Fraud in workers’ comp: one big lie

Person stuck inside washing machine

It’s no great stretch to suggest that the general public perceives workers’ compensation as a system littered with fraud. For most, the phrase “workers comp” conjures images of lazy workers, fake injuries, needless neck braces, and ambulance-chasing lawyers. The mere mention of workers compensation often evokes a sarcastic comment or snide remark.

Somewhere along the line, the notion of fraudulent claims and fake injuries made their way into the public consciousness. For many, worker-fraud defines the system.

Certainly, there are workers who fake their injury or illness. Some workers exaggerate their injury in order to stay out of work longer. And, there are some workers who suffer an injury or illness outside of work, but then blame it on work in order to receive compensation. There is no shortage of stories about workers faking their injuries, such as the Florida furniture mover who moonlighted as a professional wrestler while collecting ‘comp, or the truck driver with a spinal injury who was discovered to have been injured falling from a horse during a rodeo.

But despite the fake injuries and funny stories, only 1-2-percent of workers’ claims are fraudulent.

Unfortunately, the other 98-percent of injured workers get a bad rap, as they carry the stigma of fraud simply by collecting workers’ comp. These workers didn’t ask to get hurt. They didn’t choose to lose a third (or more) of their income. And certainly the tens of thousands of workers killed on the job every year weren’t seeking a free ride.

The vast majority of fraud in the workers’ compensation system stems from employers – businesses willfully avoiding insurance costs and increased premiums. Employers commit workers’ comp fraud in several ways. Some employers fail to purchase workers’ compensation insurance even though they are required, by law, to do so. Some employers lie to their workers’ comp insurance company about their job safety in order to get lower premiums. Some employers intentionally misclassify workers as “independent contractors” instead of employees so they don’t have to include them on their insurance policy. Still, some employers refuse to acknowledge workers’ injuries, illegally covering-up these events instead of reporting them to the state agency and their insurance company.

According to a 2009 report from ISO Services (a subsidiary of Verisk Analytics, a provider of statistical, actuarial, and claims information for the insurance industry), states that prosecute fraud and generate detailed records claim that for every $1 insurers lose from claims fraud, they lose $4 to $5 — and in some states as much as $10 — from premium fraud perpetrated by employers. Similarly, a 2007 report by the Fiscal Policy Institute in New York state concluded that 25-30% of all companies in New York are not even purchasing workers’ compensation insurance

These figures shine a light on the massive amount of fraudulent claims perpetrated by employers. Clearly, the amount of money that the industry loses due to employer-based fraud grossly outweighs losses attributable to worker fraud.

Although workers’ fake injuries are far more humorous and entertaining, they’re a small part of fraud in the system. Instead of scapegoating injured workers, let’s hold businesses accountable for their part. Everyone should play fair and play by the rules.

That’s no joke!