

Here are the 3 most common types of workers' comp fraud, and how to prevent them

Many think that workers’ compensation fraud is running rampant, and it may be in some areas. We see the worst cases in presentations or in media reports. However, the media and conference speakers do not talk about the many parties involved in workers’ compensation who act honestly and ethically within the entire process, and who do all they can to reduce the negative impact on the injured employees. We also do not focus as much as we should on our own processes or execution failures that contribute to certain categories of what some call fraud or malingering.  

Let's look at three types of workers’ compensation claimants who may commit various degrees of “fraud,” some of which may be due to poor management or the process-oriented nature of workers’ compensation claims management in the current environment. They are:

  1. Abusers.
  2. Opportunists, and
  3. Forgotten, frustrated, and forlorn employees.

The Abusers

These employees were not injured at work, but were injured elsewhere or previously and claim the injury occurred at work. Some of these will not only file multiple fraudulent workers’ compensation claims, but will also file fraudulent automobile or general liability claims. 

I believe that the number of claims that are outright fraud are a relatively small percentage of the total number of claims presented. Unfortunately, these fraudulent claims often result in payments over a long period and in claim payments and loss adjustment expenses that should not have been paid in the first place. In my mind they also take benefits away from employees who have truly been injured on the job and deserve the benefits.

The Opportunists

These employees are actually injured on the job, but then take advantage of the system to gain more benefits than they should. They work to extend their benefits beyond a reasonable period; exaggerate their symptoms; are uncooperative with treatment plans; and use stalling techniques when adjusters, medical providers, or employers take positive actions for the claims management process. These same tactics are also used by the abusers described above, but the only difference is the initial site and intent of the injury claim. Claims by opportunists can also become very costly, again deflecting payments from the parties who deserve them.  

Patient and nurse

Forgotten, frustrated, and forlorn employees

These are employees who were injured on the job, have legitimate claims, and have no intent of committing fraud. They follow the rules and cooperate with claims management activities and efforts by:

  • Promptly reporting their injuries to the proper supervisors or managers.
  • Working with their  employer, adjuster, nurse case manager, or primary physicians  to see the medical provider best qualified to treat them.
  • Following all instructions regarding their medical care and treatment, including the reasonable use of prescriptions.
  • Providing documentation as requested during their claim, such as medical reports and return to work or continuing disability notes.
  • Participating fully in physical therapy, work hardening, functional capacity evaluations, and/or vocational rehabilitation to re-strengthen themselves and to increase the probability of their return to work.
  • Informing their medical provider of their willingness to participate in modified duty if the employer accommodates it, and closely following the medical provider’s orders if it is allowed.

However, if barriers arise that adversely affect the employee’s treatment or recovery, the same cooperative employees may feel:

  • Forgotten, as the employers and adjusters move on to other claims, replace them in the workplace, or move on to other priorities and responsibilities.
  • Frustrated, because they are doing all they were told to do without success. In some cases their own employers create barriers, such as refusing to accommodate modified duty.
  • Forlorn, the definition of which includes such words as unhappy, sad, and depressed. We have all seen employees who have become depressed over a period of time due to their inability to heal or their inability to work again, not to mention the financial stresses that occur as they are being paid benefits that may be much less than what they need. 
  • De-motivated if the employer has programs that provide the disabled with net pay that is more than or close to the net pay that they received before the injury.

These same employees who have no intent to commit fraud may lose faith in the individuals directing their care and may finally give up. Then they get caught up in the process-oriented steps of going to the doctor, providing a disability note to their employers, etc. Inertia sets in and the claim continues along a line toward an unsuccessful outcome for everyone.  


How do we combat fraud?

We must promptly identify fraudulent claims abusers or opportunists, and either deny them if we can or mitigate them if we cannot. One of the best ways to fight and mitigate the impact of workers’ compensation fraud is to manage employees and their claims consistently in a people-oriented environment. There should definitely be defined processes, and it is vital to inform supervisors and employees of their respective responsibilities in the event of a work-related injury, but focus should also be on removing barriers to employees’ recoveries.

“Forgotten employees” often get frustrated and disheartened by the barriers to their recovery. The following matrix identifies some of the steps that employers, TPAs, and others who are involved in claims management must follow. Some of you will consider these to be basic steps, but frequently companies or public entities do not prepare properly, and this lack of preparation and execution has resulted in claims that went in the wrong direction. The employer and adjusters should follow these procedures consistently without exhibiting favoritism, so that all supervisors and employees feel compelled to adhere, and that all see it as a fair process.


Employees are expected to:

Reporting injuries

  • Require employees to immediately report injuries to their supervisors and investigate all delayed reports, even if submitted by your most trusted and valuable employees. 
  • Train supervisors on how to talk with the employees after an injury is reported so they will avoid using an angry or accusatory tone, focusing instead on what is best for the employee and how to prevent an injury in the future.

Seeking Medical Treatment

  • Be sure that all supervisors and employees are fully aware of the requirements for referral to medical providers.
  • Identify reasonable and objective medical providers who the employees do not consider too employer-oriented, but who will work well with all parties for the employee’s benefit.

Following Recommended Medical Treatment

  • When possible, have someone contact the medical provider before the initial examination to prepare them for the examination, and inform the medical provider of the employer’s interest in the employee and its willingness to provide modified duty based on the provider’s instructions.
  • Ensure that the employee attends all scheduled examinations and cooperates fully with the medical provider’s instructions. 
  • Work with the adjuster or the nurse case manager (NCM) to clarify treatment or to request help as needed to obtain proper treatment without delay.

Return to Work

  • Work with the medical provider, the employer, and the adjuster or Nurse Case Manager to return the employee to work as soon as possible.
  • Closely follow instructions if the employee is allowed to return to work so they will not re-injure themselves, even if they are pressed by their supervisor(s) to perform work that exceeds their restrictions.


Interviewing employees

Consistency is vital because fraudulent employees will be required to follow the same structure and steps that honest employees must follow. Fraudulent employees find this more frustrating and difficult to navigate. Employees with something to hide will have to be on their toes to keep their stories straight, and often the employer will provide different versions over a period of time that should be pursued. This assumes, of course, that the different versions were recorded on claim forms or recorded statements so the change can be noted. Honest employees do not have that problem and will be glad to do whatever it takes to cooperate if it will reduce the negative impact on them. Fraudulent employees will be frustrated by the steps and activities they must follow.

All of these requirements assume that the employers have communicated well with their employees and supervisors so the employees are aware of their responsibilities if they are injured. The employer and the TPA should also have a plan in place to aggressively manage the claim so it will have the least possible impact on the employee physically, psychologically, and financially, and that the employer can get the employee back to productive work as soon as safely possible. 

The best way to manage a fraudulent claim is the same as for managing legitimate claims. Management must be aggressive, consistent, and ongoing so that truly fraudulent claims will be identified and denied if possible; will be mitigated as much as possible if they can’t be denied; and so that no claims will fall into the “forgotten employee” category, providing better results for everyone.

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