There are examples of fraudulent practices among all the participants in workers’ compensation programs, including the insurers themselves.
Insurance Fraud Methods
Audits of insurance agencies have uncovered various methods by which insurance companies either defraud the system or cheat individual workers. The most prevalent method for systematic fraud is when an insurance company enters the receipt of premiums for workers’ compensation policies into their general liability fund in order to avoid paying the surcharge required if the receipts were correctly entered into their workers’ compensation fund.
Fraud Against Injured Workers
Fraud against workers has been found to manifest in some of the following ways:
- Unpaid benefits
- Late payments
- Inaccurate benefit notices
- Failure to notify injured workers of their rights, such as their right to apply for vocational rehabilitation benefits after a certain amount of time off work due to injury
One study found that, on average, insurers shortchanged one of every six injured workers by an amount of $900 each annually. Another study showed that audits of insurance companies uncovered the fact that 80% of them had unpaid funds still owed to injured workers.
Some employers pay less premiums because they tell insurers that employees in more dangerous jobs work in less dangerous jobs. Also, employers sometimes call actual employees “independent contractors” to avoid paying workers’ comp premiums for those employees. This kind of fraud is many times more prevalent (and costly) than any employee fraud, as shown in national studies.
Workers’ compensation programs were instituted, at least in part, to take the burden from individual communities of caring for an increasing number of injured workers. Unfortunately, because fraudulent practices allow some insurance providers to escape payment of benefits to some workers, the costs that were to be borne by the workers’ compensation system may be borne either by the workers or by taxpayer-based benefit programs.