WORKERS’ COMPENSATION RED FLAGS... · 2018-11-29 · 2,476 referrals, 120 workers’ compensation related . 2010 $20,836,308 in losses investigated 1,106 cases closed due to insufficient

WORKERS’ COMPENSATION RED FLAGS October 18th, 2018

Cassandra Rudy Workers’ Compensation Claims Consultant [email protected] 763-746-8263

mailto:[email protected]

MARSH & McLENNAN AGENCY LLC 2 October 15, 2018

AGENDA • Workers’ Compensation Today • Fraud • Red Flags • Prevention of Fraud • Litigation

MARSH & McLENNAN AGENCY LLC

WORKERS’ COMPENSATION TODAY


WORKERS’ COMPENSATION TODAY • Experience Modification Rating

• PTSD: Presumption & Treatment Parameters

• Presumption for Retirement Increased from age 67 to 72 for Dates of Injury After 10/1/18

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WORKERS’ COMPENSATION TODAY • $1.78 billion in 2016

• Medical 35%, Insurer expenses 31% and Indemnity benefits 29%

• Integrated Benefits Institute: Direct loss, including time loss payments, medical, legal and benefits costs = 28% of total cost of disability

• >$6 billion annually on prescription drugs = 19% of overall medical costs

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WORKERS’ COMPENSATION TODAY • July 2018 – Unemployment Rate – 3%

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QUESTIONS


FRAUD


WHAT IS FRAUD? • A person who, with INTENT to defraud, receives WC

benefits to which the person is NOT ENTITLED by misrepresenting, misstating, or failing to disclose any material fact is guilty of theft Representing party must know the fact was false and

must have intended another to be induced to act based upon the false representation

Misrepresentation must be the proximate cause of actual damages


WHAT IS FRAUD? • 3 CONTEXTS IN MN WC CASES Perpetrating fraud to obtain benefit Fraud in the context of a WC settlement Fraud in the hiring process

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WHAT IS FRAUD? • TYPES Hurt off the job Self-inflicted or Intentional injury

Inflated injury Double dipping Crooked doctors and lawyers Narcotic Abuse – Fastest growing area of fraud Hard fraud vs. soft fraud

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WHAT IS FRAUD? • ABUSE VS. FRAUD > Abuse: any practice that uses the comp system contrary to either

intended purpose that includes the magnification of symptoms and overutilization of benefits

> PRESENCE OR ABSENCE OF A SPECIFIC, PROVABLE FALSE STATEMENT!

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WHY DOES FRAUD HAPPEN? • ROOT CAUSE: SOCIETY HAS CREATED AN ENVIRONMENT WITH

HUGE INCENTIVES TO CHEAT

• LOW RISK, HIGH REWARD – More than two-thirds of consumers (68 percent) say they believe

insurance fraud happens because people believe they can get away with it (up from 49 percent in 2003);

No formal Special Investigative Unit procedures Outreach weak overall

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WHY DOES FRAUD HAPPEN? Morality Issues

• Regardless of age, consumers who cheated on exams in high school twice or more are far more likely to be dishonest later in life. Compared to consumers who didn’t cheat, high-school cheaters are:

• Three times more likely to inflate an insurance claim (6 percent vs. 2 percent) and lie to a customer (20 percent vs. 6 percent); and

• Twice as likely to lie to or deceive their boss (20 percent vs. 10 percent).

• (Josephson Institute, October 2009)

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http://josephsoninstitute.org/surveys/


WHY DOES FRAUD HAPPEN? • FRAUD TRIANGLE – SOCIOLOGIST DONALD CRESSEY > Incentive/Pressure > Rationalization > Opportunity

• ENTITLEMENT

• VICTIM

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WHY DOES FRAUD HAPPEN? INSURANCE RESEARCH COUNCIL STUDY

• Approximately 10% of adults feel it is acceptable to have sustained

an accident at home but claim they injured themselves at work • Another 17% believe it is acceptable to cooperative with doctors and

attorneys to file false claims to collect benefits

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WHY DOES FRAUD HAPPEN? Coalition Against Insurance Fraud – Accenture 2010

• 10 percent think “insurance fraud doesn’t hurt anyone.” (Insurance Research Council, March 2013)

• More than half (55 percent) of U.S. consumers say poor service from an insurance company is more likely to cause a person to defraud that insurer

• More than three-quarters (76 percent) say they’re more likely commit insurance fraud during an economic downturn than during normal times (up from 66 percent in 2003);

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https://www.insurancefraud.org/downloads/InsuranceResearchCouncil03-13.pdf

https://www.insurancefraud.org/downloads/InsuranceResearchCouncil03-13.pdf


WHY DOES FRAUD HAPPEN? JOURNAL OF AMERICAN MEDICAL ASSOCIATION

1 out of 10 doctors have reported medical signs or

symptoms a patient didn’t have in order to help the patient secure coverage for needed treatment or services in the past year

MEDICAL PROVIDER STUDY TASK FORCE, COALITION AGAINST INSURANCE FRAUD – OCTOBER 2008 Licensing boards often fail to take any actions against

those licensees who commit felony offences related to insurance fraud

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FRAUD STATS MN DIVISION OF INSURANCE FRAUD PREVENTION 2017

2,476 referrals, 120 workers’ compensation related

2010 $20,836,308 in losses investigated 1,106 cases closed due to insufficient facts, unfounded

or no prosecutable action 102 referred to prosecution 34 criminal charges with 8 convictions $608,940 in restitution

