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How to Protect Your Business From Workers’ Compensation Fraud

Workers' compensation claim-related fraud can be costly, but by knowing the warning signs, businesses can help prevent it. Following are several "red flags" that are common signals of potential workers' compensation claim-related fraud. The presence of two or more items should raise suspicion and trigger an investigation:
• Monday morning, or start of shift, injury reports. The alleged injury occurs first thing on Monday morning, or the injury occurs late on Friday afternoon but is not reported until Monday.
• Employment change. The reported accident occurs immediately before or after a strike, job termination, layoff, end of a big project, or the conclusion of seasonal work.
• Suspicious providers. An employee's medical providers or legal consultants have a history of handling suspicious claims, or the same doctors and lawyers are used by groups of claimants.
Ranney Pageler is vice president of the Fraud Investigations Department for Employers, a small business insurance specialist, in Austin.
By Ranney Pageler, Contributing writer
Workers' compensation received significant attention in Texas during 2014, from the resignation of the state's Workers' Compensation Commissioner Rod Bordelon to the adoption of the pharmacy closed formulary approach in dealing with drug claims. The area that should be uppermost in the minds of business owners, however, is how to avoid workers' compensation fraud.
There are two different types of workers' compensation fraud that can directly impact businesses: claim-related fraud and policy-related fraud. Both are serious crimes.
One of the ways policy-related fraud occurs is when a policyholder or insurance agent misrepresents a situation in order to obtain a workers' compensation insurance policy at less than the appropriate cost. Claim-related fraud, meanwhile, is perpetrated by the claimant, a medical provider or vendor, the policyholder or even by insurance company personnel, in the course of the workers' compensation claim process.
A common case of claim-related fraud committed by an employee occurs when an employee falsely claims a work-related injury or illness occurred or exaggerates an existing injury or illness in order to gain a workers' compensation benefit.
According to the National Insurance Crime Bureau, claim-related fraud was the most common reason for a workers' compensation claim to require further investigation. Between 2010 and 2012, questionable claim incidents regarding workers' compensation and employer's liability claims increased 25 percent in Texas, the NICB says.
Workers' compensation claim-related fraud can strain a business' operations as well as lead to higher insurance costs. It also ultimately hurts workers who are legitimately injured on the job by undermining the perceived validity of all claims.
What Businesses Can Do
Workers' compensation claim-related fraud can be costly, but by knowing the warning signs businesses can help prevent it. Following are several "red flags" that are common signals of potential workers' compensation claim-related fraud. The presence of two or more items should raise suspicion and trigger an investigation:
Monday morning, or start of shift, injury reports. The alleged injury occurs first thing on Monday morning, or the injury occurs late on Friday afternoon but is not reported until Monday.
Employment change. The reported accident occurs immediately before or after a strike, job termination, layoff, end of a big project, or the conclusion of seasonal work.
Suspicious providers. An employee's medical providers or legal consultants have a history of handling suspicious claims, or the same doctors and lawyers are used by groups of claimants.
No witnesses. There are no witnesses to the accident and the employee's own description does not logically support the cause of the injury.
Conflicting descriptions. The employee's description of the accident conflicts with the medical history or injury report.History of claims. The claimant has a history of suspicious or litigated claims.
Treatment is refused. The claimant refuses a diagnostic procedure to confirm the nature or extent of an injury.
Late reporting. The employee delays reporting the claim without a reasonable explanation.
Claimant is hard to reach. The allegedly disabled claimant is hard to reach at home and does not respond promptly to messages or has a history of frequently changing physicians, addresses or jobs.
Suspicion of potential fraud should be reported immediately to the workers' compensation insurance carrier or the Insurance Fraud Unit of the Texas Department of Insurance for further investigation.
Business owners should also routinely convey to all employees a commitment to workplace safety and zero tolerance for workers' compensation fraud. In order to help reinforce this message, businesses should ask their insurance agent or carrier for anti-fraud materials such as posters or payroll stuffers, as well as educate all employees on the adverse impact that workers' compensation fraud can have directly on each of them and their individual jobs.
Ranney Pageler is vice president of the Fraud Investigations Department for Employers, a small business insurance specialist, in Austin. He was recently named chair of the Property Casualty Insurers Association of America fraud committee.

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