21 Best Practices for Fighting Fraud By Brent Heurter

Any employer that wants to eliminate risk in the current workers' compensation climate should be paying attention to issues of fraud. In California, for example, businesses are already reeling from the high costs of workers' compensation insurance. Medical costs have increased more than 100% in the last 5 years, and 25% of all claims are reported to be fraudulent.

Because of these abuses, workers' compensation fraud costs employers hundreds of thousands of dollars every year. To make matters worse, some employers don't get the help and support they need from their carriers.

Fighting fraud is doable if you have the proper tools and you are willing to take control and fight fraud before it happens. For example, if you instill a proper fraud prevention culture in your workplace, you'll see a drop in injury claims. You can take control and substantially reduce your risks.

The 21 best practices listed here are a road map for preventing, investigating, and dealing with workers' compensation fraud. By following these 21 best practices, you will be taking the steps to stamp out fraud in your workplace once and for all.

If you want to prevent fraud ...

1. Know the law. The law is on your side. You don't have to be a victim to fraud. Educate yourself on California's Insurance Code. If you foster a culture of vigilance within your organization, you will establish an environment in which fraud is not tolerated. Tap into the best resources available and study the successes that other companies have attained in fighting fraud. Knowledge is power.

2. Hire smart. It's far better to conduct a thorough background check of a potential employee before hiring than to discover-too late-that you have a "professional victim" on your staff. Be sure to check to see if the prospective employee has previously filed a WC claim that was litigated or disputed.

3. Create a workers' compensation system in which fraud is not possible. Your roles and responsibilities should be clear, your claims handled efficiently, and your medical treatment monitored. This will minimize the opportunity for fraud. But when fraud is suspected, have the tools available to fight it and win!

4. Set a zero tolerance policy. Employees should be informed about how the workers' compensation system functions. They need to know that the system will help them in the event of an injury-but they also need to know that fraud will not be tolerated in your workplace.

5. Advertise your fraud policy. Let your employees know exactly what your policy is about fraud. Conduct a campaign within your company to get the word out. Your employees will help you fight fraud if you give them the chance. Train them to be on the lookout for fraud.

6. Make it easy to report fraud. Most people are honest. They don't like fraud any more than you do. If you provide a safe, anonymous way for an employee to report an abuse, you will find that fraud will be identified in the front lines of your operation.

If fraud is suspected... 7. Catch "professional victims" in their own game. Be poised and ready to investigate and get tough with suspects.

8. Conduct an investigation. The first day is the best time to determine how to proceed with a claim. There are certain types of questions that are appropriate to ask if you suspect that a claim is questionable. You need to ask very specific questions-and record the answers.

9. Get your carrier involved. Approach your carrier immediately about claims that you believe are questionable.

10. Have a backup plan. Don't rely solely on your carrier for support. Carriers can be slow to respond. Set up a team of experts to go to when you have a question about a questionable claim.

11. File the required forms with the Department of Insurance. Ninety-five percent of the time, insurance carriers fail to file the required FD-1 form with the Department of Insurance when filing a questionable claim. Make sure that your questionable claims are on record!

12. Search the national insurers' database. If fraud is suspected, check to see if there is any history of personal injury claims. If any red flags appear, press your carrier to investigate the claim in depth.

13. Conduct an activities check. Don't wait for your carrier to investigate an employee's activities. It's always a good idea to conduct your own investigation to identify the patterns of movement of an employee who you suspect has filed a fraudulent claim.

14. Check medical records. You'll need to know, when looking at a claim, if an employee has any previous injuries that may have an impact on the claim.

15. Consider drafting a "threaten to sue" letter. Don't leave any stone unturned if fraud is suspected.

16. Conduct surveillance if you suspect an employee has lied. If you have information that an employee out on workers' compensation leave is working elsewhere or is malingering, be prepared to obtain incriminating evidence.

17. Take a deposition. If you are not getting support from your carrier, consider obtaining an attorney to arrange for a deposition with the employee.

When you want to take a case all the way ...

18. Fight fraud to the fullest extent of the law. There are tools an employer can use to aggressively investigate a case. An employer should use whatever tools are at its disposal for cracking down on fraud.

19. Deliver your case to the District Attorney's office. Have a representative present your case to pursue an arrest and/or a conviction.

After the claim has been resolved ... 20. Avoid the domino effect. After your case has been resolved, renew your efforts to educate your employees. If you don't, there may be a rash of WC claims filed.

21. Remove paid and reserved amounts from your experience modification calculation. Any claim filed against your company affects your experience modification calculation. Make sure you do not continue to pay for a fraudulent claim, even after it is resolved!

Brent Heurter is founder and chief solutions officer of ClearComp (www.clearcomp.com). His most recent publication on fraud is "How to Wipe Out Workers' Comp Fraud In Your Workplace: Your Arsenal of Fraud-Fighting Tools, Strategies, Tips and Techniques."For more information, call 1-888-CLEAR-89.

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The views and opinions expressed by the author are not necessarily those of workcompcentral.com, its editors or management.