Taming the workers-comp monster in California

Crooked providers, lien setup bleed comp system Continue reading

If you need more proof the workers-comp system in California is a mess, look no further than the report this week that indicted and convicted medical providers filed more than $600 million in liens against workers-comp claims.

The lien system in the state continues to be fertile ground for fraud. Designed as a safety net to ensure injured workers get treated, it’s now a slush fund for crooked medical providers and lawyers.

Fraud and abuse are rife in Southern California, where medical rings are targeting just-retired workers, says one insurance exec who wrote us this week. Runners hang out at Social Security offices and other venues frequented by retirees. They entice the retirees to file claims by offering free medical care and a windfall to supplement retirement income. The retirees are brought to lawyers’ offices, signed up and then shuttled off to medical offices for “treatment.”

The number of worker “injuries” occurring on the last day of the job is rising, this exec says.

Legislation to help weed some of these abusive providers out of the system is cruising through the California legislature. The bill would ban providers who’ve been kicked out of Medicare and Medicaid for over-billing. The bill sponsor says there’s evidence that crooked docs banned from government health plans have turned to workers comp to ply their trade.

The sponsor also says his legislation will target lawyers who sign up comp clients, but never actually interview them, then file claims for them in distant cities and ultimately settle the cases for their fees — often without the workers’ knowledge.

The legislation is a good idea, but much more needs to be done. Workers compensation in California is a huge, complex multi-faceted program. There are no easy answers on how insurers, employers, policymakers and others can hit that sweet spot of minimizing fraud while making sure injured workers get the treatment they deserve. But finding a better way than the lien system might be a good start.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Partnering to combat workers-comp schemes

Joint efforts magnify impact and boost efforts against premium cons Continue reading

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.


Should a firefighter collect comp money while working?

Judge in New York considers tossing charges against volunteer Continue reading

A judge in Western New York is considering dismissing workers-comp charges against a volunteer fireman because he’s technically not working for money.

James Moreland, 66, claims he hurt himself two years ago at his blacktopping job, and filed for workers comp benefits. He’s collected $45,000 since then. Moreland also also gone out on 177 fire and rescue calls.

He’s not getting paid as a fireman, so he’s following the law in that area. But the question remains, if he’s fit to volunteer as a firefighter, should he continue collecting comp money?

If the judge dismisses the charges, as the defense has requested, it could affect volunteer firefighters across the state. It also would send a message to workers in Western New York that committing fraud is not a big deal. And that’s a shame, because people there already have a high tolerance for fraud.

Perhaps it stems from the tough economy that continues to plague the area. Yet there seems to be a large percentage of people in Western New York who are either on comp or drawing Social Security disability. I know from first-hand experience. I lived there for 22 years and visit often. Many people think it’s perfectly fine to fudge the truth if it means getting a check in the mail every month.

The judge’s decision will have an impact, one way or another. We’ll be watching and report back to you.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Comp systems may miss boat in sticking with ICD-9

Uniform medical codes can help detect fraud across insurance providers Continue reading

Come October 1, medical providers and health plans across America will be using a new medical coding system — ICD 10. The codes are much more detailed for billing for specific treatments and procedures. The new system will help perfect reimbursement, aid medical research and could improve medical outcomes.

The new codes also should help better detect scams once medical billers, insurer data systems and fraud fighters learn to effectively use thousands of new codes.

Unfortunately, half of state workers comp systems plan to stick with its predecessor — ICD-9. A big reason likely is the large cost of updating to ICD-10. But in the longterm, it may be pound-foolish not to switch over. They won’t be able to share claims data as easily with other systems to help track fraud trends and pinpoint treatment areas vulnerable to fraud.

The Healthcare Fraud Prevention Partnership recently conducted a study using code combinations from Medicare, health plans and property/casualty insurers. The data analysis resulted in significant savings for all. Each could focus on specific treatment areas that previously failed to appear on anyone’s radar. Fraud was detected more easily and false claims were refused.

