Comp Fraud Battle Hits Some Hurdles, Study Finds

Comp Fraud Battle Hits

Some Hurdles, Study Finds

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, according to the head of an anti-fraud group.

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

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

The coalition survey of state workers' comp fraud bureaus, he noted, has seen the average personnel count dwindle from 17 to 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 now about 15, which he said 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.

Workers' comp fraud bureaus, according to Mr. Jay, 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, he suggested, are far more cooperative if the bureau staff asking questions are “wearing a gun.”

He noted that only eight of the 12 fraud bureaus have the authority to file civil actions, and only seven do tracking of restitution. In 2003, he said, the survey found that the bureaus had $720,000 in restitution ordered–an amount, he added, that 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 said, is often constrained by a short statute of limitations.

In addition, he said fraud bureaus–in addition to prosecuting outright fraud–are often burdened with the job of pursuing employers who operate uninsured.

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. In addition, he said, 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 an inconsistent focus from state to state. He also said the complexity of some schemes is more than individual insurers and state bureaus are equipped to combat, and that many insurers fail to spend enough to deal with fraud.

Mr. Jay said he believes 2005 is a good year for passage of anti-fraud legislation, because more state legislatures are controlled by Republicans, who he characterized as generally more friendly toward law enforcement measures.

Among threats to the system, he said, 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 hindering legitimate investigations.

State fraud bureaus are often underfunded, have seen staff dwindle, and lack police powers to issue subpoenas and make arrests.