STUDY SHOWS EMPLOYERS, NOT WORKERS, ACCOUNT FOR 75% OF WORKERS’ COMP FRAUD

When the issue of fraud comes up in workers’ compensation, we usually hear about an injured worker who allegedly filed a false claim, collected benefits while working, exaggerated the severity of an injury or denied having a previous injury.  While worker fraud does sometimes occur, a new report shows that employers – not workers – account for three-quarters of the fraud costs in the workers’ compensation system. 

The study was done by the Coalition Against Insurance Fraud, which is made up of a number of groups, including insurance companies and businesses.  After a 15-month study, the task force determined that $25 billion out of the $34 billion in annual workers’ compensation fraud costs were due to premium fraud by employers.  The report found that underreporting payroll costs by an employer was the most common form of fraud, including misclassifying employees as independent contractors, hiding salary payments as reimbursement for things like tools or mileage, deducting premium costs from employee wages, paying employees in cash and mischaracterizing the nature of an employee’s work.  These actions not only cost the system billions of dollars each year, but they harm injured workers by lowering workplace safety standards, improperly denying benefits after an injury, and reducing the amount of benefits that depend on the worker’s pre-accident wage.

The task force made several recommendations to address and prevent employer fraud, including better communication between users of the workers’ compensation system, which includes unions and trade groups.  The Coalition Against Insurance Fraud’s website contains information to assist with reporting fraud.  In addition, the NYS Workers’ Compensation Board has an Office of the Workers Compensation Fraud Inspector General that investigates claims of fraud.  Their website contains an online complaint form and other resources if you believe that an employer has engaged in fraudulent activities.

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