International Fraud Awareness Week, observed globally during the third week of November, aims to combat fraud through education and prevention. As fraud becomes more sophisticated, awareness and vigilance become more important. Combating it requires a collective effort by insurers, law enforcement, policymakers, and the public. 

Workers’ compensation (WC) fraud, though a small percentage of total workers’ compensation insurance transactions, is a serious issue and involves intentionally misrepresenting facts to gain benefits or avoid legal obligations. Fraud can be committed by employees, employers, healthcare providers, and legal counsel. The consequences for WC fraud are serious, ranging from fines and restitution to criminal charges and imprisonment.

Solutions: 

The good news is that there are ample opportunities to identify and combat fraud, and MEMIC is here to help. 

Employee Fraud may involve intentionally faking or exaggerating injuries, filing claims for non-work-related incidents, or working elsewhere while collecting benefits.  Employers can be proactive by doing the following: 

• Foster Transparency: Educate employees about WC benefits and the expectations for communication. Encourage immediate reporting of incidents, even minor ones, to avoid complications and improve outcomes.
• Conduct Background Checks: Check references and use pre-employment services such as MEMIC’s partner, Safer Hire, to identify concerning trends.
• Use Worksite Surveillance and Drug Testing: These tools can deter fraudulent behavior and support legitimate claims. Be sure to have robust policies in place and enforce them consistently. 
• Coordinate Claims Internally: Assign a coordinator to ensure all incidents are documented completely and accurately, file claims promptly, and support or coordinate employee care. They should also maintain communication with the insurance claim adjustor, medical providers, and the injured employee to keep things on track.
• Investigate Accidents Thoroughly: A strong investigation process not only prevents future incidents in your workplace but also makes it harder for an employee to fake injuries. 
• Know the Red Flags: Watch for exaggerated symptoms, inconsistent stories, or skepticism from coworkers. Listening to workplace chatter can uncover potential fraud. Report concerns immediately to the claim adjustor to determine the appropriate response.
• Create a Return-to-Work Program: Proactively identify light or modified duty positions allowing an injured worker to Return to Work sooner, keeping them engaged in your operations. Have policies that clearly define expectations.

Employer Fraud: May involve intentionally misclassifying workers, underreporting payroll, or failing to carry required coverage. 

• Contractor vs Employee: MEMIC recommends obtaining insurance verification from contractors and subcontractors to ensure they are providing proper coverage for their employees. In 2007 in New York City alone, over 50,000 construction workers were misclassified as independent contractors and lacked Workers’ Compensation coverage, according to Reuters. This spurred increased penalties and more clearly defined rules, including the NY Construction Industry Fair Play Act in 2010 with many other states having similar legislation.
• Accurate Classification: Work with your insurance agent to determine what National Council on Compensation Insurance (NCCI) designation best fits the positions in your company. NCCI regularly reviews and updates classification codes for better clarity across all industries. Policyholders can also contact MEMIC Audit for questions. 
• Recordkeeping and Communication: Regularly review payroll and business operations for significant changes that may affect coverage. This may include changes in workforce size, payroll structure, lines of business, or geographic area. Communicate these changes to your agent so your policy can be updated.

Healthcare and Legal Provider Fraud: May involve intentionally inflating bills, ordering unnecessary procedures, or double-billing insurers. “Medical Mills” are unscrupulous partnerships between lawyers and medical professionals who seek out injured workers, inflate costs, exaggerate or lie about the worker’s condition, and share a cut of payouts with each other. 

• Medical Providers: Proactively identify and meet with your company’s provider panel or preferred Medical Provider. Explain company operations, light/modified duty opportunities, and incident investigation policies to help providers feel more confident in returning an injured employee to work and signal your dedication to employee care and cost containment.
• Communication with Insurer: Employees and employers should communicate any suspicious activity to the insurer’s claim adjustor or your state’s Department of Labor. Insurers often request independent medical evaluations to ensure appropriate care for the employee. 
• Medical Billing Review: At MEMIC, we partner with Corvell to review medical bills and medical care against industry standards to ensure the employee receives prompt, competent care while containing costs. 
• Triage: MEMIC offers its policyholders First Call 24/7 Injury Triage, connecting your employees with quality care providers, immediate injury management, and cost containment.

Working together with transparency, partnership, and expertise, we can all play a part in fraud prevention while improving response to injured worker needs. 

For further information visit Report Fraud - MEMIC. 

Employees and employers with MEMIC insurance can report suspected fraudulent or unusual activity by contacting your claim adjustor, calling 1-800-ABUSE WC, submitting an Online Fraud Report, or contacting your state’s Department of Labor. All methods allow for anonymous reporting. 

The MEMIC SafetyNet Blog is grateful to our Premium Audit and Fraud Department team members for their expertise and assistance in this topic.

Posted ByTony Soares, MSIE, CSP, CSSBB, CSHE, WCP®