Workers’ compensation insurance is designed to help employees with their medical costs and lost wages if they are injured at work. It is also meant to protect employers from lawsuits due to these same workplace incidents. But what happens when employees, employers, or healthcare providers take advantage of this safeguard and commit workers’ compensation fraud? How can you protect your business from workers’ comp fraud?
About workers’ compensation fraud
Workers’ compensation fraud costs six to seven billion dollars each year according to estimates by the Coalition Against Insurance Fraud (CAIF) and the National Insurance Crime Bureau (NICB). This type of white-collar crime may lead to fines and imprisonment for fraudsters—and increased premiums or penalties for businesses. Therefore, if you’re a small business owner, it’s critical that you recognize the signs of workers’ comp fraud and take precautions to help protect your business.
Types of workers’ compensation fraud
Workers’ compensation fraud typically falls into three main categories and may be committed by employees, employers, or healthcare providers.
- Employees may commit claim-related fraud by completely fabricating a story about an injury, by claiming an injury happened at work rather than outside of work, or by exaggerating the extent of a work-related injury.
- Employers may engage in policy-related fraud by falsely reporting employees as contractors, by inaccurately classifying their employees in a lower risk category, by lying about a work-safety program, or by not carrying coverage when required by law.
- Healthcare professionals can commit medical provider fraud by performing unnecessary services to collect insurance payments, by fraudulently billing for services, or by participating in kickback schemes with other providers.
Examples of workers’ compensation fraud
It may be helpful to imagine some specific examples of workers’ compensation fraud:
- Your employee returns to work on a Monday and reports a back injury as a result of lifting boxes at work; when in reality, the injury was sustained over the weekend while moving into a new home.
- To save money on premiums, an employer reports to a workers’ comp insurer that an employee who performs labor in a warehouse actually works full-time at a desk.
- A doctor’s office submits a bill for an inflated amount, knowing that the patient sustained the injury while at work.
How to prevent workers’ comp fraud
To reduce your risk of workers’ compensation fraud, you can:
- Prescreen new hires through drug testing and background checks
- Be forthcoming about physical requirements and hazards of the job before hiring
- Educate your employees as to the proper way to lift, pull, and carry objects
- Provide training on work-related hazards, exposure risks, and safety equipment
- Tell your employees and new hires you have a zero-tolerance policy for false claims
- Teach your employees how workers’ comp works and how to correctly report injuries
- Provide a safe way for employees to report suspicious workers’ comp activity
- Maintain and report accurate records regarding employee roles and numbers
How to report workers’ compensation fraud
If you suspect workers’ compensation fraud, record the details of the incident in writing and contact your state’s department of insurance. You may also choose to contact a workers’ compensation attorney if you suspect an employee is committing workers’ compensation fraud.
How to protect your small business
Of course, one of the best ways to help protect your business and team members is to have workers’ compensation insurance coverage. That’s why it’s so important to make sure the coverage is being used appropriately.
Thanks for reading! Please note that this content is intended for educational purposes only. As laws change regularly, you should refer to your state legislation and/or an advisor for specific legal counsel. If you’re a small business owner, learn more about workers’ compensation insurance or check your current rate in 3 minutes.