Workers Comp Fraud – Risk Management

The vast majority of workers’ compensation claims are legitimate. Most injured workers want nothing more than appropriate medical treatment and compensation for lost wages until they can return to work. Workers’ compensation fraud, in its many forms, undermines the perceived legitimacy of all workers’ compensation claims and creates an unwarranted drain on scarce tax dollars. It is vital for the County to aggressively detect, prosecute, and deter fraudulent workers' compensation claims in order to protect precious tax dollars and provide citizens important services.

Types of Fraud

The most common types of fraud as reported by the Los Angeles County District Attorney's office include Claims Mills, Provider Fraud, Premium Fraud, Employer and Insurance Carrier Fraud, and Applicant Fraud.

Claim Mills

Organized workers’ compensation fraud involving doctors and lawyers have been an ongoing problem, especially in Southern California. Fraud rings have made a practice of recruiting people to file phony work injury claims.

The workers are sent to medical clinics or legal referral centers (commonly known as “claim mills”), which in turn refer them to a doctor or lawyer who is in on the scheme.

Provider Fraud

Regardless of the legitimacy of the original claim, many medical or other health practitioners fraudulently maximize the number of medical reports and referrals in each case to increase the number of billings. They may also over bill or render unnecessary treatment.

Premium Fraud

Premium fraud occurs when employers fraudulently misstate the number of employees or the nature of their work, such as reporting a roofer as an office worker. Other businesses are part of the “underground economy” and carry no workers’ compensation insurance. Under new California law, the Workers’ Compensation Fraud Division can now prosecute the uninsured employer.

Employer and Insurance Carrier Fraud

In this type of fraud, employers or employees of an insurance carrier will make a false statement regarding a worker's entitlement to benefits. The statement is designed to discourage the worker from pursuing a legitimate claim.

Applicant Fraud

These cases involve workers who fake an injury, lie about the extent of their injury, lie by denying filing previous claims, fail to disclose a prior injury to the same body part, claim a non-work injury is work related, or illegally work while obtaining benefits.

IT IS UNLAWFUL TO DO ANY OF THE FOLLOWING

Make or cause to be made any knowingly false or fraudulent material statement or material representation for the purpose of obtaining or denying workers’ compensation benefits.
Present or cause to be presented any knowingly false or fraudulent written or oral material statement in support of, or in opposition to, any claim for compensation for the purpose of obtaining or denying workers’ compensation benefits.
Make or cause to be made any knowingly false or fraudulent statements with regard to entitlement to benefits with the intent to discourage an injured worker from claiming benefits or pursuing a claim.
Knowingly assist, abet, conspire with, or solicit any person in an unlawful act described above.

The Penalty

Every person who commits workers’ compensation fraud outlined in Insurance Code Section 1871.4 shall be punished by imprisonment in the County jail for one year, or in the State prison for two, three, or five years, or by a fine not exceeding one hundred fifty thousand dollars ($150,000) or double the value of the fraud, whichever is greater, or by both imprisonment and fine. Restitution shall be ordered, including restitution for any medical evaluation or treatment services obtained or provided. The court shall determine the amount of restitution and the person or persons to whom the restitution shall be paid. A person convicted under this section may be charged the cost of investigation at the discretion of the court.