State adopts zero-tolerance for work comp claims fraud

by Jan K. Allen

SBJ Contributing Writer

The insurance industry and the state of Missouri are adopting a no-tolerance policy for fraudulent claims in workers' compensation injuries, according to Dennis Smith, president and chief executive officer of Missouri Employers Mutual Insurance Company, MEM. Tougher penalties and statewide marketing efforts are in the works.

The new law, passed by the legislature and expected to be signed by Gov. Mel Carnahan by mid-July, makes work comp fraud a felony and cracks down on offenders. Under the law, up to five years' jail time and a $5,000 fine can be imposed, Smith said.

The old law rated a work comp fraud offense as a Class A misdemeanor, with a possible $1,000 penalty and up to one year in jail.

"If you have a legitimate injury, we're going to send you to quality medical providers. But if you try to defraud us, we're going to send you to the slammer," said Tom Hamilton, senior investigator for MEM.

In the past three years MEM has referred 119 cases to Missouri's Fraud Non-compliance Unit. Few of the cases made it to trial, but of the ones that did in 1997, half were nailed by MEM, according to Smith.

The National Council on Compensation Insurance estimates that $2 billion to $8 billion per year is bilked from insurance companies in fraudulent claims. It's too expensive to tolerate, MEM maintains.

The policyholders foot the bill in higher premiums, and the taxpayer pays in time and money spent on prosecution, the company stated.

The most common type of work comp fraud is an employee lying about an injury, Smith said.

But he added that there are measures employers can take to avert the problem before it happens.

The first, most obvious thing is for an employer to be careful whom he hires. Look for red flags on the application, such as frequent job changes.

And finally, employers should conduct interviews with employees when they leave the company. Without fear of reprisal, many things can be revealed that a person might not be willing to talk about when he or she still had to face his peers daily, Smith said.

Probably the second most common occurrence is premium fraud. This is where an employer lies about his operations to reduce his rate of payment or the agent helps cover up potential risks so he can make a sale. These incidents are becoming less prevalent, with the insurance companies taking a tough stance on the issue, Smith stated.

Two other categories, medical provider and attorney fraud, have also waned in the face of a no-tolerance policy by the state and industry professionals. People in these fields have come to realize the risks outweigh the gain.

There are certain red flags an employer can watch for when on-the-job injury does occur. An injury that wasn't witnessed should be investigated thoroughly.

If a short-term employee is injured, it might be wise to look into his or her work history.

Education for employers and workers is an important part of fighting fraud. MEM has put together a kit for employers to help them deal with the issue and teach employees the downside of faked injuries.

It provides statistics showing that fraudulent claims are a drain on the economy and hurt everyone.

The kit contains posters, hotline stickers, prevention tips, a red-flag brochure and an anti-fraud key chain with tiny handcuffs.

Smith stated that the key chains are so popular, people call just to ask how to get them.

MEM is taking a strong stance on fraud prevention for a reason.

"We are mandated by law to take strong action," Smith said. "It's part of our posture as a public corporation."

For information about the fraud kits and future seminars, contact the MEM hotline at 800-442-0592.

INSET CAPTION:

The National Council on Compensation Insurance estimates $2 billion to

$8 billion in annual claims are fraudulent. [[In-content Ad]]