Comp Fraud Battle Hits

Some Hurdles, Study Finds

Efforts to fight workers' compensation fraud are being helped bynew laws and a positive legislative climate but hindered byfinancial constraints and an apathetic judiciary, according to thehead of an anti-fraud group.

Dennis Jay, executive director of the Coalition AgainstInsurance Fraud, based in Washington, delivered his assessment atthe National Council on Compensation Insurance annual meeting inOrlando this month. He included results of a coalition survey of 12states that have law enforcement units exclusively devoted tocombating workers' comp fraud.

Mr. Jay's talk–”Fraud Trends In Workers' Compensation: Are WeWinning The Battle?”–included a rundown on what he said were thestrengths, weaknesses, opportunities and threats to efforts tocombat criminal activity.

The coalition survey of state workers' comp fraud bureaus, henoted, has seen the average personnel count dwindle from 17 toabout 12. The average funding level was reported to be under$800,000. Case referrals, which averaged 800 in 2003, increased tomore than 1,000 in 2004.

Mr. Jay said that rates of conviction, which averaged about 40in 2002, are now about 15, which he said was due to the fact thatbureaus are “not going after just the easy cases” or the“low-hanging fruit.” At the same time, there has been a dramaticincrease in the filing of civil actions.

Workers' comp fraud bureaus, according to Mr. Jay, are hamperedby the fact that only three of the 12 are equipped with policepowers to issue subpoenas and make arrests. Targets ofinvestigations, he suggested, are far more cooperative if thebureau staff asking questions are “wearing a gun.”

He noted that only eight of the 12 fraud bureaus have theauthority to file civil actions, and only seven do tracking ofrestitution. In 2003, he said, the survey found that the bureaushad $720,000 in restitution ordered–an amount, he added, thatindicates they may be pursuing too many small cases.

The survey, Mr. Jay reported, found that bureau managers feelhampered by a lack of resources and a judiciary that lets manyoffenders off with light punishment. Prosecution of such cases, hesaid, is often constrained by a short statute of limitations.

In addition, he said fraud bureaus–in addition to prosecutingoutright fraud–are often burdened with the job of pursuingemployers who operate uninsured.

Mr. Jay said that strengths for the anti-fraud programs includethe fact that there is legal infrastructure in place to go afterfraud and that additional fraud statutes are being passed all thetime. In addition, he said, publicity campaigns have created agrowing public awareness of the problem.

Outlining weaknesses in the anti-fraud effort, Mr. Jay saidthere is a lack of a national strategy to combat fraud and aninconsistent focus from state to state. He also said the complexityof some schemes is more than individual insurers and state bureausare equipped to combat, and that many insurers fail to spend enoughto deal with fraud.

Mr. Jay said he believes 2005 is a good year for passage ofanti-fraud legislation, because more state legislatures arecontrolled by Republicans, who he characterized as generally morefriendly toward law enforcement measures.

Among threats to the system, he said, is the possibility of adecline in the economy, which traditionally leads to an increase inclaims. Other problems noted by Mr. Jay included a lack of gooddata on the extent of fraud and consumer privacy restrictionshindering legitimate investigations.

State fraud bureaus are often underfunded, have seen staffdwindle, and lack police powers to issue subpoenas and makearrests.