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Worker’s compensation fraud occurs when employees try to take advantage of company policies for their own financial gain. It also occurs when companies ignore policies or mishandle paperwork so they don’t have to offer worker’s compensation. In one case, fraud occurs when employees try to steal from the company. In the other, employers deny their staff the support they are due.
All parties within an organization need to understand these types of schemes to catch and report them.
Understanding Workers’ Compensation
Worker’s compensation is a form of insurance that companies carry to protect their employees in the event of an injury. If an employee is hurt while performing tasks for the company, their medical expenses, rehabilitation costs, and lost wages will be covered.
You don’t necessarily need to be at work to receive workers’ compensation benefits, but you need to be doing your job when the injury occurs. For example, if a delivery driver slips on a patch of ice while bringing an order to a customer, their medical care could be covered by workers’ comp.
The Importance of Workers’ Compensation
Worker’s compensation is a way to protect employees when they are hurt. Without laws in place to mandate compensation, employers could legally fire employees for missing work after a workplace injury or expect employees to pay the medical bill themselves — even if the injury was the company’s fault.
Without this insurance, companies could also create unsafe workplaces because they wouldn’t care if their employees were injured. Safe workplaces mean fewer injuries, which means companies pay less for workers’ compensation insurance. It saves companies money to protect their team members.
Despite the value of workers’ compensation, there are times when these claims are denied. Insurance providers deny claims when there is a lack of causation, which means there isn’t any proof that the injury was caused by the workplace, or for pre-existing conditions that might have been worsened on the job.
Introduction to Workers’ Comp Fraud
While workers’ compensation is a valuable asset to employees, some people try to abuse the system for financial gain. An employee might fake an injury to receive compensation from the company and potentially take time off of work. This is robbing the company because they are receiving money for an accident that didn’t happen.
Employers and insurance companies can also commit workers’ compensation fraud. Employers can misfile paperwork so employees aren’t covered while insurance companies can deny claims for trivial or invalid reasons. In each of these examples, one party is trying to take money from another.
Types of Workers’ Comp Fraud
One of the best ways to understand worker’s compensation fraud is to review examples of it from different parties. Here are a few ways companies might experience fraud to the detriment of everyone involved.
- An employee files a claim for an injury that did not happen or that was faked.
- An employee makes a minor injury seem worse than it is to receive better benefits for it.
- An employee files a claim for an injury that is not work-related but tries to pass it off as a work accident.
- The employer mislabels employees as independent contractors so they don’t have to provide workers’ compensation, healthcare, and other benefits.
- The employer sends incorrect payroll data to the insurance provider. By underreporting, companies pay less in insurance coverage and employees receive less coverage.
- The employer fails to purchase workers’ compensation even if it is legally required by your state.
- The insurer denies claims for trivial reasons.
- The insurer approves a claim but offers a small payout that isn’t enough to support the employee.
You can see how diverse the types of workers’ compensation fraud can be. In each case, one party is misrepresenting the severity of the injury or failing to support employees after an accident.
The Role of a Workers’ Comp Fraud Investigator
To prevent fraud, some employers or insurance companies will hire investigators to make sure the workers’ compensation claims are valid. These professionals have formal educations and certifications in insurance investigation. They are trained to look for red flags in the claim and track down evidence to prove that it is invalid.
If an investigator can prove that a claim is false or invalid, they can save the company and insurance provider money while also catching a fraudster in the act.
How Investigators Detect Workers’ Compensation Fraud
Investigators use a variety of techniques to detect fraud. They can use data analysis, check video surveillance, and interview employees and medical professionals to confirm that an injury occurred and the diagnosis is accurate. Through their years of experience, they learn to spot fraud and follow leads to prove it.
For example, an employee could claim they were injured but nobody saw the accident. This is suspicious because no one can validate the story and prove the injury happened at work. The investigator will look at video footage to see if they can spot the employee getting injured or not.
They could also look at medical records to see if they are appropriate for the injury. It is a warning sign to the investigator if the employee fails to get medical treatment, has a slow and exaggerated recovery, or has irrelevant tests and treatments for their diagnosis.
The Impact of Workers’ Comp Fraud
Fraud can have ripple effects across the company and prevent employees from getting the care they need when injuries occur. Once fraud initially occurs, employers are more careful to look for it. It creates distrust in the company where employees might have their claims denied or inspected carefully to make sure they are valid.
If left unchecked, fraud can increase a company’s workers’ compensation premiums. After an insurance provider notices a company has higher instances of injury, they’ll require the company to pay more in case another accident occurs. A few false claims each year can have a big impact on insurance costs.
Preventing Workers’ Comp Fraud
Employers can prevent fraud before they bring in professional investigators. Good company policies and education can reduce the chances that fraudulent claims make it to the insurance company.
For example, employers can set up cameras in the workplace so any injuries are filmed. They can have documentation processes where employees take photos of the injury and accident scene. Employers can also suggest immediate medical care for an injury to employees, which starts a paper trail.
Companies can also audit their compensation claims and reporting processes regularly to make sure they follow the latest best practices.
Best Practices for Employers and Employees
Employers can reduce the likelihood of fraudulent claims by creating a positive workplace culture. They can embrace core values like honesty and transparency within their teams while also offering competitive pay and time off. Companies can also invest in safe workplace practices so team members are less likely to injure themselves.
It’s also up to employers to train employees on reporting procedures and their compensation rights. Workers deserve compensation if they are injured and need to know how to file for it.
There will always be scammers who try to take money from their employers or workers. However, when all parties know how to look out for fraud, the odds of catching these criminals are much higher.
If you or a loved one needs help navigating a workers’ compensation