Workers' Comp Fraud: How and When to Get an Investigation

(Editors note: At the recent Brown Bag event with L&I sponsored by the AGC Legislative Office the issue of workers comp fraud was raised as a particularly challenging one. As a follow-up Lauren Gubbe Director of the AGC Retro Workers Compensation Program offers advice to members. Fraud will also be the topic of the next Brown Bag event details to be announced soon.)

Workers compensation fraud is a costly problem paid for by both employers and employees. Fraud can be committed by employers employees health care providers attorneys and others. It ranges from businesses under-reporting worker hours to providers billing for services not performed to an injured worker collecting benefits for an injury that did not occur on the job and/or timeloss compensation benefits while working at another job.

Unregistered companies that dont pay premiums negatively impact firms and their employees that do pay premiums since all the cost of injuries that occur against them are charged to firms reporting hours in the same risk classification.

Although the Department of Labor and Industries (L&I) works with state and federal law enforcement as well as other state agencies to detect and prosecute individuals and businesses involved in fraudulent activity related to industrial insurance there are few cases that actually result in criminal prosecution. In fact in 2007 only 13 were referred for prosecution (six employers four providers and three workers).

How to get an investigation:

1) Pay directly for a private investigation
2) Request an investigation through the L&I claims manager (however it is up to the discretion of the L&I claims manager whether to refer the claim for investigation).
3) Request the investigation directly from the investigators via www.lni.wa.gov/Main/Fraud/ or by calling toll-free 888-811-5974. This approach is probably the best one since it will be evaluated by an investigator rather than a claims manager. Keep in mind that the more information you can provide the Department investigator up-front the better.
a. For claim validity the investigator generally has 30 days to complete their investigation.
b. For activity checks the investigator generally has 60 days to complete the investigation with surveillance. If the person is observed to be performing activities that the medical information in their claim file indicates they are unable to do the L&I investigator and an L&I nurse case manager will meet with the doctor.

When to get an investigation:

The most frequent complaints are with regard to the validity of a claim. For example when a worker changes the description and/or the date of the injury and when someone who never reported an injury files a claim months later and/or after leaving employment.

Information on L&Is website (see below) lists red flags that may merit an investigation. Keep in mind that neither failure to report a claim nor the fact that no one witnessed an incident is a legal basis to deny a claim; however these can be building blocks utilized when other factors are present. Certainly when there are multiple red flags the case should merit additional scrutiny - but this is not necessarily our experience with the Department. Nevertheless there is always opportunity to protest and appeal L&I decisions on claims.

L&I claims managers frequently cite that the laws are Liberally construed in favor of the worker but this should come into play only when its a toss-up with how to rule on an issue with no preponderance of information weighing in either direction. Unfortunately because L&I is a state agency its staff approach claims more from a position of being a benefit distributor like DSHS as opposed to a workers compensation insurance adjustor. For the most part L&I claims managers have limited understanding of how claims costs impact employers (and their employees) future L&I insurance rate.

Preventative measures to consider:

• Provide education to your employees on what their cost of L&I insurance is. Employees who understand that it costs them when fraudulent claims are filed are less likely to keep the secret if they are told someone is misusing the system i.e. hurt over the weekend playing baseball working under the table while on time-loss or kept on salary etc.
• Keep in touch with people when they are injured. Having your workforce write cards or inviting them to the site when the job is completed helps to facilitate an ongoing and positive relationship. People who feel cared for are less likely to misuse L&I by remaining on workers comp longer and are more likely to be motivated to return to work.
• Investigate all injuries when they are reported. Have the person injured provide a full description of how it happened and what specifically was injured and sign it.
• Interview all people separately. Ask open-ended questions to get them to explain what happened in their own words. Get signed statements.
• Note any inconsistencies. Then ask direct and clarifying questions.
• Take pictures. (If equipment was involved and a third party claim is possible secure the equipment and ensure chain of custody procedures are followed.).
• Determine if the injury could have occurred as stated.
• Evaluate how the accident could have been prevented. A discussion of the alleged mechanism of an injury what could have been done differently (not just on the workers part but also co-workers) is always a good topic for a tool box talk (and also facilitates a culture where people look for the safest way to do the job and feel a sense of ownership in the safety program). In a less formal environment you may hear something different than you heard at the time of the accident investigation that may be useful to you or an investigator.
• Implement a separation interview. When providing individuals with their last pay check have this form completed. Include a question as to whether or not they had any on-the-job-injuries. Immediately begin your investigation if they indicate they had an injury. If they indicate they did not have an injury in your employ and file a claim down the road submit the separation interview to the L&I Claims Manager. L&I may reject the claim based on the workers signed statement they did not have an injury in your employ. However L&I may also still allow the claim; but this certainly should be a red flag to the claims manager to inquire of the worker why he 1) said he was not injured on your job and 2) waited so long to seek treatment. In addition to looking at prior claims filed - as the case is a red flag claim - the L&I claims manager should be asking for all medical treatment records from any prior treatment for the same condition to ascertain if the person had any other incident(s) that caused or contributed to the condition he is filing the claim for.
• Provide job descriptions with the physical requirements to the doctor at the time the person in your employ seeks treatment. This will ensure that time-loss benefits are certified based on an accurate understanding of the requirements of the job.

