Healthy Concern Don't let workers' comp fraud cripple your business.

Workers' compensation fraud costs the insurance industry $5billion every year, according to the National Insurance CrimeBureau in Palos Hills, Illinois, an organization that investigatesinsurance fraud. "The hidden cost of workers' compensationfraud is the higher premiums and the way it slows down the processfor everyone," says J.C. Benton of the state-run Ohio Bureauof Workers' Compensation Fraud Division in Columbus. Bentonnotes that of all workers' compensation claims, 5 percent to 15percent contain some element of fraud.

"Fraud is pervasive, whether from faking an injury orexaggerating the extent of an injury," agrees Gregory Blaies,an attorney in Ft. Worth, Texas, who defends employers andinsurance carriers in workers' compensation cases. Blaies hasseen cases of people living off the system who, by age 30, haveracked up a dozen claims with a dozen different employers. Lowerback problems and other soft tissue damage is easy to fake anddifficult to disprove. Most doctors are sympathetic to patients whoappear to be in pain and are more inclined to prescribe time offfrom work than to declare there's nothing wrong and risk amalpractice suit should an injury worsen.

Although your business could be the target of a scam artist whotakes a job intending to fake an injury, a problem is more likelyto come from a worker who gets hurt playing football on Sunday andfiles a claim alleging injury at work Monday morning. Even morecommon, Blaies asserts, is the worker who actually is injured atwork but exaggerates the extent of the injury. After being home forseveral weeks drawing disability pay, many employees adjust totheir new lives and find it easier than working.

"A worker who's off work longer is less likely to comeback," 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 loseproductivity, you face the cost of hiring and training areplacement. And the more money your workers' compensationprogram has to pay in claims, the higher your premiums will be nextyear.

Fortunately, there's a lot you can do to investigateinjuries, stay on top of the process, and help injured workers getback to work. "It's one of the few tax and insurance costsemployers can keep down," says Bill Werther, professor ofmanagement at the University of Miami. Careful follow-up can alsokeep scam artists at bay. "If the message gets out that `Thisemployer doesn't follow up,' you're more likely to bethe 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 beeninjured and then treated badly by their companies are more likelyto see a lawyer to get even. "The prevailing attitude in a lotof companies is that if you file a workers' compensation claim,you're dirt," says Blaies, who contends companies need tobe less adversarial and more supportive. Investigate the accidentpromptly, but treat the worker as a valued employee.

Safety Valves

Step one in keeping workers' compensation costs down isavoiding accidents in the first place. "Employers with verygood safety programs can go a year or two with no injuries,"says Blaies. Be sure workers know how to use equipment correctlyand how to lift without back strain. Keep machinery in good repairand work areas free of spills and debris. Establish a reward systemfor achieving a given number of injury-free days. When employeesfeel like they're part of a team, they're less likely tofake or exaggerate injuries.

When someone gets hurt, you have two tasks: first, to take careof the injured worker, and second, to investigate the accident.Have a policy that employees should report injuries immediately tothe employer, even though the workers' compensation systemtypically gives them 30 days to file a claim. By the time 30 dayshave elapsed, co-workers are likely to forget what happened, makinginvestigation difficult.

When an employee reports an injury, have his supervisor drivehim to the doctor, make sure he gets proper care, and find out howthe injury is likely to affect his work. How much leave does heneed? Will he soon be capable of doing a different job, if not hisregular one?

If the doctor prescribes medication, Blaies advises supervisorsto take the employee to the pharmacy and, if needed, pay for theprescription (seek reimbursement later from the workers'compensation program). In some cases, the injured worker won'tbe able to use his regular medical insurance unless it also coversworkers' compensation injuries. "If he can't pay forit, he'll get a lawyer," Blaies says.

Meanwhile, investigate the accident. Contact the insurancecarrier immediately; if the carrier does not send an investigatorright away, conduct a preliminary investigation yourself.

Bring in several co-workers to ask for their version of theaccident. Could it have happened the way the injured worker says itdid? Take notes. Scam artists typically engage"witnesses" to verify their tales of woe, so beware of aco-worker who seems overly eager to play witness.

It's best not to talk to the injured employee or witnesseswho may be favorable to the injured employee about whether aworkers' compensation claim will be filed. You could later beaccused of trying to intimidate the worker into not filing a claimor witnesses into giving false testimonies.

If the injury appears legitimate, ask your insurance carrier totreat it as a valid claim. Otherwise, the carrier is likely totreat it as suspect, which could upset your valued employee."Don't treat it as being out of your hands," Blaiessays. You want your employees to understand that the company caresabout them.

Following Up

"The biggest employer error is not knowing what's goingon in the hospital and when the employee will be able toreturn," Werther says. It's easier to decide that a backproblem is a permanent disability when no one from the workplaceseems to care. Instead, Werther and other experts recommend callingthe employee several times each week with updates on how things aregoing at work and questions about how the employee is doing andwhen she'll be able to return.

"You'll see the person's mood shiftsignificantly," Blaies says. It's especially helpfulpsychologically if the person doing the follow-up is theemployee's immediate supervisor, not someone in the personneldepartment. That makes the employee feel needed--and less likely tofile for total disability.

Likewise, Werther recommends staying in touch with the doctor,who may be someone hired by the insurance company to assess theemployee's progress. If the employee is better but not fullyrecovered, ask when she will be able to do modified work.

As soon as possible, get the employee back to work. Ifnecessary, create a short-term, modified position the person can dowhile recovering, whether it's part time or less rigorous thanthe normal job.

These steps not only keep down your workers' compensationcosts, but they also help make the most of your investment in youremployees.

Steven C. Bahls, dean of Capital University Law School inColumbus, Ohio, teaches entrepreneurship law. Freelance writer JaneEaster Bahls specializes in business and legal topics.

Contact Sources

Gregory Blaies, c/o Decker, Jones, McMackin, McClane,Hall & Bates, 301 Commerce, #2400, Ft. Worth, TX 76102, (817)336-2400;

Ohio Bureau of Workers' Compensation, (800)OHIO-BWC.