Workers comp in the 26 states sticking with ICD-9 should reconsider. Sooner or later, they’ll have to make the upgrade. Might as well bite the bullet now and and join the rest of the medical and insurance communities — and reap the benefits.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Comp benefits too low for injured Fla. workers, judge rules

Focusing more on preventing fraud reduces need to cut benefits Continue reading

A judge in Florida delivered a wake-up call to insurers and employers last week in ruling that workers compensation in its present form violates the state constitution. Current benefits aren’t enough to balance workers giving up their legal rights to sue, the court ruled.

Is this the result of a wayward judge, or more mischief by the trial bar trying to throw out a no-fault system that limits lawsuits?


But business-friendly legislatures in many states have cut benefits for several years, to where some contend that injured workers are being shortchanged. Especially in Southern states, critics say it’s too easy to deny benefits and that the ability to appeal has been sharply curtailed.

At one time, benefits were so rich in some states that it encouraged workers to fake injuries and malinger once they started receiving benefit checks. Remember California in the 1990s with the spike in stress claims? Or Pennsylvania, where you could make more on comp than your regular job because benefits weren’t taxed?

The political pendulum has swung far and wide. Sooner or later it will begin turning back toward increased benefits, especially if more states deem their comp systems are out of balance.

Insurers and employers should prepare for that day because pressure will increase to hold the line on premium hikes. A good start is to beef up anti-fraud measures and go after schemes by claimants and medical providers, as well as premium scams by businesses. Better prevention programs like this one would help as well.

A hostile environment for fraudsters will best serve the interests of insurers, employers and workers who are legitimately injured.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

A taxing idea to help curb workers comp premium fraud

Insurers and states could team up to detect more rate evaders Continue reading

A grand jury empaneled by Manhattan DA Cyrus Vance yesterday issued a sweeping report on widespread premium fraud in the Empire State’s workers compensation system. New York insurers lose nearly $500 million in premium in just the construction industry, the report says.

Vance highlighted the report in a keynote speech yesterday at the annual meeting of the New York Alliance Against Insurance Fraud (NYAAIF). He outlined several useful reform ideas, including:

• Increasing penalties, especially for large-dollar fraud schemes,

• Requiring insurers to conduct more audits of insured businesses,

• Creating a uniform application form, and issuing IDs injured workers can use to get medical treatment; and

• Developing an integrated database of information on applications, audits and certificates of insurance.

The last recommendation details how data analytics can be employed to better detect fraud, but it needs to go further.

What’s still needed is a simple solution to determine if an insured is accurately reporting payroll. The state could set up a relatively simple database with aggregate payroll data that it maintains from tax information all employers are required to report by law. Using tax-ID numbers, insurers could query the database and determine if there are discrepancies with data reported on comp applications.

Yes, some employers do defraud both insurers and the state in under-reporting payroll, but most don’t because penalties for tax fraud are much steeper than premium schemes.

To protect privacy, the aggregated data from the state wouldn’t have to be disclosed to insurers — only whether the data doesn’t match. A mismatch then would trigger an audit.

This solution — combined with advanced analytics to detect misclassification — could deter and detect much of the fraud, except for the very sophisticated schemes.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Comp scammers more daring or just dumber?

Fraud of the MonthHow desperate (or dumb?) do you have to be to get a buddy to shoot you in the leg in order to file a workers comp claim? That’s what Pierre Lamont Taylor did while working for UPS in Baltimore. He and his cousin, Joseph Francis Brooks, got the idea one day while watching television. Brooks shot Taylor to stage a robbery. UPS’ insurer paid out a cool quarter million to Taylor who shared his payday with his cohort and everything was fine until a friend spilled the beans to Maryland state police.

Brooks was sentenced last week by a judge who said the scheme by the pair “ranks as one of the dumbest things” he’s seen in all his years as a lawyer, prosecutor and judge.

