You don’t think Workman’s Compensation Abuse can hurt?
In Massachusetts, the office of Gov. estimates that fraud accounts for more than $400 million of the $3 billion paid out in claims. In New Jersey, the director of the insurance department's fraud division, Louis Parisi, said fraud or abuse in his state could account for some of the costs in 25 percent of workers' compensation claims. In Colorado, a study for employers found that as much as 30 percent of workers' compensation claims involved fraud or exaggeration, including outright faking and stretching recuperation periods, said Michael D. DeWitt, executive vice president of Avert, a consulting company in Fort Collins. Authorities in Florida, Texas and other states say that evidence is rising of employers who are defrauding the system by lying about the number of employees or by setting up deceptive lease-back agreements to "lease" their workers to other companies to reduce their premiums. In many cases, when workers are injured they find they have no coverage at all. Other Problems Costs Growing At a Rapid Pace
Fraudulent claims and abuse are by no means the only the problems afflicting workers' compensation systems.
The oldest social program resulting from a compact between labor and management, workers' compensation was begun in the United States at the turn of the century to blunt the often savage health dangers facing workers. By the late 1960's, however, benefits to injured workers were often regarded as so low that they failed to meet the needs of the injured and their families. In 1972, a Presidential commission in the Nixon Administration recommended that states sharply raise benefits. Among other recommendations adopted by most states was one to give employees unable to work a minimum of two-thirds of their gross salaries before they were injured or 80 percent of their net pay -- tax free.
Since then, the total costs of workers' compensation have soared. The average premium that an employer pays for an employee has jumped to more than $500 today from the $92 it was 20 years ago. The number of claims doubled in the 1980's and the cost of claims during that time rose by 154 percent. Meanwhile, lost workdays attributed to on-the-job injuries doubled, to more than 90 million in 2002 from 30 million in 1975 -- even as the economy moved from factory work to service jobs and the increase in industrial accidents remained flat. Among the states with systems in crisis are Maine, Rhode Island, Massachusetts, Pennsylvania, Texas, Louisiana and Florida.
In part, the rise in costs is a result of an increase in benefits, which encourages more people to use the system. Studies show that for every 10 percent increase in the value of benefits, workers' compensation systems pay out 15 percent more money. Workers' compensation costs have also been driven up by price of medical care and increasing litigation. In Illinois, litigation expenses now amount to 14 percent of all the dollars paid out in claims in disputes that may not involve fraud at all but legitimate disagreements. Medical Bills Vary Greatly One study published by the Minnesota Department of Labor and Industry in 1990 found that the same treatments for back injuries and sprains cost more than twice as much when charged to workers' compensation than to Blue Cross and lasted longer. Treatment for back disorders on average cost $308 when charged to workers' compensation, compared with $132 to Blue Cross, and lasted 21 days, compared with 10 days. For sprains the difference was even more striking: $167 for eight days under workers' comp; $84 and one day under Blue Cross. By comparison, the treatments for fractures, which leave less to discretion, were about the same.
The Cost of Fraud
Workers' compensation fraud has a significant impact on the cost of workers' compensation.
Insurance fraud imposes an enormous burden on our national economy. It has been estimated that the cost of insurance fraud against workers' compensation insurance carriers alone is over $5 billion each year. Workers' compensation fraud carries a higher price tag than fraud in any other category of property/casualty insurance.
Not A Victimless Crime
Every dollar paid out because of insurance fraud must be made up by a dollar increase in premiums. Companies pass on the increases in premiums to their customers through higher prices for the goods and services they sell. Moreover, the overall effect of fraud can be disastrous. Not only does the expense of fraud raise insurance premiums, it discourages business from expansion, can reduce productivity and threaten a company's survival. Other employees must pick up the slack of malingering co-workers, jobs go unfilled, and pay raises or profit sharing gains suffer as revenue is lost.
There are also hidden costs to fraud. The cost of workers' compensation coverage increases with every worker a business hires. The hidden cost of insurance fraud not only discourages businesses from expanding their operations, it also encourages schemes to hire workers "off the books" to keep costs down, minimizing the benefits and protections afforded these workers and allowing them to pocket salaries without paying their fair share of taxes.
One way or another, insurance fraud increases the cost of living while decreasing the quality of life for everyone.
New York Times Monday, December 31, 2007
Fraud and exaggerated claims are driving up the cost of workers' compensation insurance by billions of dollars a year, a variety of experts say, and have become a significant though still largely unrecognized factor in the skyrocketing cost of health care. This conclusion has been reached by regulators and law-enforcement officials in several states who are looking into the forces behind the rising costs and by insurance officials who have begun investigations of questionable claims. It is suggested, too, by a number of studies. To many workers, these authorities say, lying about injuries or illness related to work has become no more sinister than crossing the street against a red light. That attitude and the resulting false claims are helping to push workers' compensation systems in some states into crisis or even to the edge of collapse. Cheating in 20% of Claims Although other factors are also contributing to the $60 billion paid out by employers to public and private insurers for workers' compensation each year, officials and insurance companies in Oregon, California, New Jersey and other states say that as much as 20 percent or more of claims may involve cheating. They say it is costing legitimately injured workers many of the benefits they deserve.
"We've found workers' compensation is riddled with fraud," said Stan Long, the president and chief executive of SAIF, the state-owned workers' compensation insurer in Oregon, which says it has uncovered fraud in one of every four claims. "If you run a system where you give money to everybody who asks, you are going to get a lot of people asking for money." Fraud by employers is also increasingly being recognized as a problem in workers' compensation, as is widespread abuse by doctors and lawyers. But experts say cheating by individuals illustrates a larger phenomenon in American society that government and insurance companies have often ignored: the belief that cheating on insurance is acceptable because the system always seemed to have endless amounts of money to pay for it. They say that is an attitude the nation can no longer afford. In the last decade the costs of the insurance programs that care for workers injured on the job in the 50 states have grown more than 150 percent -- or 50 percent faster than the cost of health care over all.
In more than a dozen states where employers have been hit by double-digit premium increases, officials say rising workers' compensation costs have devastated small companies and sapped the competitiveness of entire industries. In some states, like Maine and Rhode Island, where costs have risen more than 50 percent a year, insurance companies are abandoning programs as unprofitable. For years experts have attributed the increasing cost of workers' compensation to growing litigation, the rising price of medical care in general and the expanded coverage and benefits awarded by states. But until now insurers, government agencies, employers and social scientists have rarely studied how much fraud may also be involved.
Employers have often been timid in challenging workers' compensation claims they deemed dubious, many executives say, partly out of fear of being seen as attacking vulnerable workers and partly because fraud is hard to prove. In addition, they say, insurance companies often discourage investigations. A Culture of Fraud Recently, however, a small, but growing number of government officials and insurance companies have begun to look into the question. They say they are finding that in some states at least, workers' compensation has nurtured a culture of fraud, in which workers regularly lie without fear or shame. In Los Angeles, pitchmen working for doctors and lawyers swarm the sidewalks outside unemployment offices, openly telling passers-by they can win thousands of dollars in workers' compensation benefits simply by filing phony claims. In Pittsburgh, the city reported a 15 percent drop in workers' compensation claims this year after it televised videos taken by hidden cameras of supposedly injured police officers and firefighters working at second jobs, playing basketball and fixing roofs. "It is socially acceptable to exaggerate, or even lie, to insurance companies and workers' compensation agencies," said Douglas F. Stevenson, executive director of the national council of self-insurers, a trade association of large corporations. "Such conduct has become so institutionalized that it no longer shocks our sense of morality."
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