Workers' Comp Fraud: Alert for Small Business

Often lacking sophisticated detection technology, small businesspeople are espec

ially vulnerable to workers compensation fraud. But there are some easy-to-spot
red flags every small businessperson should be aware of when processing workers
' comp claims.
Workers' compensation fraud ranks No. 2 (behind identity theft) as the second mo
st costly type of white-collar fraud in the United States today, according to th
e Insurance Information Institute.
Ironically, workers' comp fraud can be easy to spot if you know what to look for
. Insurance companies have found that certain behaviors and patterns are charac
teristic of suspicious claims.
Below are red flags which everyone working in human resources and the workers' c
omp field should be aware when processing workers' comp claims.
IN GENERAL
-- Accident occurs just prior to a strike or immediately prior to job terminatio
n, strike, layoff, or retirement, or at the end of seasonal work
-- Accident occurs just following worker's return from leave or vacation
-- Accident is unwitnessed
EMPLOYERS AND CLAIMS ADJUSTERS
Employers and claims adjusters should be aware of the possibility of fraud in ca
ses where:
-- Employee has received poor performance evaluations or is known to be a poor p
erformer
-- Has frequent absences prior to injury
-- Has been disgruntled
-- Is a new employee or has been a frequent job-changer
-- Has been having financial problems
-- Participates in dangerous hobbies or sports
-- Is moonlighting or taking night courses or receiving other types of off-the-j
ob training
-- Has family members receiving workers' comp benefits
-- Has a history of frequent accidents or illnesses, particularly involving subj
ective symptoms that are difficult to diagnose or treat (e.g., psychological pro
blems, insomnia, etc).
-- Is seldom at home or reachable by phone
-- Frequently changes doctors
-- Has recently purchased a disability policy
-- Insists on quick settlement of claims
-- Is reluctant to cooperate with investigators
-- Has an unusual degree of familiarity with workers' comp insurance
MEDICAL RED FLAGS
The following are indicators that may show up in the course of the worker's medi
cal treatment:
-- Subjective injuries which are very difficult to confirm by diagnosis (chronic
pain, sleep disorders, etc.)
-- Worker resists attempts to confirm injury by diagnostic procedures
-- Worker submits a physician's or lab report very similar or identical to physi
cian's or lab reports submitted by other workers who previously claimed injuries
-- Worker submits photocopies of medical bills rather than originals
-- Worker asks that reimbursement payments be made directly to him/her rather th
an to physician or lab
-- Physician, lab or other health care provider submits bills with implausible t
reatment dates, such as on weekends or holidays.
-- Attorney representing worker submits representation letter dated same or next
day after accident occurred
-- Attorney representing worker pressures employer or insurer for a quick settle
ment or charges excessive fees or fees for services which were unnecessary or no
t performed.

Joseph Ryan is manager of Washington Research Associates, Inc., which provides e

conomical pre-employment screening services to small businesses at http://www.e-
EmploymentScreening.net.