Recent workers comp scams have become more brazen, dumb and sometimes violent. A handful are detailed in this month’s web feature highlighting prominent and interesting cases. Some are laughable, some sad, but all hurt the integrity of this needed line of insurance, as this month’s article concludes:

People who defraud the workers comp system — whether they’re workers, employers or medical providers — increase already expensive insurance premiums on businesses, many of which already are on the edge of solvency. This prevents them from expanding their businesses and hiring new employees — something this nation desperately needs right now. Workers comp fraud also is an affront to the truly injured workers and makes it harder for them to get the compensation they deserve.

Good Morning America features the Coalition

QuiggleABC-TV’s premiere morning newscast featured an excellent piece on workers compensation fraud this morning. It profiled a handful of insightful cases, including comp claimants who were caught skydiving and running a race in drag. This segment not only is entertaining, but also serves to build awareness about fraud and communicates who ends up paying for these crimes. This awareness helps to deter fraud, as well. Some people will think twice about committing fraud if they see others getting caught and punished.

The segment includes an interview with the coalition’s Jim Quiggle, who initiated the idea for the segment and provided producers with the cases that were profiled. You can view the segment here.

Social media as an investigative tool

social mediaI’m in negotiations to buy a new home and have started gathering intelligence on the sellers to understand their motivations and gain an upper hand in our deliberations. Now I’m no great sleuth and don’t have access to many of the tools investigators use these days. But I do know my way around the Internet, so I start with Google and get some basic information on the young couple selling this house, such as their occupations, published writings, schools they attended, etc. Interesting, but hardly insightful.

Then I turn to Facebook. From checking up on long-ago girlfriends and long-forgotten college buddies, I know a lot of people keep their Facebook pages open — or just don’t know how to set the preferences to keep them from prying eyes. So I search on the husband’s name and get a quick match. Unfortunately, his page is restricted to his Friends.

Then I try the wife’s page and have better luck. It’s open for everyone to see. Perusing her page I get a sense of who she is, her likes, her friends and her hot buttons. And then a post from a couple months back hits me straight in the face — she announces to her friends she’s pregnant with her third child. Now this is a tiny house that must seem even smaller with two kids, let alone three. These are very motivated sellers and, with this nugget of information, I expect to buy this home at a very good price.

My little investigative endeavor pales against the exploits and successes insurance investigators are enjoying these days using social networking sites. An article in Business Insurance on Monday profiled several success stories on catching workers comp cheats.

Frank Pinder, head of GlobalOptions SIU, recently told us about a case of an injured worker who claimed he was too hurt to get out of bed, yet he had time to update his MySpace page and post upcoming dates and venues his rock band was playing. “When our investigator arrived at the gig, the drummer not only banged away for the entire set without pain, but showed no signs of injury when carrying his drum set and amplifiers on and off the stage,” Frank reported.

Another case involved a women who claimed fear of leaving home prevented her from working. Frank says it took a day for his investigators to check her Twitter page and her Tweets to learn about social events she was planning to attend including a friend’s baby shower.

With people in their 30s and 40s now dominating social media outlets, the Internet has become an invaluable tool for fraud investigators. If you have a clever example of using social media as an investigative tool, please share it with us.

A prison guard’s second worst nightmare

I’m not familiar with the specifics of this case, but this is a much longer prison term than we’ve seen in many years for this type of fraud.

Ex-Prison Guard in Sacramento Sentenced To 7 Years

A former Folsom prison guard has been sentenced to seven years in prison for faking injuries to get money from the state.

It’s one of the most severe sentences ever for pension fraud in California.

June Lucena claimed she was too injured to work after falling 16 to 20 feet from a guard tower in 1999 and undergoing surgery on her shoulder and jaw.

But surveillance tape showed the 45-year-old piloting a jet ski and frolicking on a water slide.

A Sacramento County jury convicted Lucena on 14 counts of fraud for faking injuries to get workers’ compensation and state disability. Permanently disabled guards get tax-free pensions of half their pay for life.

Lucena’s attorney, Lance Daniel, called Friday’s sentence “outrageous,” and said he has filed notice to appeal.

Prison can be especially tough on ex-guards. This should serve as a strong deterrent to other prison employees in the state. Defrauding workers compensation isn’t worth the risk.