Fraught With Fraud
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FRAUGHT WITH FRAUD
Can you relate to this subscriber's exasperation?
"My company has been in business since 1972. We have a very good safety record but we have been buried in fraudulent claims... outrageous false claims that come from a system that is corrupt and totally out of control. My question is how do we deal with this problem which has plagued business in the U.S. for years and is getting worse?"
Our reader then provides two examples:
"A guy works for a few hours. He says that his arm hurts. Goes to the doctor. We find out that his arm was broken a year before he worked for us and there was no insurance where he worked. My company was forced to pay him a year's wages and pay all of his medical bills even though everyone knew that he was never hurt at my business.
"A woman who answers the phone at my foundry makes a claim that her arm hurts from picking up pens and the phone. We now have a claim for more than $150,000 and she stays at home and takes narcotics but still rides her horse, carries bales of hay and rides her Harley Hog motorcycle. She also has a business where she cans salsa and she screws lids on and off all day but that is not a problem for her.
"How do we deal with this? How can we fight back?"
In this edition of ISHN's E-newsletter we tackle the issue of fighting workers' compensation fraud.
SIZING UP THE PROBLEM
But before we discuss fighting backing, are safety and health pros indeed facing a worsening "plague" of workers' compensation fraud?
Search the Internet and you'll find statistics to support all views. Make sure to check what the source of those statistics is selling.
"Fraudulent workers' compensation claims cost American businesses anywhere from $1billion to $20 billion annually," according to a Florida-based claims investigator.
"Each year, businesses lose over $70 billion to workers' compensation fraud," states another investigative service.
From $1 to $70 billion - that's enough wiggle room to steer a supertanker full of comp claims through. You find the same far-flung estimates for the percentage of all comp claims believed bogus.
Five to 25 percent have an element of fraud, says Midwestern Insurance Alliance.
Eighty percent of all comp claims are exaggerated, according to the Workers' Compensation Reduction Corporation, which will "work side by side with you to help keep your costs down."
State agencies that process workers' comp claims tell another story. In California, employers and insurers are required by law to report suspected fraud claims. In 2001, the California Department of Insurance received 3,548 fraud referrals. That's out of about 1.6 million claims filed annually.
In Wisconsin, the Department of Workforce Development reports that allegations of workers' comp fraud were 0.06 percent of total estimated claims in 1996, and 0.2 percent of all reported lost-time claims in the state.
Actually, one of the fastest-growing areas of workers' comp fraud centers on employers, not employees, according to the California Workers' Compensation Institute. Employer fraud ranges from underreporting payroll by paying cash to employees to misclassifying employees in order to obtain lower premiums.
STRIKING A NERVE
Discount the hype served up by many insurance companies, private investigators and some district attorneys - most objective research points to workers' comp fraud being more of a nuisance problem that makes for memorable anecdotes. Salsa-canning, Hog-riding injured workers have a way of sticking in your mind.
Still, fraud clearly strikes a nerve with safety professionals. Our inquiring reader - "buried in fraudulent claims" - vented anger shared by others we sought out for advice.
"I see no hope for the poor business owner," says one of our respondents. "Whacked out left wing, pinko communist Democrats" run the system and need to be "tossed out on their ears," he suggests.
"This is the kind of stuff that really discourages me about safety and our culture," says psychologist Dr. Scott Geller. "I really don't know how to fight back. Our culture seems to promote this cheating mentality."
"The overriding culture, with our country's litigious condition, seems too powerful to overcome," agrees consultant David Sarkus.
COOLER HEADS PREVAIL
Well, we've got to start somewhere. A good first move: purge any negative emotions before you respond to possible workers' comp fraud. Cheaters, phonies and rip-offs get everyone's blood boiling, especially if you're a small foundry owner trying to survive, like our reader. But to get to the bottom of your problem, you need to go with facts, hard analysis, cool thinking.
Safety and health manager Mark Hansen offered this clear set of tough love tactics:
"Crack down on workers' comp claim repeaters, put them on probation for cause. If they do not improve, fire them for cause," he says. "Put all new employees on a 90-day trial. If they do not perform, let them go. Let employees know that they will be terminated for fraudulent claims. Threaten to charge the employee for the cost of the claim if it is fraudulent."
