Avoiding Workers’ Comp Fraud

Fraud is a pervasive problem in the Workers’ Compensation system. Employees, providers, and third-party administrators all contribute to the $7.2 billion annual loss.

A business can use a reputable administrator and provider to reduce risk, but fraud prevention on the employer level is also necessary to manage rising premiums due to illegal practices.

Here’s what you can do to avoid it.

What Constitutes Fraud?

Employee fraud involves a person making an intentional false representation so they can receive benefits. Unfortunately, this happens far too often, escalating overall costs and premiums.

If the employer discovers fraud, the employee must repay the money plus interest, and their workers’ compensation benefits may be terminated or denied.

Avoiding Fraud

Obviously, an investigation into potential fraud doesn’t just affect the employee. It takes up valuable employer time and resources, too. These measures can help you limit your risk and avoid fraud incidents.

Screen during Hiring Process

A thorough screening process can identify potential issues so they don’t become company headaches. Proper hiring practices usually include verification of the applicant’s health and identity as well as a credit and criminal record check. However, companies need to check local, state, and federal laws when they’re screening applicants.

In Pennsylvania, employers may only consider felony and misdemeanor convictions on criminal records when making an employment decision, provided they follow the Criminal History Record Information Act. Employers failing to do so may pay up to $10,000 in punitive and exemplary damages, litigation costs, and attorney fees.

The Pennsylvania Human Relations Act protects residents from discrimination. Accordingly, employers cannot require medical exams for applicants unless they’ve extended a conditional offer of employment, but only if everyone entering the same job category must do so.

In Philadelphia, an employer cannot ask for a credit check unless the work falls under an exceptions list in Philadelphia’s Fair Practices Ordinance.

Clearly, these complex laws can make it difficult to comply. Your attorney and HR department should have current information. Seek their counsel regularly and adjust your policies accordingly.

If you are permitted to use these screening measures and discover fraud, always discuss your intentions before you make your final decision. You don’t necessarily need to refuse them a job. You can also place restrictions on their employment, increase supervision, or recommend they apply for another position.

Provide Workers’ Comp Training

Studies indicate educated employees that understand the implications of fraud are less likely to commit it. Review your company policy and explain the legal, monetary, and other repercussions if they’re caught abusing the system.

Show Employees You Value Their Contribution

An injured or ill employee may wonder whether things will be the same when they return to work. By developing a strong return-to-work program you let them know that they’re valuable and your business is willing to go the extra mile for them.

By modifying duties, offering an alternative position or altering the workplace, you’ll strengthen workplace bonds and reduce the length of claims.

Spotting Fraud

Fortunately, most employees aren’t fraudsters. They file legitimate claims for legitimate injuries or illnesses. The following may be signs of a fraudulent claim, but don’t assume anything. Investigate fairly and carefully, otherwise it could lead to a lawsuit.

Transient – certainly some people do move often, but if you notice they switch jobs or providers multiple times they might be doing so to work the system.

File claims often – once again, some people are more prone to illness and injury than others, but if you spot multiple claims you may want to investigate further.

Provide incomplete or contrary information – claims without a witness and claims that either do not have sufficient information or information contrary to the supposed cause are also reason for concern.

File a claim with employment shift – if an employee files a claim after their laid off, terminated, striking, or ending their season, investigate further.

You hear rumors – rumors on fraud through the grapevine aren’t necessarily true, but heed them. They may indicate foul play. Provide employees with a way to report fraud issues anonymously.

They delay filing a report – unless an employee faces extraordinary circumstances, they should report an incident immediately. Claims filed early Monday morning may indicate the incident occurred outside the workplace.

They won’t co-operate – if an employee refuses a medical exam to confirm their condition or they will not use the return-to-work program, you’ll want to investigate further. They may have legitimate reasons for their refusal, but it can also be an indication of fraud.

They participate in high-risk activities – employees that love to indulge in risky after hour activities and file a claim also merit further investigation.

Legally screening employees, reinforcing company policies, and watching for signs of fraud can reduce risk.

If you need expert advice on Pennsylvania legislation, how it applies to your business, and further risk reduction, talk to us. Gilbert’s Risk Solutions understands the intricacies of workers’ compensation insurance; we’re local, and we’ve assisted Pennsylvania businesses for over 160 years.

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