5-Minute Guide: Top 25 Red Flags in Workers Compensation Claims
5-Minute Guide to Workers Compensation Insurance - The Top-25 Workers Compensation Claims Red Flags
Intended Audience:
Business Owners, Managers, Human Resource Professionals,and Supervisors.
Why This Topic is Important to Business Owners & Managers:
There are around 5-Million worker’s compensation claims filed in the U.S. each year, far in excess of any other type of business insurance.
The National Council of Workers Compensation Insurance (NCCI) estimates that between 2 to 4% of all workers claims filed annually are fraudulent, while other industry sources put the number at somewhere between 5 to 15%.
Other studies have shown that employers think that between 10 to 20% of all W.C. claims are fraudulent.
The reason for the difference in percentages is that NCCI has a much narrower definition of fraud than the other sources.
Usually reliable workers compensation sources report that each year fraud can cost employers between $10 to $15-Billion in additional premiums.
On a scale of 1 to 10, experts consider workers compensation fraud at between 7 to 8 in terms of detection difficulty.
All states classify workers compensation fraud as a felony as long as certain minimum dollar claims thresholds are met.
Claimants convicted or W.C. fraud can be required to repay their illicid indemnity benefits and the paid medical bills as well.
Definitions:
A Workers Compensation Claim is a formal request submitted by an employee to receive benefits they are entitled to as the result of a legitimate work-related injury or illness. The two most commonly received benefits are wage replacement (called Indemnification) and the payment of all reasonable medical costs associated with the claim, called Med Pay for short.
Workers Compensation Fraud is when a claimant willingly makes false statements, deliberately conceals or changes relevant facts in order to receive workers compensation benefits such as indemnity payments that they would not ordinarily be entitled to. However, while employees are the most likely to commit such fraud, it can also be undertaken by doctors, lawyers, employers and even family members. This category is sometimes referred to as Hard Fraud.
Workers Compensation Claims Abuse can be closely related to, and hard to distinguish from W.C. fraud. However, the abuse is largely unintentional and without actual criminal intent. Examples could include minor claimant exaggerations of pain and suffering, over-using medicines and medical treatments and not returning to work promptly when they know they are able. This category is sometimes referred to as Soft Fraud.
Workers Comp Claims Malingering is defined as an injured worker who is faking, prolonging or other exaggerating their medical condition or symptoms with the primary intention of extending the disability length so as to avoid having to return to work. Care must be taken to determine if a given example of malingering fits into either the fraud or the abuse category as specified under the applicable state worker’s compensation laws.
Top-25 Red Flags with Workers Comp Claims:
Caution: Meeting just one or more of these Red Flags indicators is not necessarily evidence of a fraudulent workers comp claim. Many of the red flag indicators can have perfectly legitimate reasons behind them.
Late Claims Reporting: This is a very symptomatic example of workers comp fraud. Late claims reporting by the worker makes it difficult to verify either the accident cause or facts relating to the incident. Consequently, the claimant has more time to conceal evidence, fabricate a story as to why the accident happened and why they delayed reporting it. On a cautionary note, employee mandatory claims reporting deadline requirements can vary considerably by state.
Communication Difficulties: After management receives the claims notification they may find it difficult to contact the individual directly by telephone or email. A prime example is a spouse who answers the phone calls and makes excuses about the claimant’s absence or inability to return calls. One reason for not answering phone calls from the employer is to avoid being asked about potentially incriminating evidence such as missed doctor’s appointments. A legitimate W.C. claimant will usually respond to management or the insurance carrier after the first or second attempted contact.
Reluctance to Provide Claims Information: Simply put, a legitimate worker’s compensation claimant will usually provide the needed information in a timely and forthright manner. The primary reason for this lack of employee cooperation is the possible exposure of information that could assist in the employer denying or contesting the claim.
Questionable Accident Description: This can arise when the person alleges they were injured in an area they don’t usually work in or while conducting an activity they don’t usually engage in. Additionally, the claim may allege the injury happened during lunch or break time to try to explain for the lack of witnesses or corroborating evidence. Another example is where the injury type or the extent of injury does not match the work activity that was being conducted.
Questionable Accident Timing: This can include reporting accidents early on Monday morning, before or after a long weekend, after vacations, and following negative personnel actions that were taken against them. Another example can occur is in rural areas with a strong hunting culture, where there is an increase in worker’s compensation claims before deer, wild turkey or bear season.
