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SANTA MONICA, Calif.-Claimants, providers and lawyers aren't the only ones illegally taking advantage of the workers compensation system: Employers are just as guilty, an attorney says.
In fact, premium fraud costs the system more than claimant and provider fraud put together, an expert contends.
But because it's not as "glamorous" as spying on workers exerting themselves at home after filing work-related injury claims, it doesn't get the attention claimant fraud gets, said Donald Elisburg, an attorney from Potomac, Md., who spoke on a panel at the Business Insurance Fifth Annual Workers Compensation Conference last month in Santa Monica.
"It would be interesting to see what video surveillance would look like if you could show a video of somebody sitting in their office misclassifying employees, or cooking the books so that there wasn't any premiums in the process," he said. "How would you be able to show that in a surveillance video?
"Well, obviously that doesn't have as much appeal to the public, and I doubt that will ever be on the Channel 2 News, and I somehow dare say that Oprah wouldn't like it either," he quipped.
Nevertheless, stepped up anti-fraud efforts by other employers, as well as insurers and law enforcement agencies, have contributed significantly to the financial improvements the workers compensation system has experienced over the past several years, asserted Peter C. Madeja, president and chief executive officer of Genex. He moderated the session.
Mr. Elisburg said he became aware of the premium fraud issue while serving on the National Council on Compensation Insurance's fraud advisory commission.
"The first demonstration of fraud that they showed us was from a company in Rhode Island that dealt with leased employees," he recounted. "They had been committing a multimillion-dollar fraud operation by having hundreds, if not thousands, of workers going to work and not paying any workers compensation premiums at all."
"That is by far the biggest dollar item for the insurance industry because of the massive amount of money that the carriers don't get," Mr. Elisburg said.
The commission's second priority was fraud perpetrated by providers and lawyers and others taking advantage of the workers compensation system.
"Then, of course, we did get to the question of claimant fraud, and legitimately so because there is the problem of the 5% or 10% or whatever the small number is that impacts on the much larger 90%," he said, referring to the proportion of claims suspected to be fraudulent.
FBI statistics indicate that as many as 10% of all disability claims-in both occupational and non-occupational lines of insurance-involve some type of fraud or abuse, Mr. Madeja said.
Rather than concentrating on the outright fraudulent activities, however, Mr. Elisburg suggested that more efforts be focused on other types of system abuse.
Just as most people feel it's OK to go 5 mph or 10 mph over the posted speed limit, "we have a tendency in this society to 'stretch,' " he said.
"So is it any wonder that people are going to 'stretch' in the workers comp system, whether it's staying out a little longer than necessary if they're still hurt, having a little more medical treatment, a little more rehabilitation?" Mr. Elisburg asked.
Similarly, many employers "cook the books a little so that the premium is lower than required, particularly if they've got a cash-flow problem that month," he theorized.
"The question is, how do you get across to everyone that when you do a little bit here and a little bit there, that it adds up to real dollars?" he asked.
"I think that's the challenge: to recognize that everybody's got a stake in the system."
"I think that when you're looking at the issue.*.*.that you have to look at the whole system," Mr. Elisburg proposed.
Also speaking during the sesssion were Bill Kizorek, president of Naperville, Ill.-based InPhoto Surveillance, and Christopher E. Mandel, senior director of worldwide risk management for Tricon Global Restaurants in Louisville, Ky.