Workers compensation scamsWorkers compensation insurance protects employees who are hurt on the job. This valued employee benefit pays for medical expenses, lost wages and other expenses while a worker heals.
Most employers and their workers are very honest. Only a small number scam this coverage for personal profit, but the damage they cause is enormous.
Workers comp fraud is a large crime in America today. Tens of billions of dollars in false claims and unpaid premiums are stolen every year.
Scams are forcing premiums higher — draining business profits and costing honest workers their pay and jobs.
And guess what — you pay higher prices at the cash register. The large costs of fraud get passed onto all consumers.
Free money is the biggest motive. Crooked workers often secretly take a second job or open a side business while falsely claiming they're too injured to work their current job. Thus they receive lost wages from their workers comp policy — and illegally earn extra money from their secret job.
A free vacation is another lure. Dishonest workers collect insurance money and claim they're disabled while pursuing hobbies, sports or other personal activities. Like skydiving, playing soccer, weight lifting or fixing up their home while supposedly injured.
How fake claims work
Hurt off the job. Workers get injured off the job, but say they're hurt at work so their workers comp policy covers the medical bills. A person might hurt his neck lifting a heavy box while cleaning the attic. Or maybe sprains an ankle during a softball game. Then he pretends the injury happened at the loading dock at work.
Inflated injuries. A worker has a fairly minor job injury - maybe a slight twinge in her lower back — but insists her back is seriously sprained. This lets the worker collect more workers comp money and stay off the job longer.
Fake injuries. Some workers simply invent injuries. Soft-tissue injuries such as muscle problems with the back and neck are popular scams. They're hard to disprove, and thus are easier to get away with.
Old injury. Sometimes a worker with an old injury that never quite healed will claim he just got hurt on the job. A damaged knee or shoulder, for instance.
Malingering. Basically, this is goldbricking. Staying at home longer by pretending you're still disabled, even though you've healed enough to return to work.
Dishonest business owners will illegally reduce the workers comp premiums they owe.
Premium swindles can be hard to discover. Businesses often hide their premium scams behind dummy companies, fake accounting, tax records and other coverups.
These cons often are complex and well-hidden. They can take much time, effort and financial expertise to discover, and convict in court.
Why get mad?
Bogus injury claims far outnumber premium scams, but most premium scams are much larger.
Just one premium swindle can steal several hundred thousand dollars in unpaid premiums in one year. Some premium swindles last for several years - thus stealing millions. A worker's bogus injury claim, however, normally steals $2,000-$50,000 total.
How premium scams work
Safer jobs. A crooked business tells the workers comp insurer that many employees work safer jobs than they really do. Example: A construction firm classifies crane operators as file clerks.
Hidden employees. A business says it has fewer employees or a lower payroll than it actually does. Example: A business owner hides employees by saying they work for a seemingly legitimate dummy firm he created. The owner may falsely claim the workers are independent contractors, and thus don't count toward his workers comp premiums.
Avoiding coverage. A business simply doesn't buy state-required workers comp insurance, hoping state officials won't notice. This leaves workers dangerously exposed if they're injured without insurance.
Dishonest medical clinics (also called medical mills) and lawyers often team up to scam workers comp insurance. These often are well-organized criminal gangs. One gang can steal millions of dollars a year.
How doctor & lawyer scams work
Inflated injuries. Clinics may inflate the seriousness of real injuries to workers, then bill insurers for costly and worthless treatments and tests. A given treatment may be more expensive than needed, or clinics may order more treatments than necessary.
Phantom injuries. Clinics may bill insurance for treatment of injuries that never happened.
Bogus lawsuits. Shady lawyers working with crooked clinics encourage uninjured workers to seek useless treatment for scams. The lawyers then may threaten to sue unless the insurance company settles the phony claim quickly. They gamble that the insurer will decide it's cheaper to settle than face an expensive lawsuit involving a jury that may be sympathetic to a worker.
Illegal kickbacks. Crooked clinics and lawyers hire recruiters (also called runners) to bring workers into the scams. The runners receive illegal kickbacks for referring patients to the lawyers or clinics. Sometimes the workers are part of the swindle, and sometimes they don't realize a swindle is taking place.