Lack of Witnesses: The alleged injury took place at a location or time that there would unlike to have coworkers in the immediate vicinity. This is particularly questionable when the claimant normally worked as part of a team or at a fixed workstation observable by coworkers. This can also be used in an attempt to conceal a non-work related injury.
Medical Tests Don’t Support The Symptoms: This is a situation where claimant’s reported pain and discomfort levels that simply aren’t supported by usually reliable medical tests. Commonly, physical dexterity testing may show a full or normal range of motions, but the claimant reports very limited mobility, sometimes associated with high pain levels or discomfort.
Disputes Doctor’s Diagnosis: This can be to the extent of the claimant rejecting solid medical evidence to their recovery such as X-rays , MRI’s or neurological tests. In its simplest form the doctor says the employee is ready to return to work and the claimant disagrees in order to avoid having to go back to work. Another example is when the worker rejects the doctor stated rehabilitation timeline.
Doctor Shopping: This is a classic tactic that fraudulent claimants will use to continue their indemnity payments by changing doctors to find who is even slightly supportive of their claim. Claimants will sometimes change physicians when they suspect that the doctor is about to release them to return to work, begins to question their symptoms or their lack of injury recovery.
Misses Doctor Visits or Therapy Sessions: This can be a prime indicator of a claimant who does not want a timely medical recovery especially when there is an imminent return to work. The main claimant motivations will often be the desire to extent disability payments for as long as possible. Managers should take a look at the frequency, pattern and claimant explanations behind failing to attend scheduled doctor visits or rehabilitation sessions.
Abuse of Work Restrictions: This is usually where the claimant refuses to accept work restrictions as life restrictions and engages in physically demanding sports, hunting, home/auto repairs that could present a high degree of re-injury risk. The implication here is that that the restriction is primarily being used to avoid work and not because of any genuine medical condition.
Rejects Light or Modified Duty: This can happen when the claimant does not want to return to return to work because it would interfere with leisure time pursuit or even working a second job. This is particularly evident when the employer has made a reasonable return to work offer or even transfer to another, less physically demanding job.
Known Financial Difficulties: This is often caused by an individual who has a lifestyle that is beyond their financial means of support, often resulting in a high credit card debt. The claimant will seek lengthy indemnity periods so they can work second jobs, otherwise known as “double dipping”. The claimant may also use their disability status as an argument to forestall actions by their creditors.
History of Frequent Job Hopping: The primary reason behind this is a claimant’s attempt to coverup such nefarious conduct as repeated W.C. claims, substance abuse or disciplinary actions. These frequent job changes can make it difficult for claims adjusters to adequately investigate the claimant’s prior employment history.
Indemnity to Medical Payment Imbalance: The usual example here is a long term disability event with little in the way of associated medical expenses. This can be indicative of exaggerated or called “Phantom Injuries” with the claimant’s objective of wanting to extended the length of the disability period beyond which is medically necessary. It can also indicate that the claimant is not actively participating in the prescribed medical or therapeutic treatments.
Obtains a Lawyer Before Filing or Immediately After Filing a Claim: In all 50-States the workers compensation claims system is specifically designed to be successfully negotiated by the average worker without legal assistance. Consequently, most legitimately injured workers will give the system a certain amount of time to work before getting attorney representation. An exceptionally apparent red flag is a worker who obtains legal representation before even filing the claim, or very shortly thereafter. Such early legal representation may indicate an attempt to exploit the claims system with the attorney actively coaching their client in how to exaggerate their injuries and suffering to obtain a higher disability rating for more and longer indemnity payments.
Out-of-State or Long Distance Medical Providers: This is particularly noticeable when there were competent, local physicians specializing in work related injuries within a reasonable travel distance. Sometimes, the long distance medical provider will have a reputation for rating injuries at a higher degree of impairment than they would normally be, and for setting questionable, long-term disability periods.
Moves a Considerable Distance After The Filing Claim: This can be a clear sign from a claimant on disability that they have no intention of ever returning to work for that employer, particularly when there does not appear to be any supporting medical or family reasons for the move. A fraudulent claimant will undertake the relocation so as to make it harder for the employer, insurer or medical provider to contact them. Quite obviously, this will make it virtually impossible for the claimant to accept even the most generous return to work offer.
