The Insurance Industry’s Myth of Workers’ Compensation Fraud

Published On: 1.13.2015 Charlotte, NC

The Insurance Industry’s Myth of Workers’ Compensation Fraud

 

Recently, the insurance industry’s focus on sensational fraud cases has helped push through national workers’ compensation reform and cost-cutting campaigns supported by public outrage over isolated cases of abuse of the system. The image of rampant fraud is false for the vast majority of workers’ compensation cases. Independent studies have shown that less than 2% of workers’ compensation claims are fraudulent.

Certainly, the thousands of workers killed every year are not asking for a free ride.

Dateline, a national prime-time television show recently broadcast a segment on workers’ compensation fraud, opening dramatically with video of an old farmer being interviewed by his lawyer. The farmer painfully describes the heaviest thing he can pick up is a cup.

The video cuts to show the same farmer caught on hidden cameras unloading bales of hay from the back of his tractor.

“It’s a crime that takes money out of your pocket, it starts with a lie, and is collecting money from you, ” the voiceover says.

This money does not mysteriously float out of viewer’s pockets as this sensational portrayal. Workers’ Compensation claims — including fraudulent ones — comes from insurance industry profits, and only then are costs passed along to employers who purchase workers’ compensation insurance. The costs are spread over the entire group of policyholders.

Workers’ compensation premiums are only 1.35% of payroll, down from a peak of 2.17%, while costs to employers decreased 38% as a percentage of payroll and benefits to workers declined 35%.

The Dateline reporter misreported, “After all, workers’ compensation fraud is quite common. The industry estimates it adds up to $5 billion a year.”

The American Federation of Labor and Congress of Industrial Organizations explained, “These allegations have absolutely no relationship to fact but are based on ‘attitudes’ about fraud (when respondents say they ‘know’ of someone supposedly on workers’ comp even though he or she might be capable of working). A similar claim put workers’ compensation fraud at 20 percent of the total of all claims in California in 1996; the truth was that suspected fraud that year, according to the state’s Department of Insurance, was .03%!”

Under-compensated Benefits

In the 1970s, benefits to injured workers sunk so low that President Nixon appointed the National Commission on State Workmen’s Compensation Laws to study the issue. It recommended that all states pay totally disabled workers at least two-thirds of their salary up to a maximum of the state’s average weekly wage. Still, 17 states have not complied with the Commission’s recommended standard wage.

A few months after the Dateline show aired, the LA Times printed, “Anti-Fraud Drive Proves Costly for Employees,” and found, “Over the last decade, employers and insurance carriers have saved billions of dollars as legislatures in many states rolled back benefits, more narrowly defined workplace injuries and introduced impediments to collecting for them.”

“The dollar amount of fraudulent workers’ compensation claims submitted by workers pales in comparison to the amount for claims never filed and, more importantly, the overall small amount of total costs paid by workers’ compensation systems. Moreover, fraud committed by insurance companies at workers’ expense is likely to be significant.”

We Can Help

The experienced Workers’ Compensation attorneys at Charles G. Monnett III & Associates provide free initial consultations, support and assistance in finding resources to help you and your family deal with serious injuries or death of a loved one. We can also help you pursue a legal action. If you or a family member would like more information about your legal options and determine whether you have a claim, call our office today at 704.376.1911 or toll-free 800.977.3077…. 24 hours a day, 7 days a week.

Posted by Charles Monnett

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