It is important to remember that investigations regarding claim validity are very challenging since the burden of proof is on the employer to prove the injury did not occur as alleged. Questioning whether the medical condition the doctor causally relates to a description of injury is even more difficult. The Department bases medical decisions on the preponderance of opinion in the file. So while L&I can get another opinion and present that opinion to the treating doctor if the treating doctor still disagrees with the independent opinion the Department is then forced to either rule with the attending physician who carries more weight in the appeal process or obtain yet another medical opinion.

Red flags described on L&Is website:

For claim fraud: you believe the person was not injured at work (or not injured at all).

• Appears to have been injured but no one else witnessed the accident
• Gives conflicting stories as to how the injury occurred
• Appears to have let a lot of time lapse between the injury date and the date they sought medical treatment
• Appears to have sustained the injury while off work
• Appears to have been injured immediately prior to a planned strike or the completion of the job
• Appears to have been injured immediately prior to or after disciplinary action against them
• Appears to have been injured immediately prior to being terminated from their job
• Moves out of the state or country shortly after the alleged injury
• Appears to have a history of filing multiple claims.

Unfair Benefits Fraud: Doing activities inappropriate for an injured worker.

• Participates in recreational or other activities inconsistent with alleged injury
• Frequently changes doctors (doctor shopping)
• Claims dependents not in their legal/personal custody.
• Claims a spouse when not married.
• Misuses drugs or displays drug seeking behavior (Prescription or non-prescription).

Disability Fraud: Working while on disability

• Works while on L&I time-loss
• Regularly away from home during normal business hours
• Receives unemployment benefits while on time-loss
• Works and is paid under the table while receiving time loss benefits
• Is doing volunteer work while receiving time-loss.

Provider:

• Bills for treatment on consecutive dates of service for minor allowed conditions
• Conducts business with the same doctor(s) and attorney(s) that repeatedly have the same questionable claims
• Bills for services that did not occur
• Bills for different services than were received
• Bills for and receives payment for conditions unrelated to the industrial injury.

Other pertinent information:

RCW 51.32.240(5) states in part that Whenever any payments of benefits under this title has been induced by willful misrepresentation of the recipient thereof he shall repay any such payment together with a penalty of fifty percent of the total of any such payments.

RCW 51.48.020 provides for a felony (class c) charges to be filed against any employer who knowingly misrepresents to the department the amount of payroll or worker hours. The employer shall be liability for up to ten times the difference in premiums due as well as any reasonable expenses of auditing the employers books. Any person claiming benefits under this title who knowingly gives false information required in any claim or application under this title shall be guilty of a felony or gross misdemeanor in accordance with the theft provisions of Title 9A RCW - the criminal statute under which a business or individual may be charged for the commission of theft against the Department.

L&Is last report to the legislature indicated that it generated an additional $19 million through employer audits with $6.5 million of that total assessed against unregistered employers. In addition L&I reported their investigations resulted in $4.4 million in overpaid time loss compensation and medical billing. In fact $139 million was assessed and recouped due to delinquent employer premiums audit assessments overpayments to workers health care and vocational providers and fraud recovery orders.

In addition L&Is last report to the Legislature indicated the Department was:
• Seeking premiums from 120 companies that closed and reopened under a new name - this action is made possible by the changes in the law governing successorship.
• Revoking the Certificate of Coverage to 34 employers who refused to enter into or adhere to payment agreements.
• Educating prime contractors about their liability for unpaid workers compensation premiums generated by subcontractors on their contracts