How Workers' Compensation Fraud
Affects Your Business

3 Types of Workers' Compensation Fraud
Summit Works to Protect You
The Warning Signs of Workers's Comp Fraud
Protecting Your Business From Claims Fraud
Helpful Links

False and inflated insurance claims cost businesses billions of dollars a year. While it’s easy to think that insurance fraud only affects insurance companies, the truth is that every fraudulent workers’ comp claim pushes premiums up. In short, workers’ compensation fraud directly affects your company’s bottom line, and anything you can do to stop it can save you money.

Did You Know?

• Thirty-six percent of all Americans think it's okay to pad an insurance claim to make up for past premiums. This figure jumps to 42 percent in urban areas.—Insurance Research Council
• More than one in three physicians admits that patients have asked them to deceive third-party payers to help the patients obtain coverage for medical services in the last year. —Journal of American Medical Association
• New estimates show that fraudulent or exaggerated workers’ compensation claims account for nearly 25 percent of the total money spent on workers’ compensation.

Summit works to eliminate as much fraud as possible through systematic cost management and medical case management—but you can help, too. Read on, and learn what you can do.

3 Types of Workers' Compensation Fraud
It’s important to know that in workers’ comp, fraud can occur even if the initial injury was legitimate. In fact, there can be many levels of fraud, stemming from three separate sources: claimants, employers and even medical providers.

1. Claimant fraud happens when an employee fakes or exaggerates an injury, lies about being injured on the job (instead of during a weekend of fun!), denies a preexisting injury or even earns a wage from another source while accepting workers’ comp benefits. The state of Florida is so serious about stamping out fraud that they require injured workers who file a claim to sign a special statement. It says that the employee understands that knowingly committing insurance fraud is a punishable crime. Those who choose not to sign the document may not receive benefits.
2. Premium fraud is employer driven. Dishonest employers who do not pay for state-mandated workers’ compensation insurance or pay less than they should are actually committing fraud. They may under-report payroll, misclassify workers, pay workers cash “under the table” or call them subcontractors. Any way they do it, it stacks the competitive playing field unfairly against companies who play—and pay—fair.
3. Medical provider fraud occurs when providers deliberately over-treat a claimant or submit fraudulent bills. A provider might also manipulate billing codes or “up code” services so that insurance companies are billed for a more expensive service than the one provided.

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Summit Works to Protect You
Summit is fighting to take the profit out of insurance fraud through our claims adjustors, underwriters, auditors and our independent agents. On average, our insureds save more than $2.5 million annually because we carefully scrutinize every claim.

At the heart of Summit’s antifraud efforts are our fraud committees—staff members who meet monthly to hear, question and discuss suspect cases. According to Bob O’Halloran, Summit’s vice president responsible for claims operations, the groups bring together key staff to review problem cases from all perspectives.

“We wanted to create an antifraud think-tank, where our staff could bring any suspect claim or audited account and know that something would be done. Our fraud units are made up of senior level and supervisory personnel, management staff and specialists who have seen a lot and are able to offer real-world solutions,” he explains.

Can You Believe It?
“We see a lot of incredible things,” says Kim St. Jean, co-director of Claims, offering the story of the claimant who alleged severe brain damage. “He was videotaped driving himself around town without a neckbrace, cane or other aid,” Kim explains. “But when he went to his doctor, a surveillance camera showed him putting a brace on in the car, then leaning heavily on a family member as he got near the door. It was quite a show!”

In another case, an employee who had been on the job only two days claimed to have slipped and hurt his arm while digging a ditch. With no witnesses and two doctors who said there was no injury, he still sued for permanent disability. He lost.

Playing the “shell” game
“It’s amazing how far some employers will go to avoid paying what they should in comp premium,” says Roxanne Moisuk, underwriting business support manager. “One issue we encounter is when a company we insure pays their employees through a shell company. The owner may state that he has no employees—or very few. However, when we conduct a premium audit on the insured company, we find large sums of payroll money paid out from the main company to the shell company. They may see it as a perfect place to hide true payroll—but we catch it.”

Melissa Snider, field services coordinator, relates another story of a shell company that actually billed Summit thousands of dollars for medical services that were never rendered. She outlines the case: “They used different client names, but the bills were always for the same preoperative service. Since Summit reviews every claim and every bill, we caught it quickly.”

With Fraud, Everyone Loses
Whenever and however it happens, workers’ compensation fraud costs everyone. According to the National Insurance Crime Bureau, the cost totals $5 billion each year. Employers experience production delays, overtime expenses and training costs for temporary help—which can lead to higher premiums, higher product prices for consumers, fewer sales and lower employee salaries. It’s a no-win cycle fueled by greed.

What’s the Answer?
What can you do to help stop workers’ comp fraud? Check the warning signs on the next page. If you suspect abuse of the workers’ comp system, you can call Summit at 1-800-762-7811, and we’ll check it out.

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The Warning Signs of Workers’ Comp Fraud
Most fraud tips come from employers, fellow employees and even spouses. That’s why it’s important to know what to look for. Here are some of the warning signs.