Your best bet, believes Hansen, is to stop the kind of employee who files false claims at your front gate. Screen him out before he gets in. Statistically, new employees are more likely to file bogus claims. Today, employers are getting more serious about screening practices. Consider:
Drug testing is a common screening tool, of course. Here's why: Between 38 to 50 percent of all workers' comp claims relate to workplace drug or alcohol abuse, according to the U.S. Department of Labor. Drug-abusing employees are five times more likely to file a comp claim, according to the National Institute on Drug Abuse.
SHOW YOUR SAVVY
For employees already on your payroll, educate, educate, educate is the advice of the safety and health experts we polled. For starters, define workers' comp fraud in newsletters, postings and meetings.
Exaggerated claims and malingering after a legitimate work-related injury are probably the most typical types of workers' comp fraud - far more common than filing totally fabricated claims, according to Midwestern Insurance Alliance.
Let your employees know you are savvy to the schemes, and have means to detect them. Employees should know that most insurance companies have special workers' compensation fraud units to investigate suspicious claims or allegations of fraud.
Red flags regarding possible fraud often surface in the course of injury incident reviews. Let your employees know that all incidents are treated seriously by the organization. This begins with a strong emphasis on quick reporting of all injuries. Evidence that might point to possible fraud, such as witness statements and physical conditions at the scene of the injury, fades with time.
All incidents involving injury should be reviewed by a team that includes employees, says consultant Dan Markiewicz. Peer pressure helps reduce bogus claims, he says.
Be careful how you use the term "investigation" in these situations. For many employees, investigation means finding fault, pointing fingers, a rush to judge and blaming the victim. Handled poorly, investigations can backfire and breed the kind of resentment that just might lead to an exaggerated claim, or a worker who is in no rush to get back to the job.
By the same token, be aware of the connotations some employees will associate with the word, "accident." Such as clumsy, clueless, rushed, fatigued, pre-occupied, unaware - all weaknesses of an individual, not the organization. Again, this might lead to resentment and retaliation - in the form of abusing the comp system.
THE BIG PICTURE
Employees who feel undervalued, unappreciated, over-worked or treated unfairly are likely to retaliate in some way, says Ted Ingalls, president of Performance Management Consultants. And he believes that in today's world, more will react maliciously, by stealing, bullying - and fraudulently claiming injury to get time off with pay.
The two cases provided by our frustrated reader appear egregious, but "it's difficult to diagnose the ailment without examining the patient," says Ingalls. He'd like to know how many claims our reader's company has annually, the number that appear to be fraudulent, and how this compares to other firms in his region and his industry.
Or, as Chip Dawson, coordinating EHS consultant for the Rochester (N.Y.) Business Alliance, says, "I ran across some false claim data a year or two ago that found that between 0.3 and 2.0 percent of claims are without merit. If he's seeing false claims at a much higher rate, he needs to look internally."
When fraud rears its ugly head, especially if you are looking into a history of allegations over time, it's probably symptomatic of more deep-rooted problems, say both Dawson and Ingalls. Maybe you need to look at your hiring practices, how you communicate to employees in general, how you respond to incidents, the tone of your safety program (discipline versus recognition), and how employees perceive safety efforts and labor-management issues more broadly.
Could the reader's company be the type of organization that focuses on compliance alone, asks Ingalls. Are employees punished if caught not following safety rules? What happens when they follow the rules? Nothing? If an injury occurs, is the de facto result to blame the injured employee?
If you are dealing with more than a few rotten apples, you might want to inspect the barrel. What the foundry owner probably needs to do is have a brutally honest appraisal of his organization, says Ingalls. Interview employees. Survey their perceptions. Hold up a mirror, company leadership could be as much a culprit as other factors. Then once you've diagnosed the real problems, work on policies, procedures, operating systems and organization values to root out the causes, he explains.
Otherwise, the "dance of distrust" will continue, Ingalls says. With more bogus comp claims to follow.
Dave Johnson is the ISHN E-News editor. He can be reached at email@example.com, (610) 666-0261; fax (610) 666-1906.
Books from ASSEYou can order these titles and more from the American Society of Safety Engineers Bookstore on ISHNâ€™s Web site. Visit â€” http://www.ishn.com/FILES/HTML/ISHN_ASSE_index/
Among the books you'll find:
- "Refresher Guide for the Safety Fundamentals Exam"
- "The Participation Factor," by Dr. E. Scott Geller
- "Safety Training That Delivers"
- "Building a Better Safety and Health Committee"
- "Safety Management - A Human Approach," and "Techniques of Safety Management - A Systems Approach," both by Dan Petersen.
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