There’s nothing worse than getting a letter in the mail from someone else’s attorney. If you run a business in California, unfortunately, chances are high that you’ve dealt with this more than once. Fraud within California Worker’s Compensation is at an all-time high.
The greater Los Angeles region has more Worker’s Compensation attorneys (per capita) than anywhere else in the country. Worker’s Compensation litigation and fraud go hand-in-hand and both are at an all-time high.
In this article, we’re going to help you understand the many (potentially surprising) areas where fraud comes from. And more importantly – how to stop it.
Here at Whiteboard, we believe the Worker’s Compensation system in California is as broken as you do.
Over the last 8 years, we’ve helped 500+ clients:
- uncover exactly where fraud stems from
- systematically prepare for fraud before it occurs
- and implement the right strategies at the right time as questionable claims unfold
Now, we’re going to lift the curtain and offer these strategies to you.
For the purposes of this article, we consider Fraud to be any action (direct or indirect) that unnecessarily increases the payout on a Worker’s Compensation claim.
The classic depiction of a fraudulent Work Comp claim is an employee that claims to have gotten hurt without any witnesses or potentially under questionable circumstances. To be direct, we’re talking about when an employee is “faking” an injury.
Believe it or not, there are many other players that contribute to fraud outside of just the employees themselves.
Where Does Fraud Come From?
The Worker’s Compensation system is inflationary by nature
Outside of the employer, every single party in the Worker’s Compensation system makes more money when claim costs are increased. It’s a broken system that almost always leaves employers with nobody to count on but themselves.
The state requires every company that has a single employee (or more) to carry Worker’s Compensation insurance. Then, they allow everyone to game the system – and employers have to foot the bill.
If you ask us, the entire system is fraudulent by design. Or lack of design. We’ve made it our mission to dig into the unpleasant details and illuminate exactly how each party plays into this problem.
When someone walks into a clinic, it’s one of the first questions they’ll be asked every time: “Was this a work-related injury?” As soon as the patient answers “yes”, the doctors know they’ll be sending away a bill that receives little to no oversight.
Doctors have no reason not to overprescribe medication, overschedule follow-up visits, or send the employee off to every referral they can think of. Chiropractor, acupuncture, physical therapy, MRI, X-Ray, the list goes on…
Clinics already know exactly what they can and can’t get away with and, financially, it makes the most sense for them to get away with just about anything they can.
Not all employees are bad. But most enjoy getting paid without having to go to work.
Work Comp clinics are known for taking employees off work for extended periods of time, even for the slightest of injuries. Once the employee is collecting a paycheck in the comfort of their own home, it’s difficult to get the employee to feel eager to return to work.
The doctor is happy to keep them off work and coming back for follow-ups. While they’re sitting at home, Work Comp attorney ads are plastered all over daytime TV. If the employee leaves their house, they drive past countless billboards for Work Comp lawyers on their way to the store.
This one probably needs the least explanation, right? Everyone knows that attorneys abuse the system.
Most attorneys represent their clients at no cost, under the agreement that the attorney is awarded a percentage of their settlement. This encourages the attorneys to do anything they can to drive settlement amounts higher and higher.
It’s commonly said that they’ll “throw everything against the wall to see what sticks”. It’s unbelievable how often an ankle sprain turns into back issues, psychological trauma, emotional distress, and even dental concerns.
Did you know that your broker makes approximately 10-15% of your Worker’s Compensation premiums?
While it’s unlikely they’re actively colluding with your employees, as your X Mod goes up – your premiums go up – and their commissions do too.
Traditionally, brokers don’t offer much when it comes to knowledge, tools, or strategies that would help with your X Mod. We believe it’s time to raise the bar.
As the entity that’s actually paying for the medical treatment and disability payments in a Worker’s Compensation claim, you might expect that your insurance carrier would be the one party that’s on your side. This is partially true.
On average, businesses in California pay back $4 in increased future premiums for every $1 that your carrier pays out on your claims, up to a certain threshold that varies for each company. This 4:1 ratio is what allows your insurance carrier to remain highly profitable, even when they have to pay out on claims.
There is a certain point in almost every claim where the best interest of your insurance carrier and the best interest of your business diverge. Adjusters aren’t trained to know what’s best for you, just what’s best for them.
Settlements are only valued in how they will impact the insurance company – not how they will impact your X Mod or future premiums. Without someone skilled and knowledgeable standing up for your best interest on each claim, carriers too can be a part of the problem.
Proactive Strategies Are Critical
In California Worker’s Compensation, an employer will lose a “he said, she said” battle 99% of the time. Maybe more.
If you want to find success in defending your business from fraudulent claims, it’s necessary to have the right combination of procedures, training, and documentation in place BEFORE a claim occurs.
Establish clear procedures and expectations for all employees
To begin building a preemptive defense against fraud, it’s important that:
- you have procedures in place
- employees are aware of these procedures
- and their awareness is documented.
This is most effectively done through the use of your employee handbook. We instruct our clients to update their employee handbooks and include clearly defined expectations for workplace injuries.
