Fraudulent Workers Compensation Claims

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Fraudulent workers’ compensation claims are often assumed to be committed by the employee. In reality, only about 1 percent of all workers' compensation claims are found to be fraudulent. “In Florida, out of 54,854 claims filed in 2005 there were 178 convictions (and 130 were against employers). In Kansas, out of 66,469 workers’ compensation claims filed in 2006, there were 798 fraud complaints reported and 718 were against employers.” Fraudulent claims founded by the employer have increased severely that other states are implementing programs to take action against such acts. In Tennessee, a penalty program was initiated in 2004 as part of the Workers’ Compensation Reform Act. Since that time the program has collected nearly $300,000 from…show more content…
One of the insurance that is required by law is Workers’ Compensation which is an insurance policy covering work-related injury and illness. Not a part of payroll or employment taxation, but required to be purchased by employers. There is high percentage of employer committing some kind of worker compensation insurance fraud. Insurance fraud is defined as an act that is committed to fraudulently receive payment from an insurer or deliberately lie to save money. A large number of insurance claims each year can be accredited to fraudulent claims, which cost insurers and other parties billions of dollars. Insurance fraud can range from mild to severe. A mild insurance fraud claim can involve the exaggeration of a claim while a severe claim can involve employer defrauding employee. Insurance fraud can be committed by applicants for insurance, policyholders, third-party claimants or professionals who provide insurance services to…show more content…
These cost are result of companies either not paying their workers compensation insurance premium or under paying, by lying about the size of their work force. For example in California a construction company would deliberately misreport wages paid to its workers to avoid paying all of the payroll taxes and state insurance premiums. According to the deputy District attorney Paul Flick, “if an employees salary was $11/hour and worked 40 hours/week, the company would report it as the employee was paid $22/hour and worked 20 hour/week to save more than half of worker compensation insurance cost for that employee.” Across the map on the east NY state alone employer committing worker compensation insurance fraud is costing 1 billion a year. This causes a cycle effect that leads to the honest companies to make up for the lack of premium paid and as a result they end up paying higher premium. Also some injured workers don’t receive the worker compensation benefit that they are entitling to which leads to raise in medical costs. This is a bigger financial drain on the system than the small percentage of employee committing worker compensation insurance fraud. It’s a huge dent in the worker compensation system because worker compensation was created so employees don’t sue the employer and employer pays for employee who has work related injury, but when the employer is committing worker

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