Eight Examples of Workers Compensation Fraud
Many Fraudsters Are Caught and Prosecuted
Insurance fraud is pervasive in workers' compensation. The perpetrators may be employers, employees, providers or virtually anyone else involved in the workers compensation system. Here are some actual cases of fraud.
Old Habits are Hard To Break
Some employers attempt to reduce their workers' compensation premium by misclassifying employees or underreporting payroll. An Ohio man did both of these multiple times.
The man operated a tree-trimming and landscaping business in Ohio, a monopolistic state in which all workers' compensation policies are issued by the Ohio Bureau of Workers Compensation (BCW). In 2005, the man was convicted of forgery, tampering with records, and failure to buy workers’ compensation coverage. In 2012, the BCW learned that he was misclassifying his workers as independent contractors and under-reporting his payroll. In response, the agency instructed the man on how to report his payroll properly.
In 2015, the BCW discovered the man was up to his old tricks, misclassifying workers and underreporting payroll. The BCW charged him with workers compensation fraud and ordered him to pay $17,000 in restitution.
Patients for Sale!
Workers compensation fraud can be especially lucrative when the perpetrators are professionals acting in concert. In Southern California, a group of attorneys, physicians, chiropractors, medical goods providers, marketers, and even a sleep specialist participated in a scheme in which they diverted over $200 million from the workers compensation system.
Two ringleaders employed marketers to recruit workers, many of whom were migrants, to file workers compensation claims against their employers. The marketers then "sold" the claimants to crooked attorneys, doctors, and other healthcare professionals in exchange for kickbacks. The ringleaders set quotas the providers were obligated to meet. For instance, a physician might be required to order at least $600 worth of medical tests or treatments for each claimant.
The perpetrators exchanged wads of cash concealed in envelopes, magazines, and even a baby shower bag. The group was eventually caught and by July of 2019, 37 people and entities had pleaded guilty or been convicted by a jury.
So What If I Don't Have a License!
While some fraudulent medical providers prefer to act as a group, others like to work alone. In 2011, the Ohio Bureau of Workers Compensation prosecuted a man for operating a medical evaluation business without a license. The man had lost his medical license in 1991 when he was convicted of illegally processing drug documents. Even so, he continued to operate his business for twenty years. While the man had contracted two licensed physicians to perform disability exams, the BWC determined he was performing many of the exams himself. The man was convicted of insurance fraud and order to repay the BWC over $100,000.
Insurance Policy for Rent!
Some employers are creative, finding new ways to commit workers' compensation fraud. Two Florida men and an accomplice "rented out" their workers compensation policies to other businesses.
First, one of the men created a construction company for which he purchased a workers' compensation policy. He then directed his insurance agent to send certificates of insurance to various contractors and subcontractors. These businesses employed hundreds of workers but didn't buy workers compensation insurance. They simply used the certificates as false evidence of coverage. The companies didn't pay their workers directly. Instead, they wrote payroll checks to the construction company, which used the funds to pay the workers (without making deductions for state or federal taxes).
Eventually, the Florida Department of Financial Services served the construction company with a Stop-Work Order for underreporting its payrolls. The company owner fled the country. Yet, the fraud continued when the second man created another construction company that he insured for workers compensation. That man and his accomplice then continued the workers compensation policy "rental" business. The scheme finally came to an end when the U.S. Attorney's office filed indictments against the three men.
Foiled by Facebook
If you file a false workers' compensation claim, don't broadcast your misdeed on social media. An Ohio man learned this lesson the hard way. He had filed a workers compensation claim for an injury he sustained at his workplace in Ohio. He received benefits from the Ohio Bureau of Workers Compensation (BWC). The man relocated to Arizona but continued receiving disability benefits based on his claim that he was unable to work.
The BCW received a tip that the man was doing construction work in Arizona. After conducting an investigation, the agency discovered that the man was working as a rescue technician for a safety company. The BCW also found photos on the man's Facebook page showing him doing repelling work. The man was ordered to pay $7,644 to the BCW in restitution and investigative costs.
Watch Out for Those Cameras!
If you decide to fake an injury to get time off from work, remember to check your workplace for video cameras. As a Florida woman discovered, video footage may derail your vacation plans.
The woman claimed that she was injured when a fire sprinkler head fell off the ceiling above her workspace, bounced off her desk, and hit her in the head. Her employer filed a workers compensation claim. The company's insurer became suspicious and referred the claim to Florida's Division of Investigative and Forensic Services (DIFS), which investigates insurance fraud.
DIFS detectives obtained video footage of the incident from the employer. The video showed that the employee's story was false. While the sprinkler head had fallen onto the worker's desk, it had not hit the worker. Rather, the worker picked up the broken part, checked to see that no one was watching, and hit herself in the head with it. The worker was arrested and faced two counts of insurance fraud.
Operation Spinal Cap
Here's another case of workers' compensation fraud committed by providers. Five healthcare professionals in California engaged in a complex game of workers' compensation fraud. The players included a hospital CEO, two spine surgeons, a chiropractor, and a health care marketer. The hospital executive paid kickbacks to the spine surgeons and the chiropractor for recruiting patients for spinal surgeries. The physicians and chiropractor received a payment for each surgery. They hid the kickback payments by creating fake contracts for work they never performed. They also inflated the cost of medical implants used in the surgeries.
The hospital then billed workers' compensation insurers and the Department of Labor (which operates some federal workers' compensation programs). The fraud lasted for 15 years and generated substantial profits for the perpetrators. Between 2005 and 2013, the hospital billed insurers more than $580 million for spinal surgeries performed on over 4,400 patients. The conspiracy was discovered by FBI investigators, which dubbed it Operation Spinal Cap. All five defendants were charged with federal crimes.
Bogus Translation Services
Provider fraud may be committed by individuals other than medical professionals. In California, a woman who provided translation services to insurance companies was charged with workers compensation fraud in 2018. The woman obtained clients by paying kickbacks to an accomplice, a physician. The physician owned a business that provided medical and chiropractic services to workers injured on the job.
In California, translation services must be provided by certified interpreters. The Santa Clara County District Attorney's Office learned that the woman was not certified. Even so, she was billing over 100 insurers, claims administrators and other businesses for services she had either provided illegally or not provided at all. The woman and her accomplice were charged with conspiracy to commit workers’ compensation billing fraud and unlawful kickbacks for patient referrals.