Workers’ Compensation is full of insurance fraud. And it comes in all shapes and sizes. When you hear the phrase “workers’ comp fraud” the picture that comes to mind for most is an employee faking a work injury for financial gain and maybe a few free vacation days. But it might surprise you to learn that most of insurance fraud is not committed by the employee, but rather it’s the employers and healthcare providers who cost the system more.

Welcome to the first of our three-part series on workers’ comp fraud. Over the next three weeks, we will discuss signs that your employer may be committing insurance fraud, the stigma attached to employee fraud, and what medical provider fraud looks like with its dramatic rise over the years.

Employer Fraud

Employers across the country commit fraud everyday. This drives higher premiums and makes it difficult for those employers who are honest and following the law. The question is, why? Well, there are several reasons but most predominantly, it is simply to avoid paying the premiums. They do this by:

1.   False job classification reporting. In Georgia, the law requires that if a business owner employs three people or more they are requiring carrying workers’ compensation insurance. However, if the person is classified as an independent contractor then the insurance need not be provided for them. So, business owners will misclassify the worker to avoid purchasing the coverage. Other business will classify workers as “owners” rather than employee, again skirting the law. In 2015, The Economic Policy Institute reported that between 10-20 percent of employers misclassify at least one employee as an independent contractor.
2.   Not reporting or underreporting the payroll. This is when the employer incorrectly calculates the company’s average weekly wage.
3.   The shell companies. This is one of the trickiest moves an employer can make to avoid paying workers’ comp premium. An employer creates a fake company which looks legit on paper, even down to having workers’ comp coverage. However, these companies are operating illegally and have employees performing labor off the books.
4.   Not having a workers’ compensation policy available. The exact policy on this law varies from state to state but in Georgia, if you are a business with three employees or more, you must carry workers’ comp insurance.  
5.   Refusing to purchase employee insurance for workers’ comp. All injured employees in the state of Georgia have the right to obtain the necessary medical care needed. But that doesn’t stop the insurance provider from unfairly denying your claim. And then some employers refuse to purchase policies and it ends up in the hands of taxpayers, who pays for medical bills with state funded sources like Medicaid and Medicare.
6.   Denying valid workers’ comp claims. Employers will try to outright deny the claim, assuming the worker will not follow up on the matter.
7.   Let’s medical insurance pick up the bill. Some employers will allow the workers’ medical insurance to kick in and take care of the cost they pay.
8.   Providing incentives. It is not uncommon for bid rigging to occur in relation to the policy as the employer allows insurance companies to compete in who will provide the lowest cost.
9.   Lays off the injured employee in a retaliatory effort. Once an employee files a claim, unscrupulous employers might lay that employee off, setting an example to the rest of the team of what to do, i.e. not to ever file a claim. Employee retaliation is illegal, but it is difficult to prove when the employer lies and cites another reason for the layoff.

If a Georgia employer commits workers’ comp fraud, they may face serious penalties which include:

•     $500 – $5,000 fines for each violation
•     Misdemeanor charges
•     Up to a year in jail and fines up to $10,000

Employer fraud is rampant, and states must adopt stricter policies and stronger punishments for the perpetrators. Employers who commit this fraud benefit enormously by not having to pay the premiums but do great harm to those individuals truly injured and in need of the benefits workers’ compensation can offer.

Next week, we will look at the less than 1% of employees who file fraudulent claims and the horrible stigma attached to employee workers comp claims.