Workers’ Compensation Fraud Can Have an Economic Effect on Everyone
October 12, 2009
[HARRISBURG, PA] – Workers’ Compensation Insurance is a necessity for every business. It pays for medical expenses, lost wages and other expenses incurred by an employee who is recovering from an injury that has occurred while on the job. And it’s illegal for businesses NOT to have Workers’ Compensation Insurance.
Workers’ Comp insurance covers not only the injuries that occur on-the-job at the work site, but also injuries that occur when an employee is on a business trip, doing an errand that is related to his/her work, or attending a business function in a social setting. In addition, if an employee has an injury or illness that worsens as a result of their job, that is also covered.
“Most PA employers and their employees are honest people,” says Ralph Burnham, executive director for the Pennsylvania Insurance Fraud Prevention Authority (IFPA). “But those who choose to commit workers’ comp fraud create an economic impact that is felt by each and every one of us.”
The National Insurance Crime Bureau estimates that workers’ compensation fraud costs health care providers more than $5 billion a year. And as the number of fraud cases increase, so do losses and the premium amounts that businesses must pay. This can be very damaging to any business, but especially small businesses.
“No one is immune from the effects of this kind of fraud,” says Burnham. “Businesses will pass those increased premium costs to their customers through higher prices for goods and services. So whether you’re buying a new appliance or having some work done on your house, ultimately, you could be paying a higher price because someone committed insurance fraud.”
In addition, as businesses are forced to pay higher premiums for their workers’ comp insurance, their business income decreases. As a result, downsizing – or business closure – can occur, or employees may be asked to take a salary freeze.
To help educate people about this problem, IFPA recently unveiled a new workers’ comp awareness campaign. “There are many different kinds of worker’s comp scams taking place — from both businesses and individuals,” says Burnham. “By making people aware of their existence, we might be able to decrease the number of occurrences.”
Scams occurring from dishonest employers include:
- Telling a workers’ comp insurer that many employees work safer jobs than they really do.
- Reporting to a workers’ comp insurer that the business has fewer employees or a lower payroll than it actually does.
- Not buying the state-required workers’ comp insurance and then hoping state officials won’t notice. This leaves employees dangerously exposed if they are injured on the job without insurance.
Scams occurring from dishonest workers include:
- Claiming an injury occurred on the job when in reality, the injury happened while pursuing personal interests or hobbies. They make this claim so that their workers’ comp policy covers the medical bills.
- Inflating an injury. By saying an injury is more severe, people try to collect more workers’ comp money and stay off the job longer.
- Faking an injury. Some workers’ simply invent injuries for “free” money or a “vacation” from work.
- Claiming an old injury as one that happened on the job.
- Staying at home even after they have healed and have been cleared to return to work.
Additional information about this and other types of fraud can be found on IFPA’s website, www.helpstopFRAUD.org. The Coalition Against Insurance Fraud contributed material for this release. (www.insurancefraud.org)
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Contact: ifpapr@helpstopfraud.org