Dollar for dollar, workers-compensation premium scams may be larger than bogus work injury claims. At least that’s what many expert say. And the problem seem to be getting worse, especially in urban centers with deep underground economies.
The Coalition met recently with an unlikely ally in this effort: the United Brotherhood of Carpenters. It represents organized labor in the building trades. The union believes premium-avoidance schemes harm workers and cost governments mightily in lost revenue.
Why lost revenues?
Shady businesses lowball how many workers they have, and their payroll size. They often pay workers in cash, under the table. All of this helps dishonest employers avoid paying full workers-comp premiums, plus a bevy of federal, state and local taxes.
So, governments lose tax revenues. Workers are cheated out of workers- comp protection, wages, overtime, unemployment benefits and Social Security. Honest employers lose business and income because cheaters use the illicit savings to underbid them for contracts. And, workers comp insurers lose premiums.
Our recent meeting with the carpenters union revealed disturbing examples of prominent building jobs that included premium-avoidance schemes: A building at the University of Connecticut, a Florida hospital, construction at the Atlanta airport, and a building at the Walter Reed military hospital complex in suburban Washington, D.C.
The latter hits close to home — I drive by the hospital complex almost daily.
The carpenters’ proposals for comp insurers are a primer on why partnerships could be a great resource to move an anti-fraud agenda forward more decisively:
- Work together on best practices for conducting audits and investigations into premium-avoidance schemes;
- Adopt procedures to red-flag potential premium fraud; and
- Cooperate with stakeholders on investigations.
Workers-comp insurers already appear to be doing much of this. Yet it needs repeating that expanding everyone’s knowledge of schemes is a force multiplier. This will help identify more plots schemes, and boost the entire anti-fraud effort.
Fraud fighters must work with allies to educate state policymakers to better stop costly comp scams — premium avoidance and bogus injury claims.
We can make greater progress by including non-traditional allies such as the carpenters union. The more influential allies that are brought together, the stronger the efforts against comp scams will become.
The carpenters union is a clarion call that effective partnerships will help everyone better combat workers-comp schemes of every kind.
About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.