Workers' compensation fraud costs the insurance industry $5 billion every year, according to the National Insurance Crime Bureau in Palos Hills, Illinois, an organization that investigates insurance fraud. "The hidden cost of workers' compensation fraud is the higher premiums and the way it slows down the process for everyone," says J.C. Benton of the state-run Ohio Bureau of Workers' Compensation Fraud Division in Columbus. Benton notes that of all workers' compensation claims, 5 percent to 15 percent contain some element of fraud.
"Fraud is pervasive, whether from faking an injury or exaggerating the extent of an injury," agrees Gregory Blaies, an attorney in Ft. Worth, Texas, who defends employers and insurance carriers in workers' compensation cases. Blaies has seen cases of people living off the system who, by age 30, have racked up a dozen claims with a dozen different employers. Lower back problems and other soft tissue damage is easy to fake and difficult to disprove. Most doctors are sympathetic to patients who appear to be in pain and are more inclined to prescribe time off from work than to declare there's nothing wrong and risk a malpractice suit should an injury worsen.
Although your business could be the target of a scam artist who takes a job intending to fake an injury, a problem is more likely to come from a worker who gets hurt playing football on Sunday and files a claim alleging injury at work Monday morning. Even more common, Blaies asserts, is the worker who actually is injured at work but exaggerates the extent of the injury. After being home for several weeks drawing disability pay, many employees adjust to their new lives and find it easier than working.
"A worker who's off work longer is less likely to come back," Blaies says. "The less contact with the employer, the less likely the employee will feel wanted and needed." When an injured worker fails to return, you not only lose productivity, you face the cost of hiring and training a replacement. And the more money your workers' compensation program has to pay in claims, the higher your premiums will be next year.
Fortunately, there's a lot you can do to investigate injuries, stay on top of the process, and help injured workers get back to work. "It's one of the few tax and insurance costs employers can keep down," says Bill Werther, professor of management at the University of Miami. Careful follow-up can also keep scam artists at bay. "If the message gets out that `This employer doesn't follow up,' you're more likely to be the target of fraudulent injuries," Werther says.
One key is to recognize that despite the prevalence of fraud, there are plenty of legitimate injuries. Employees who've been injured and then treated badly by their companies are more likely to see a lawyer to get even. "The prevailing attitude in a lot of companies is that if you file a workers' compensation claim, you're dirt," says Blaies, who contends companies need to be less adversarial and more supportive. Investigate the accident promptly, but treat the worker as a valued employee.