An Overview of Different Types of Workers’ Compensation Fraud


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Workers' compensation is insurance coverage mandated by each state (it is not provided by the federal government) where employees can claim payments if they are injured while on the job.

Worker compensation scams involve the exploitation of these insurance plans.

According to the National Insurance Crime Bureau, workers' compensation scams play a significant role in the $30 billion of losses due to fraud nationwide.
By the term ‘workers’ compensation’, many people get misled that these frauds are only carried out by disgruntled and dishonest employees. But in actuality, these frauds can be played out by any of the party involved i.e. employee, employers and medical services providers.

In this article, we will shed light on all these three types of workers’ compensation scams to enlighten our readers to remain cautious in whichever capacity they are involved with workers’ compensations plans.

Workers’ Compensation Fraud by Employees

Also known as claimant frauds, they are the most common and discussed type of workers’ compensation scams. Employees can enter fraudulent claims to abuse the compensation policies of an organization. There are usually two incentives which motivate workers to get their hands dirty in carrying out this fraud:

  • Paid 'vacations'
  • Financial Gain

To get misleadingly compensated, there are some common tricks played by these dishonest employees:

  • Faking an injury
  • Overstating the nature and degree of the injury
  • Requesting a claim for an injury that has happened off the work hours
  • Making a compensation claim for an old injury

Red Flags of False Workers’ Compensation Claims

For employers, it is always tricky to handle workers’ compensation claims. The best practice is to never directly accuse any employee of submitting a false claim. There are several red flags regarding false workers’ compensation claims. Look out for them to protect your business from reimbursing undeserving workers.

No witness to the incident: In false claims, there is usually no witnesses to the incident for which the worker is claiming compensation.

Unexplained delay: In false injury claims, there is a significant delay in occurrence and reporting of the accident without furnishing any valid reason.

Incur injury just before the end of employment period: Workers who are serving their notice period or at end of their employment contract try to falsely avail their workers’ compensation plan.

Coincide with holidays: A worker claiming for leaves or a compensation for an injury happening just before or after a holiday is a potential sign of fraud.

Want a quick settlement: Employees making false compensation claims often strive for early settlements. They are also quick to hire an attorney to contest their claim.

Evidence to Nab the False Compensation Claims

Among several claims, it can be quite tricky to identify workers’ compensation frauds even in the presence of the above-mentioned red flags. However, there are a few things you can do to gather evidence to establish the authenticity of these claims.

Set up a Medical Board

To make sure that you are not getting ripped off by false workers’ claims, you can set up an impartial medical board. Have a comprehensive checkup of every claimant to ensure the sanctity of the claim. This is common among commercial insurance companies. Employees making false claims will try every way possible to evade the checkup from the medical board.

Have a Check on the Employee’s Activity

If a red flag has been raised regarding a certain compensation claim, then it is important to keep a vigilant eye on the employee in question. By doing this, you can gather substantial evidence against the claim in several different forms.

You can catch the worker getting involved in activities that would be impossible with his/her claimed injury. Moreover, if you find out that the employee is doing a side job, then this information can also be used against him or her and his false claim.

Workers’ Compensation Fraud by Employers

Worker’s compensation fraud instigated by employers are rather elaborative and systematic. The employers who are guilty of such scams do this to reduce the number of premiums they owe in the name of workers’ compensation. They are also called premium fraud because they are centered around the amount of premium money.

One of the most methodical steps taken by employers to deceive workers is to misclassify their positions to reduce the amount of premium they have to pay out. For instance, an employer would register his labor force as administrative staff to pay less premium money because the latter job description contains less risk. A significant amount of money can be saved by abusing the system this way.

Aside from this, there are several signs of employers committing premium fraud.

  • Such employers are not consistent with internal audits
  • They use false and misleading company names to change the nature of premiums availed
  • Falsely understating the number of employees is used to save money in the name of workers’ compensation funds.

Workers’ Compensation Fraud by Medical Services Providers

Doctors and other medical professionals can also be a part of workers’ compensation fraud. These professionals play a crucial role in the execution of any program such as this. They can abuse their position to carry out organized scams in order to get benefits from exploiting the worker’s compensation program.

These worker’s compensation-related frauds comprise several different misdeeds including:

  • Overbilling
  • False quotations of services and products prices
  • Kickbacks

Signs of Medical Services Providers Fraud

Even though it’s very hard to trace frauds instigated by medical professionals associated with a worker’s compensation program, there are still some pointers which can help you in identifying such scams:

  • Bills for products and services that are never availed
  • Fake patient cases
  • Duplicate billing is also done by deceitful medical services providers to charge extra

Worker compensation frauds involving medical service providers are mostly carried out in large organizations where dozens and hundreds of employees are covered by the plan. Having a good legal team by your side can help you in challenging people who are trying to rip you off through the systematic rigging of medical bills.


Posted On May 12, 2018