In the past, we’ve discussed that insurance fraud costs worker’s compensation programs $30 billion annually in the U.S. However, the National Association of Insurance Commissioners now puts that number even higher at $34 billion ($9 billion from premium fraud; $25 billion in claims fraud).
While we are not saying everyone engages in this illegal behavior, investigators and insurance professionals often see three groups engaging in insurance fraud. Those caught can face prison, substantial financial penalties, or both.
3 common sources of fraud
We will go through some common scenarios one at a time.
- Employees: They may file a claim saying they cannot work because they were hurt on the job. Whether uninjured or less injured than they claim, the worker gets another job. They may do this on their own or as part of a scheme devised by others.
- Employers: People assume that the employee is the culprit, but employers may try to game the system by reporting the wrong number of employees on the policy or misclassifying their jobs to one with a lower premium. They may also opt not to pay premiums, instead keeping the money or diverting it elsewhere rather than paying the policy. Individual cases can add up to millions of dollars in lost premiums.
- Healthcare providers: Healthcare professionals may think they figured out a loophole where they can get away with billing or overbilling for services. Either on their own or often in concert with others, they run up massive bills sent to the insurers.
Insurance fraud impacts everyone
Workers’ compensation fraud is not a victimless crime. Instead, it shifts the financial burdens to those who play by the rules and uses resources that could go to those who genuinely need them. Paying a fair share better ensures that premiums don’t go up for everyone.