Claimant Fraud

• New employee has an accident
• Recent termination, upcoming layoff, job change, retirement
  
• Recent disciplinary action, missed promotion or requested transfer
• Poor attendance record
• Problems with co-workers
• Prior lost-time claims
• Accident occurs Monday morning, immediately after a vacation or holiday
• Accident happened in an area the employee is not expected to be in or while performing a task not ordinarily performed
• No witnesses or the only witness is a personal friend of the employee
• Claimant resists signing authorizations, delays treatments or refuses light-duty offers
• Alleged restrictions are out of line with type or degree of injury

Premium Fraud

• Certificate of Coverage with inaccurate data
• Cross-outs, white-outs or erasures on documents
• Number of employees, classifications and payroll are inconsistent

Medical Provider Fraud

• Medical documentation does not support the service billed
• Billed procedures are for evaluation and management codes only
• Provider is actively billing multiple claims for an injured worker
• Injured worker does not recall the treatment being billed
• Provider’s medical reports read almost identically for different patients
• Much higher healthcare costs than expected
• Unusual frequency or duration of treatments

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Protecting Your Business From Claims Fraud
Summit starts every claim with a three-point check—the accident report, the doctor’s findings and the employee’s report. If all three match up, we can be 99 percent sure the claim is genuine.

You can help protect your company against workers’ comp claim abuse by developing policies like the ones shown here. Put them in writing and make sure every employee understands them.

• Document your safety program. Specify management, supervisory and employee responsibilities. Employees should know you want them safe.
• Mandate safety procedures. Include a documented review of all company safety policies. Emphasize items such as workers’ comp benefits, safety rules and regulations, disciplinary procedures, accident reporting requirements, accident investigation, post-accident drug screening and return-to-work procedures.
• Screen new employees. Include an application, personal interview, reference checks, drug screening, physical, health questionnaire and motor vehicle registry checks. Employees with something to hide won’t be interested.
• Document accident response procedures. Supervisors need documented procedures to follow in the event of an injury. This includes ensuring that the injured employee receives proper medical attention, preserving the accident scene, reporting the accident and documenting the investigation.

Remember, all accidents should be reported within 24 hours of the incident. Summit’s injury hotline is open 24 hours a day. Call 1-800-762-7811.

• Explain workers’ comp benefits to the injured employee. Studies show that most litigation is the result of employees not understanding the benefits they are entitled to. Those who feel a part of the process are much less likely to look for extras that are not their due.
• Be ready with a return-to-work program. Identify jobs that can be performed by an employee with work restrictions. Consider nonroutine tasks such as inventory, equipment inspection or short-term projects. Document the individual task requirements to help the treating physician determine if the injured employee is capable of the modified duty.

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Helpful Links

Want to learn more? Check out the following links for state-specific information about insurance fraud and workers’ compensation laws. Many sites provide ways to report suspected fraud.

Coalition Against Insurance Fraud

Provides state-specific legislative updates, fraud reporting hotlines and contact information for many states throughout the United States.
http://www.insurancefraud.org/fraud_bureaus.htm

Alabama

Department of Industrial Relations—Workers’ Compensation Division
http://dir.alabama.gov/wc/

Arkansas

Worker’s Compensation Commission
http://www.awcc.state.ar.us/

Insurance Department—Criminal Investigation Division, Fight Fraud Arkansas

http://www.fightfraud.arkansas.gov

Florida

Division of Workers’ Compensation
http://www.fldfs.com/WC/

Division of Insurance Fraud
http://www.fldfs.com/fraud/

Georgia

State Board of Workers’ Compensation
http://sbwc.georgia.gov

Kentucky

Department of Labor—Office of Workers’ Claims
http://www.labor.ky.gov/workersclaims/

Louisiana

Office of Workers’ Compensation Administration
http://www.laworks.net/wrk_owca.asp

Louisiana Works™ Department of Labor
http://www.laworks.net/WorkersComp/OWC_MainMenu.asp
http://www.laworks.net/LaFraud/Stamp_Out_Fraud.asp

Mississippi

Workers’ Compensation Commission
http://www.mwcc.state.ms.us/

Office of the Attorney General—Insurance Fraud Unit http://www.ago.state.ms.us/divisions/pid/insurance.php

North Carolina

Department of Insurance—Investigations Division
http://www.ncdoi.com/Investigations/inv_home.asp

Industrial Commission Fraud Investigations Section
http://www.comp.state.nc.us/ncic/pages/fraud.htm

South Carolina

Workers’ Compensation Commission
http://www.wcc.state.sc.us/

Office of the Attorney General
http://www.scattorneygeneral.org/public/insurance.php

Tennessee

Department of Labor and Workforce Development—
Workers’ Compensation Division
http://www.state.tn.us/labor-wfd/wcomp.html

Bureau of Investigation, Criminal Investigation Division—
Workers’ Comp Fraud Reporting
http://www.tbi.state.tn.us/divisions/cid_wcfu_new.htm