What Is Workers’ Compensation Fraud?
Workers’ compensation fraud can involve employers, employees or even healthcare providers, and it can take many different forms. Whether simple or more complex, fraudulent activity can impact the whole workers’ compensation system and may lead to higher insurance premiums over time.
If an employee is
injured at work or becomes ill due to their job duties,
workers’ compensation insurance is there to help. It can help pay their medical bills and replace a portion of lost wages if they need time off to recover. Without this type of insurance, employers would have to pay for these costs out of pocket. Because workers’ compensation plays a key role in providing financial support, the system can sometimes be misused. Understanding what types of workers’ comp fraud exist and how to report them is one way to help protect your business.
Workers’ comp fraud involves someone intentionally providing false or misleading information so they can receive financial benefits they’re not entitled to. This fraud could include:
- Employee Fraud (Claimant Fraud): When an individual misrepresents an injury or illness to collect workers’ compensation benefits. Examples include claiming an injury that didn’t happen at work, exaggerating the severity of an injury or continuing to receive benefits once able to return to work.
- Employer Fraud (Policy Fraud): Involves misreporting information to reduce workers’ compensation insurance costs. Examples include misclassifying employees, underreporting payroll or not having the required workers’ comp coverage.
- Healthcare Provider Fraud: When a medical professional bills for services that weren’t provided, overstates the cost or complexity of treatment or recommends unnecessary procedures related to a workers’ compensation claim.
Workers’ compensation fraud can happen in many ways and may involve employees, employers or even third parties. These common scenarios can help you spot red flags while you’re reviewing a workers’ compensation claim, so you can stay compliant.
Employees and Workers’ Compensation Fraud
Some workers’ comp fraud cases may involve employees providing inaccurate or incomplete information when filing a claim. This isn’t always intentional, but workers’ comp fraud generally occurs when details about a work-related injury or illness are misrepresented to receive benefits that may not apply.
Here are a few general examples of situations that could raise questions about fraud during a workers’ compensation claim review:
- An employee reports a work-related injury after lifting a heavy box. He submits a workers’ compensation claim, but there is no evidence the injury occurred on the job.
- An employee becomes ill and believes it may be related to workplace chemical exposure, but later it’s determined the illness was not caused by work conditions.
- An employee experiences a repetitive strain injury at work. When reporting the injury, they exaggerate the symptoms as more severe than what medical evaluations determined.
Employers and Workers’ Compensation Fraud
Employers may also be involved in workers’ compensation fraud in certain situations, often related to how coverage or payroll is reported. Here are a few examples of how employer-related workers’ comp fraud may occur:
Employee Misclassification
Employers may classify full-time workers as temporary employees or contractors to have lower workers’ compensation premiums, but this misclassification is considered fraud. Proper classification of employees is necessary and important. If you’re found to have misclassified your employees, you could be penalized.
Inaccurate Employee Counts
In some situations, workers’ comp fraud may involve an employer reporting an inaccurate number of employees, which could affect their total cost for workers’ compensation insurance.
Misrepresenting Workplace Safety Practices
In some cases, workers’ compensation fraud may involve an employer not being truthful about
workplace safety. For example, a business tells an insurance company or agent that a work safety program is in place, which can impact the
employer's workers’ compensation costs. If that program isn’t implemented, it can create compliance concerns.
Failing To Carry Required Workers’ Compensation Insurance
If you don’t purchase workers’ compensation insurance, and your business is in a state that requires it, this could constitute fraud. Understanding your state’s requirements can help you stay compliant and avoid coverage gaps.
Employers lose an estimated $30 billion annually due to workers’ compensation fraud.
1 Knowing what to look out for can help you spot fraudulent activity and other potential issues early on. Keep in mind that
workers’ compensation audits may also help uncover fraudulent activity, which could result in fines, penalties or even policy cancellation. A few warning signs to watch out for include:
- Inconsistent injury reports: If an employee is injured or becomes ill due to their job, they must report it to a supervisor and explain what happened. If the employee’s story is unclear or changes numerous times, you should take additional steps to get more information and investigate further.
- Video evidence: If your business uses security cameras, you can review footage to determine what happened and confirm reported details.
- Conflicting witness accounts: Be sure to speak to witnesses or co-workers to validate an employee’s report.
To help reduce the risk of workers’ comp fraud, put clear processes in place from day one. Make sure new employees understand the timelines to follow when
filing workers’ compensation claims. Ongoing training can also help support them, especially if it covers your workers’ compensation policies and any
return-to-work program you offer. Your team and your business are better protected when employees know what to do and what to expect.
How To Report Workers’ Comp Fraud
If you believe an employee reported a suspicious claim or there is workers’ comp fraud happening at your business, you should always report it. Here’s how to report a false workers’ comp claim:
- Provide your state with information on the name and address of the person you’re reporting.
- Be sure to include information about the incident. Explain why you believe the person may be committing workers’ comp fraud.
- Provide any relevant additional information and details about the person.
- After reporting the fraud, a state agency or official typically takes over the workers’ compensation fraud investigation.
If an employer, employee or healthcare provider commits workers’ comp fraud, they are subject to penalties, which may include:
- Felony: Workers’ compensation fraud can be charged as a felony, meaning it is treated as a serious criminal offense.
- Imprisonment: A felony conviction may result in prison time, depending on the severity and applicable laws.
- Fines: If you’re found guilty of workers’ comp fraud, you may be required to pay significant financial penalties imposed by the court.
- Restitution: In some cases, you may be ordered to repay the money wrongfully obtained through fraudulent activities.
Help Protect Your Business With The Hartford
Workers’ compensation fraud is a serious issue that can result in significant financial and legal consequences for businesses. Understanding your state’s workers’ comp coverage requirements and knowing how to spot potential fraud can help you stay compliant and protect your employees. We’re here to support you every step of the way. Get a fast and free
workers’ compensation quote online, or call
855-829-1683 to speak to one of our specialists.
