Workers' Compensation Fraud


The American workers compensation system exists to protect employees who become temporarily unable to work after an injury on the job from the negative financial effects of lost wages and high medical bills. Unfortunately, some unscrupulous employees engage in workers compensation fraud, either by completely fabricating an injury or exaggerating the extent or severity of their problem to lengthen recovery times and increase their lost-wage payouts.

How Big of a Problem?

The extent and severity of workers compensation fraud in the United States is a matter of debate. Some sources with ties to employer–friendly organizations claim that up to 25 percent of injuries resulting in workers compensation claims are either outright lies or exaggerated unreasonably.

Other sources, mainly government agencies with an interest in reducing the number and cost of workers compensation cases nationally, claim that the biggest issue lies with injured workers who use their own medical providers to examine their injuries.

These claims have gained traction in recent years, leading more private organizations to send injured workers to specific medical facilities approved by the employer's insurance company in order to prevent what they see as diagnoses that inflate the scope of their injuries.

Common Types of Fraud

Whether it's 25 percent or merely one to two percent of all claims, workers compensation fraud is a legitimate issue. There are always going to people out there to make money through duplicitous means. But in so doing, they hurt the ability of truly injured workers to receive a fair award for their on-the-job injuries.

Perpetrators' approaches to fraud vary widely, from staged workplace accidents and misrepresentations regarding accidents that occurred outside the scope of work duties to lying about the severity of an injury or completely faking one altogether. Some schemes are doctor-aided, meaning that doctors treating injured workers inflate the scope of a workplace injury to collect higher bills on the government's tab.

Fighting Against Fraud

The fight against workplace injury fraud has two major fronts: the private and public sectors. Private–sector approaches generally occur at the company level and under the direction of certain trade organizations like the Workers Comp Resource Center.

These include immediate medical exams at a company–approved facility, training programs that teach employees to recognize fraud as it occurs and a culture of openness that enables them to report it, and a robust commitment to investigate and prosecute any suspected fraud cases.

Public-sector fraud prevention involves a combination of statute, investigation and enforcement. Most states have strict laws against workplace fraud. In n California, such activity is a felony with strict penalties including probable jail time. Meanwhile in Texas, the state does not even require its employers to pay into the workers' compensation system.

A Negative Impact

Workplace injury fraud has far-reaching consequences. In organizations where it occurs, it builds a cloud of suspicion over all employees, not just the small minority who commit it.

Fraud also lowers wages and increases insurance costs for everyone; the former because workers' compensation money must come from somewhere and the latter because frivolous medical exams and inflated bills contribute to overall higher medical costs. Fortunately, companies are becoming more proactive about investigating, stopping, and reporting fraud where it occurs.