The continued existence of the Coalition of Insurance Fraud organization appears secure. According to information compiled by the watchdog group, insurance fraud is alive and well in the U.S. The coalition's research of various government and business reports shows that:
The number of employees misclassified by employers nationwide increased from 106,000 workers to more than 150,000 workers between 2000 and 2007. This is a conservative figure because states generally audit less then two percent of employers a year. (U.S. Government Accountability Office, 2009)
Nearly one of four Americans says it is all right to defraud insurers. Eight percent say it is "quite acceptable" to bilk insurers, while sixteen percent say it is "somewhat acceptable." (Accenture Ltd., 2003)
One of three Americans says it is all right for employees to stay off work and receive workers' compensation benefits because they feel pain, even if the doctor says the employee may return to work. (Insurance Research Council, 1999)
One of five employees have been aware of fraud in their workplace. (Insurance Research Council, 1999)
Although Florida is not at the top of a workers' compensation fraud-watch list, it is not immune to the problem, either. A joint report from the Florida Division of Insurance Fraud, Bureau of Workers' Compensation Fraud and the Division of Workers' Compensation, Bureau of Compliance (DIF-DWC) issued Jan. 1, 2010, included fraud statistics for the most recent five-year period. The data indicated little variation in any of the categories studied, including cases presented, arrests and convictions; in a few key areas the numbers showed a slight decrease from prior years.
"Overall, workers' compensation fraud in Florida has been relatively flat over the past few years," said Bob O'Halloran, vice president of claims for Summit Consulting, Inc., in Lakeland. "The fact is that Florida has a strong workers' compensation fraud statute that encompasses tough penalties and a broad enforcement arm — and both bring greater awareness to the industry and employers."
In addition to legislative remedies to improve penalties and enforcement at the state level, carriers and servicing agents work to improve loss ratios and overall results. Toward this end, some carriers fund their own Special Investigative Units (SIUs) to combat fraud. Others outsource the investigative work, or use a combination of in-house and outside resources.
Paul Colbert is president and CEO of Meridian Investigative Group, Inc., in St. Petersburg. The firm works closely with insurance carriers on workers' compensation cases. "Companies such as ours offer a variety of services, including surveillance, background checks and claim investigations," Colbert noted. "Due to insurance company screening and assignments, the success ratio is pretty high. I would estimate that 75 percent of the time we secure information that is contradictory to the indicated injuries and resulting abilities."
Although some observers were worried that the current economic pressures would compel a growing number of employees to file fraudulent claims to continue their pay and benefits, that fear does not seem to have been realized. "While we have noticed an increase in this type of fraud, offsetting it is the fact that so many layoffs have already occurred," said O'Halloran. "The remaining workforce tends to include more experienced workers who are intent on doing everything possible to keep their jobs, which can cut down on the frequency and severity of claims."
Carriers, state agencies, and others help keep insurance fraud in check with information and education. "Probably the most significant thing we can do to combat fraud is help with education," said Colbert. "We are approved continuing education providers in Florida regarding insurance fraud, which of course includes workers' compensation. We do a lunch-and-learn with a three-hour class for insurance company adjusters, and we are looking at ways we can do more."
"Perhaps the only trend to note would be that the mix of fraud claims has changed over past three to four years," said O'Halloran. "For us, the most prevalent instances of fraud have been related to working while receiving benefits, which represent the highest number of known cases.
"Also prevalent were frauds related to illegally documented workers, and malingering/prolonged cases and misrepresentation of an injured worker's prior medical history," O'Halloran said. "In the past 18 months or so, that seems to be changing. There is now a greater frequency of prior medical history misrepresentation, and few cases of injured employees working another job while receiving compensation benefits. We are also seeing slight increases in inaccurate reporting of payroll and incorrect employee classification."
According to the DIF-DWC joint report, the prevailing trend in Florida "continues to be the illegal sale and brokering of certificates of worker's compensation coverage" or "renting" of insurance certificates. Another prevalent scheme involves the use of fictitious companies working in concert with check cashing stores and money service businesses. It is a convoluted scheme that ultimately puts money in the pockets of the money service business and the criminal "claimant" while costing legitimate businesses and insurance carriers millions of dollars a year.
"The state of Florida's 2008-2009 data shows $34 million in court-ordered restitution, and one can guess that it's just the tip of the iceberg," O'Halloran said. "In fact, the National Insurance Crime Bureau estimated that $1 of every $10 in workers' compensation premium is lost to fraud."
Experts note that obtaining a conviction in a criminal case is challenging. "Prosecuting fraud cases is not as simple as one might think," said O'Halloran. "We aggressively investigate allegations as appropriate and attempt to prosecute them. We do our very best to prepare, defend and perfect fraud allegations. But because fraud is a criminal offense, it bears a significant burden of proof — beyond a reasonable doubt. We recognize that some cases just won't rise to that level."
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