Lack Of Money & Apathy Hamper Fraud Fight

NU Online News Service, May 6, 2:50 p.m. EDT--Orlando, Fla.--Efforts to fight workers' compensation fraud are being helped by new laws and a positive legislative climate, but hindered by financial constraints and an apathetic judiciary, the head of an anti-fraud group said.

The commentary by Dennis Jay, executive director of the Washington-based Coalition Against Insurance Fraud, was delivered at the National Council on Compensation Insurance's annual meeting held here this week. His observations included results from a coalition survey of 12 states with law enforcement units devoted exclusively to combating comp fraud.

Mr. Jay's talk, titled "Fraud Trends In Workers' Compensation Fraud--Are We Winning The Battle?" included a rundown on what he said were the strengths, weaknesses, opportunities and threats to efforts to combat comp fraud.

He said the coalition survey of state comp fraud bureaus found that the average personnel count dwindled from 17 to a current level of about 12. The average funding level was reported to be under $800,000. Case referrals, which averaged 800 in 2003, increased to more than 1,000 in 2004.

Mr. Jay said that rates of conviction, which averaged about 40 in 2002, are currently about 15. He said this was due to the fact that bureaus are "not going after just the easy cases" or the "low hanging fruit." At the same time, there has been a dramatic increase in the filing of civil actions.

Comp fraud bureaus, Mr. Jay noted, are hampered by the fact that only three of the 12 are equipped with police powers to issue subpoenas and make arrests. Targets of investigations, Mr. Jay suggested, are far more cooperative if the bureau staff asking questions "are wearing a gun."

He noted that only eight of the 12 comp fraud bureaus have the authority to file civil actions and only seven do tracking of restitution. Mr. Jay said that in 2003 the survey found that the bureaus had a total of $720,000 in restitution ordered. The amount, he said, indicates they may be pursuing too many small cases.

The survey, Mr. Jay reported, found that bureau managers feel hampered by a lack of resources and a judiciary that lets many offenders off with light punishment. Prosecution of such cases, he continued, is often constrained by a short statute of limitations. In addition to prosecuting outright fraud, fraud bureaus are often burdened with the job of pursuing employers who operate without comp insurance.

Mr. Jay said that strengths for the anti-fraud programs include the fact that there is legal infrastructure in place to go after fraud and that additional fraud statutes are being passed all the time. He added that publicity campaigns have created a growing public awareness of the problem.

Outlining weaknesses in the anti-fraud effort, Mr. Jay said there is a lack of a national strategy to combat fraud and there is an inconsistent focus from state to state. He also said that the complexity of some schemes is more than individual insurers, and state bureaus, are equipped to combat. He added that many insurers fail to spend what they need to deal with fraud.

Mr. Jay said he believes 2005 is a good year for the passage of anti-fraud legislation because more State Houses are controlled by Republicans, which he described as generally more friendly toward law enforcement measures.

Among threats to the system, he observed, is the possibility of a decline in the economy, which traditionally leads to an increase in claims. Other problems noted by Mr. Jay included a lack of good data on the extent of fraud and consumer privacy restrictions.