The handbook should inform employees that workplace injuries are required to be reported immediately, it should inform them who they should report injuries to, and it should inform them of the process that will follow once a supervisor or manager is made aware of the injury.
Once you update your employee handbook, all current employees should re-sign the handbook to acknowledge these changes. Any new employees that you hire should also be informed of the injury procedures and sign their acknowledgment via the handbook.
With this step complete, you’ve now built the foundation of defense.
Next, re-train and re-affirm that injury protocols are clear
After employees have signed the new handbook, we recommend holding regular training sessions to re-acknowledge (and document everyone’s understanding of the rules and expectations). We typically recommend that clients do this monthly, but the frequency may depend on your operations.
The important part is that employees are regularly documenting that they still understand the procedures and are not harboring any unstated injuries.
At Whiteboard, we’ve worked with our partnered Work Comp defense counsel to create a Workplace Injury Acknowledgement form for our clients to use in these meetings. If your employees acknowledge in writing, on a regular basis, that they’re not currently injured and they know how to report any injuries, you’re well on your way to a solid defense.
If you choose to create your own form, it’s important that the form removes all loopholes that fraudulent employees (and their attorneys) take advantage of in court. For example, the form should be available in other languages when necessary, the form should have them acknowledge they don’t have any currently unreported injuries or concerns, the form should mention that this is a re-training of information they’ve previously received, etc.
Build your credibility as a “good” employer
With the employee handbook and the documented, regular re-training, it will be difficult for your employees to claim a questionable injury if they were to become disgruntled or look to take advantage of the system down the road.
To further your credibility as a good employer, you should encourage a culture of safety. Regular safety initiatives are a valuable way to demonstrate that you care about employee safety.
On the reverse side, it’s also important that when employees violate safety protocols or injury reporting procedures, they’re held accountable. This allows you to demonstrate that you take these matters seriously.
If you want to go above and beyond, you can also offer employees additional resources for workplace injuries. Whiteboard offers a 24/7 bi-lingual injury response service. When your employees are injured, we can dispatch mobile technicians that treat under the OSHA guidelines for first aid, right there where the employee was hurt.
As an employer, this is great for you since it keeps 87% of injuries from going to a clinic and becoming a claim. But it can also be interpreted as a benefit to your employees. Instead of having to get transportation to a clinic to sit in a waiting room (average wait time is a couple hours), your employees get personalized care, right there on the spot.
If you combine the strategies above, no one will be able to doubt that your business puts an emphasis on your employee’s safety. Employees that suffer a legitimate injury will have clear expectations and top-level care. If you have employees that are trying to take advantage of the system, your procedures will document the red flags every step of the way.
In addition to the Employee Handbook and the Workplace Injury Acknowledgement forms, you should properly document everything else that transpires as an injury or claim arises.
One way that our clients have found success is to have all employees call their injuries into our Triage Hotline. This is where we dispatch the mobile technicians, but it also allows us to take a recorded statement of their injury at the time it’s reported. You don’t have to use our service, but you should find a way to record these injury statements.
Often, we see what’s originally a small injury spread to multiple body parts, and injuries that have never been mentioned before are added as the claim grows. A recorded statement at the time of injury can help clarify what ailments actually came from work – and what ailments are just being added as an afterthought.
If your employee reports an injury to you or has an open claim, you also need to document your availability to continue providing work. The employee may or may not have work restrictions applied. It’s important to properly document if you have Full Duty or Modified Duty available in order to limit the employee’s ability to collect disability payments.
Educate your employees
Did you know that most employees in California think that Worker’s Comp is a benefit provided by the state? When they take advantage of time off work – or even when they get an attorney involved – most don’t know that they’re harming the business that employs them. They think they’re taking advantage of a state program.
In other instances, employees may be overwhelmed by the paperwork, jargon, and bureaucracy that surrounds Work Comp. They might hire an attorney because they don’t know any better and they think an attorney is the only way to make sure they get the appropriate treatment.
If you educate your employees on how Worker’s Compensation works, how it impacts your business, and how to navigate any claims they may go through, your employees will be significantly less likely to take advantage – or to be taken advantage of by an opportunistic attorney.
Whiteboard clients have access to an “employee liaison” who helps injured workers through every step of their claim. When employees feel knowledgeable about the process and feel like they are being cared for, claims are significantly more straightforward – saving you time and money.
With the information above, you’re armed with the knowledge to protect yourself against Work Comp fraud from all angles.
- Management of doctors and adjusters on your company’s behalf
- Established procedures for workplace injuries that are regularly documented and re-trained
- Proper resources and documentation as injuries are reported
- Training and education for your employees
If you can implement these strategies, you’ll see the success and frequency of fraudulent claims decline. This will result in a lower X Mod and lower Work Comp premiums. If you need help implementing these strategies, we help our clients do all of this and more. Book a free discovery call here and one of our X Mod Experts can help you establish proper procedures and protect your company from fraud.
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10 Ways to Reduce Workers Comp Insurance