Workers Compensation Fraud Essay Research Paper Worker

Workers Compensation Fraud Essay, Research Paper

Worker’s Compensation is a service that provides reimbursement for lost wages to employees who have sustained injuries from work or work-related tasks. It is also one of the services that is most often the victim of fraud. Each of the three types of fraud, claimant, employer, and provider, is defined by the same characteristics, outlined by the Ohio Board of Workers Compensation:

· Receiving workers’ compensation benefits that are not entitled to the claimant;

· Making false or misleading statements with the purpose of securing goods or services under the Workers’ Compensation Act;

· Altering, falsifying, destroying, concealing, or removing records needed to assess claim validity or establish the nature of goods and services for which reimbursement is requested;

· Entering into an agreement for conspiracy to defraud the BWC or a self-insuring employer by making false claims for disability benefits.

The public and many enforcement agencies tend to dwell on claimant fraud, as it is the most widely publicized (Beck). The fixation on claimant fraud has distracted the public and these enforcement agencies and policy-makers from growing evidence of the real problem: millions of dollars in employer and provider fraud.

Claimant fraud is very serious, but has more than its share of attention in the media, completely blowing the problem out of proportion. The Press Democrat found that, “While some insurance companies claim one out of three workers lie about their injuries, or 33%, the actual number of fraud cases sent to prosecutors is less than one out of one hundred, or less than 1%.” In New York, for example, over $6 million in insurance fraud was documented, less than 2% of which resulted from claimant fraud cases (Dao par. 2). The state of Kansas, however, reports that the most common form of fraud involves workers being untruthful about the extent of injuries that occur on the job (Lorenz). This proves little if any about the real problem, though, because only about 1,000 claims were investigated in Kansas over five years (Lorenz), while over seven times that amount were investigated in New York and California in the same time period (“Insurance Fraud”).

Throughout most sources, though, it is clear to see that employer fraud is the most prevalent and costly type of fraud. Employer fraud includes a number of schemes used by employers to reduce the number of workers’ compensation insurance premiums by underreporting payroll, misclassifying employees’ occupations and misrepresenting their claims experience. According to the National Council on Compensation, the most common frauds include:

· Misclassification of workers. Employers can either classify workers as independent contractor or misrepresent the work performed, which places workers in a less hazardous occupational category. Both of these tactics are intended to avoid or reduce premiums.

· Underreporting payroll. Another method of premium reduction is employers not reporting parts of the work force, paying workers off the books, or creating a “companion corporation” to hide a portion of the employees.

· Misrepresentation of claims experience. Employers hide previous claims by classifying employees as independent contractors or leased employees or creating a new company on paper.

Despite laws in states across the nation, many corporations fail to purchase workers’ compensation insurance for their employees. There are also reports of employers instructing injured workers to seek treatment under group health insurance rather than workers’ compensation, employers discouraging workers from filing claims, and firing workers who file claims. (Helvacian and Shim, sec. 14-16)

The other major type of fraud is provider fraud, more specifically medical provider fraud. Defined by the United States Department of Labor and Industry, this type has the most varied and numerous different schemes involved in it.

· Creative billing and “upcoding.” Each deal with billing the Workers’ Compensation Industry. The former is mainly defined as billing for services that aren’t performed, and the latter involves billing more than the scheduled amount for the services that are performed.

· “Unbundling” involves performing a single service but billing it as a series of separate procedures.

· Product replacement involves a pharmacy or dispensary billing the industry for a brand name drug when the drug dispensed was generic.

These are all relatively old methods of swindling the system, but are still the most widely used because of how difficult it is for investigators to track those methods. Some newer and more sophisticated techniques have become increasingly more prevalent, partially because of the even more untraceable nature of each new method. These methods are:

· Under- and Over-Utilization. The term utilization refers to the level of care given to a patient for a fixed fee; under-utilization involves not providing enough care and over-utilization is providing unnecessary treatments or tests to justify higher fees.

· Kickbacks occur when providers are given incentives for patient referrals.

· Internal Fraud is when agreements are made between insurance companies and providers to defraud employers.

These types of fraud

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