Social Media Posts Indicate an Active Lifestyle: Many people who engage in illegal activities are impulsive and don’t consider what such questionable social media posts can reveal. Often, the posts will show claimants engaged in sports or other recreational activities that would seem to violate their physician issued work restrictions. Particularly, it makes sense to assume that a totally disabled worker would normally not be able to have an active and physically demanding lifestyle like they had before filing the claim.
Multiple Medical Providers: A classic example is where there is a worker who seeks out multiple medical providers without either a medical need or a referral from another doctor. Multiple and conflicting doctors’ reports can keep the disability checks continuing even with questionable claims.
Excessive Medical Testing: A primary reason for this is to delay the closure of the claim so that disability payments can continue. The claimant will seek additional testing in the hopes that one such test will support their claim, or at least given them the benefit of the doubt. This may also be indicative of attorney or physician fraud. Sometimes, this type of fraud can involve a criminal ring of multiple physicians, clinics and/or attorneys
Purchase of Expensive Luxury Items: About half of all employees on longterm disability report at least some level of financial hardship. A definitely red flag is a claimant on extended disability who has purchased expensive motorcycles, autos, fishing boats, campers or even vacation properties in anticipation of lengthy indemnity periods primarily because they have little or no intention of ever returning to work with that employer.
Significant Personal or Lifestyle Changes: These can include divorce, death of a family member, caregiving demands, substance abuse, and financial troubles that may put considerable demands on the worker’s time. Therefore, work becomes an impediment to their dealing with their personal issues.
Prolong Healing Time: This is where the severity of the injury does not appear to match the extended recovery time taken. With most injury types there are medically expected recovery times that can be used as a baseline reference to identify possible malingers. The excessive healing time can be associated with missed doctor visits and therapy treatments.
Claim Filed Shortly Before Ending Employment: The more common examples include retirements, layoffs, plant closures, forced transfers, job terminations or other negative personnel actions. This fraudulent activity can be undertaken by an individual who sees W.C. indemnity payments as more preferable to unemployment benefits. This is because to collect unemployment insurance payments the claimant has to be actively seeking work, is usually of a more limited time duration and is considered as federally taxable income.
When an Employer Suspects W.C. Fraud:
The suspicion of W.C. fraud should not solely be based on conjecture, employer prejudice or communications primarily based on here-say comments from other employees.
It maybe advisable to question supervisors and reliable coworkers about the possible employee motivation behind a questionable W.C. claim such as the need to take care of an ill or aged relative.
With suspected W.C. fraud involving substantial dollar amounts, the employer may want to consider obtaining the services of an attorney experienced in workers compensation law to provide a legal opinion as to whether the exiting claims information meets the legal threshold for fraud.
Upon confirmation of probable fraud, the insurance carrier should be notified, along with an explanation as why fraud is suspected.
The employer should be prepared to supply the carrier with supporting documentation such as witness statements or copies of the in-house accident investigation.
The carrier’s fraud investigators will probably want additional information beyond that initially furnished to the carrier’s claims department such as a detailed claim’s timeline or additional witness testimony.
Employers Workers Compensation Claims Best Practices:
Support the management policy that claims avoidance is better than claims administration.
Understand that employers do not so much acquire their workers compensation problems as they hire their workers compensation problems.
To avoid disability malingering, management should initiate a rapid contact with the claimant and expressing concern, support and inquiring when the employee thinks that they might be able to return to work. This helps to establish a positive claims relationship between the employer and employee.
There should be a detailed and aggressive in-house accident investigation program that is capable of identifying questionable accident scenarios.
Establish & implement an Accident Repeater Program that does not infringe on an employee’s right to file workers compensation claims.
Have a well established return-to-work program that has as its primary mission providing the injured worker meaningful alternative work that minimizes the chance of re-injury.
For Additional Information or questions on this Subject, Contact Centurion’s Loss Control Manager, Rob Brooks, at:
(606)434-0739
Disclaimer:
This publication is intended for general educational purposes only, and is not to be considered as business, financial or legal advice.
Readers should consult with appropriate professionals before making any decisions based on the content of this newsletter.
Some of the data &/or statistics referenced within were obtained using artificial intelligence.
Centurion Insurance Services and the writer make no guarantees or warranties of any kind, express or implied, about the reliability, completeness or suitability of the information contained herein.
We will not be liable for any losses or damages arising from the use of the information provided.
