Workers compensation coverage is essential for many businesses. It protects employers and employees if an injury happens on the job. Work comp covers important expenses, like medical costs, rehab services, and lost wages. But where there are benefits, fraud is always a possibility. What workers compensation fraud prevention strategies can business owners use? How can they identify suspected fraud?
On this episode of the WorkSAFE Podcast, we’re sitting down with a fraud investigator. Bill Byington works at Missouri Employers Mutual. He is the Senior Special Investigative Unit Specialist, and carries out investigations in work comp fraud cases. Byington has previous law enforcement and military police experience.
First, we’ll share the most common types of fraud. Then, we’ll discuss how employers can prevent fraud. Finally, we’ll talk about what business owners can do if they suspect a fraudulent claim.
Listen to this episode on the WorkSAFE Podcast, or read the show notes below.
The common types of work comp fraud
Work comp fraud happens at many different levels. Employees can make false claims – and employers can, too. According to Byington, there are a few common types of fraud:
- Employee claim. This happens when an employee files a claim for benefits they aren’t entitled to. For instance, their injury may have happened at another location.
- Employer fraud. This happens when an employer fails to report a claim. They may try to handle the incident themselves. For example, they may pay for medical care to avoid reporting the injury.
- Certificate of Insurance (COI). This happens when a subcontractor provides a false document. A COI ensures that a subcontractor – and their employees – have work comp coverage. But these documents can be faked.
- Premium fraud. This happens when an employer provides wrong information about their workforce. This includes reporting the wrong payroll or classifying high-risk workers as lower-risk.
Why do employees commit fraud?
Employees commit fraud for different reasons. Some have a past criminal history. Others are in a bad work or life situation. They see work comp benefits as a better option. Byington has even seen self-injury in some desperate situations. For example, one employee broke their own kneecap in an attempt to get a payout. Another stuck his hand inside of a machine, crushing the bones. However, these purposeful injuries are sometimes the most severe.
Why do employers commit fraud?
Business owners may commit fraud to get, or keep, lower premium rates. For example, a roofer may be listed as a secretary on payroll documents. A secretary is a lower-risk job than a roofer. As a result, they pay lower premium. In these cases, an injured employee is still fully covered. But the employer will have serious questions to answer.
Workers compensation fraud prevention: 3 ways to protect your business today
There are a few easy ways to help protect your business from work comp fraud.
Put a reporting policy in place
Safety policies are the key to keeping employees safe. Any on-the-job incident should be reported immediately. The more time that passes between the incident and the report, the more time there is to make up a story. It is also easy to forget details after even a few hours pass by. Quick reporting lowers the risk of an injury becoming worse. Put an incident reporting policy in place. Employees should understand and sign it.
If employees know that employers will follow up on any incidents, then they may be less likely to commit fraud.
Know your employees
If employees feel like they are being treated unfairly, then they may be more likely to file a false claim. Talk to your employees. Get to know them. Hold regular safety meetings. Review safety rules. Listen to employee concerns. “Have a positive environment in place for your employees where they feel wanted and needed,” Byington recommends.
Investigate the claim
Byington encourages employers to conduct an investigation after an incident. Were there witnesses? Collect their statements. Take photos of the scene with a camera or smartphone. If the employee is able, then get a written statement from them. How did they injure themselves? Does their injury make sense given the cause? Note any odd details and report them to your adjuster.
Why should businesses care about fraud?
“Financially, fraud is expensive,” Byington advised. It increases premium rates. Eventually, those rates increase for all employers. “It’s not cheap and it affects all of us.”
How to handle a suspected fraud case
When investigating a workplace incident, an employer may suspect fraud. Byington tells business owners to focus on the facts. Don’t accuse anyone of fraud – especially if you don’t have any evidence. First, carry out your investigation. In Missouri, the Fraud and Noncompliance Unit (FNU) will notify the employee of any serious claims. Even in Byington’s work, he can only present the evidence he finds to this team.
Don’t fire an employee. This action may violate state laws or the employee’s rights. To clarify, if you do want to take any kind of action, then he suggests contacting an attorney or other legal staff first.
Always report workplace injuries
Employees aren’t the only ones who commit work comp fraud. Some employers may try to avoid reporting a claim. They may also try to handle the claim internally. However, in the state of Missouri, this is illegal. All on-the-job injuries must be reported.
Byington has seen the cost of not reporting the claim. For example, one employee injured a finger with a nail gun. Their employer opted to pay for an ER visit out of pocket. However, without proper continued care, the employee developed an infection. As a result, they lost the injured finger. The claim became much bigger – and much more serious. An amputation has a serious lifetime impact. Their employer failed to report the injury. Now, the employee is much worse off than they were before. Above all, the benefit of work comp coverage is timely medical care. Employers can also access medical advice and step-by-step guides to assist them.
Be prepared for future fraud cases
The longer an employer is in business, the more likely it is they could face a fraud case. Byington recommends that every business prepare for a potential fraud case. Get to know your employees,. In addition, do careful checks before bringing in a new hire. “Most career criminals are going to talk,” Byington added. They may brag about their injuries, or the benefits they are planning to get.
Make sure that you have an incident reporting policy. Have each employee read and sign it. If an incident does happen, then conduct an investigation. Who was involved? What happened? When did it happen, and how? Notice anything unusual? Make a note of it and report it to your adjuster.
A common myth is that work comp fraud doesn’t cost anything. But the cost of work comp fraud is high – for everyone involved.
Learn more about workers compensation fraud prevention in your workplace.