Fake clinics. Some clinics are bogus. They have no licensed doctors. The office also has little useful medical equipment, and gives almost no helpful or needed treatment. The clinic is merely a staging ground for bogus workers comp claims.
We all pay a price for workers comp fraud.
Higher premiums. Businesses pay higher workers comp premiums because insurers pass the high costs of fraud onto their policyholders. Often the premium increases are large and very damaging - especially for smaller businesses that can least afford higher premiums.
Higher prices. Consumers pay higher prices for goods and services when businesses pass their higher premium costs onto customers.
Lost jobs. Workers lose jobs because businesses often must reduce their workforce, move to another state, or even go bankrupt because of higher premiums.
Lost pay. Business owners freeze or reduce worker pay as they try to offset the often sharply higher cost of premiums.
Endangered workers. Workers can find their health, safety and life savings threatened. They could have a serious work injury but no coverage because their employer illegally avoids buying insurance.
Weakened businesses. Higher workers comp premiums depress a firm's income, lower employee productivity, and force some companies to go out of business. Honest businesses also find it harder to compete against dishonest firms that lower costs by illegally avoiding workers comp premiums.
Taxpayer ripoff. Some workers comp programs are government-run. Thus they're supported by tax dollars. This means your tax dollars are being stolen — hundreds of millions a year.
Workers work harder. Guess who takes up the slack when a fellow worker leaves the job with a fake injury? Fellow workers, who may have to pull extra duty.
Workers and business owners also can pay a high price for committing fraud. You can lose everything with one crooked act.
You get caught. Insurers aggressively pursue suspicious claims and premium scams. Crooks have a good chance of getting caught.
Jail time. Workers comp fraud is a crime, which can mean serious jail time if you're convicted.
Fines. You may have to pay large fines and repay the stolen money if you're convicted.
Lost job. You'll lose your job and income if you're convicted of making a bogus claim.
Lost business. Your business could close down or be seriously damaged if you're convicted. Your hard work and dream are all thrown away with one dumb swindle.
Criminal record. Conviction means a criminal record, which can harm your chances when applying for future jobs — jobs you may need to support a family or keep your career going.
Shame. You can't support your family if you lose your job and go to jail. Your kids, friends and neighbors also know you're a convicted crook — someone they should look up to as a role model.
The high cost of fraud can damage your employer. It can also cost you in lower pay — and even jeopardize your job. Help your employer fight workers comp swindles.
Contact supervisor. Contact your supervisor or insurance company's fraud hotline immediately if you suspect someone's committed a scam. Include as many details as possible. Don't wait; the trail may get cold.
Watch for medical mills. Be wary if a doctor wants tests or treatments that seem excessive for your injury... Avoid lawyers who aggressively recruit you for treatment at a specific clinic... Keep records of your visits and treatments, and compare to the statements the insurer sends you.
If you're hurt on the job, seek the treatment and compensation you deserve, and know your rights as an injured worker in your state.
A happy workforce reduces the odds of workers comp fraud at your business. So help to create a safe and supportive workplace. Specifically...
Show you care about safety and your employees. Build strong teamwork among your employees about safety. Equally important, be clear that you won't tolerate fraud.
Build partnerships with employees. Create a safety program. Listen to employee complaints. Correct safety problems now. Show you care about good working conditions.
Zero tolerance. Inform employees that your company has zero tolerance for fraud. Scams cheat their company — and threaten their jobs.
Check job applicants carefully. Criminal backgrounds and a history of suspicious injury claims can be good predictors of potential fraud.
Report accidents. Require workers to report all job accidents immediately — and get them treatment promptly.
Report fraud. Show workers how to report suspected fraud confidentially. Prominently place your insurer's fraud hotline number around the workplace, but don't go overboard. Honest workers may find it offensive if all workers comp claims are treated with suspicion.
Alert your insurer. Let your insurance company know about suspicious claims immediately. Encourage active investigation of suspect claims.
Provide procedures. Give employees written safety and anti-fraud policies & procedures.
Reward fraud tips. Consider an employee reward program for reporting suspicious claims that lead to conviction.
Know the warning signals. Employers should know the warning signals of suspicious claims. Obtain a list of fraud indicators from your workers comp insurer.
Verify your insurer. Make sure your workers comp insurer is licensed in your state. Contact your state insurance department. You don't want to be sold fake or unauthorized insurance.