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PROCESS OF PROVING FRAUD • **It is the responsibility of the employer and insurer to prove all

elements that fraud exists**

• MN INSURANCE PREVENTION UNIT > Since 1993 the Unit has investigated 3,300 cases, referred more

than 200 to prosecution and between 1995-2001 there were 99 criminal fraud charges filed with 74 convictions with $2,692,500 in total value

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PROCESS OF PROVING FRAUD Workers’ Compensation standard exists of “Reasonable Basis to Believe” VERSUS the Criminal standard of “Beyond a Reasonable Doubt”

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PROCESS OF PROVING FRAUD INCREASE SUCCESS RATE OF PROSECUTION

Prove beyond a reasonable doubt Surveillance Interviews Synopsis

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http://youtu.be/wdhk88TcPho?hd=1

http://youtu.be/wdhk88TcPho?hd=1


CONSEQUENCES OF FRAUD If the employee is found guilty of theft in regard to a fraudulent WC claim = Up to 20 years in prison and $100,000 fine MN: Any theft >$500 = felony

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CONSEQUENCES OF FRAUD

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FRAUD CASES


RED FLAGS


RED FLAGS • Rumors from co-workers

• Injured worker was recently hired

• Subjective complaints without objective findings

• Serial claimant

• 1st thing Monday morning report

• Injury occurred immediately before interruption

• Lack of witnesses

• Injury occurred where worker isn’t normally

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RED FLAGS • Immediate legal representation

• Overly familiar with WC terminology and legal

• Disgruntled employee

• Significant inconsistent statements

• Malingering

• Doctor shopping

• Development of symptoms in body parts not initially mentioned

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RED FLAGS • Reliable sources observe injured workers participating in

activities outside restrictions

• Habitually missing medical appointments

• Lag time report

• Not home when you call

• Identification problems

• Medical incompliance

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QUESTIONS


FRAUD PREVENTION


FRAUD PREVENTION PRE-HIRE • Criminal Background Checks • Professional Certification Verification • Pre-Employment Physicals - CRT • CANNOT LOOK INTO PRIOR WC HISTORY!! • Character Testing

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PRE-EMPLOYMENT PHYSICAL • Strain/Sprain injuries account for 31% of the days that

employees spend away from work if they have been on the job < 1 year

• Isokinetic physical capabilities evaluation that measures strength and range of motion for knees, shoulders and lower back Pre-Employment Post-Injury Assessment Fitness for Duty Functional Capacity Exam (FCE) Pre-Separation Baseline

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MARSH & McLENNAN AGENCY LLC 35

CHARACTER TESTING Why? Because employee theft and fraud are costing an employer an average of $9 per employee per day!! Study reveals close connection between youthful

attitudes & behavior and continuing patterns of dishonesty as young people enter the work world.

People make companies successful and they are truly your #1 asset.


FRAUD PREVENTION: PRE-INJURY • Promote a fraud-free workplace

• Educate employees on insurance costs

• Workers’ compensation orientation

• Safety policies and expectations

• Policies – prompt reporting, stay-at-work

program, reporting suspected fraud, filing

false claims

• Supervisor training

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FRAUD PREVENTION: POST-INJURY

PROMPT REPORTING

• Waiting period – 3 calendar days • Insurance carriers view lag time reporting as a serious

risk as it leads to higher costs! • Institute written policy requiring employees to

immediately notify their supervisor of a work-related injury. The rule should have disciplinary consequence for nonconformance

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FRAUD PREVENTION: POST-INJURY MEDICAL TREATMENT

• Medical Choice? • Interview Providers • Communication • Workability

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ACCIDENT INVESTIGATION

• Written form • Physical inspection of scene • Interviews • Photos & preservation of physical evidence • Written, signed narrative of injured worker • Record keeping • Recommendations

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STAY-AT-WORK PROGRAM

• Transitional Duty • Indemnity costs decrease by 2/3rd • Medical costs decrease by 50%

• Speeds Healing by 3x

• Reduces Litigation Risk

• Improves Employee Morale

• Promotes Good Relationships & Trust

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FRAUD PREVENTION : POST-INJURY

STAY-AT-WORK PROGRAM

Impact of Age 25-39 years old: 80-97% probability of return-to-

work 12-35 years old less likely to return-to-work, out

of work 62-276% longer than their younger counterparts

• Impact of Comorbities Diabetes – Require 2-3x normal healing rate

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COMMUNICATION

• Insurance Adjuster • QRC, NCM • Defense Counsel • Agent • Supervisor, HR, Safety

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COMMUNICATION

• Employee

- Listen - Find common ground - Be available - Sense of humor - Bring out their best

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“The most important single ingredient in the formula of success is knowing how to get along with people” Theodore Roosevelt




TERMINATION • Exit Interviews

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QUESTIONS


LITIGATION


• http://www.youtube.com/watch?v=uoyrQV7z-4s

• http://www.youtube.com/watch?v=iU4hrzxc8c0&feature=endscreen&NR=1

http://www.youtube.com/watch?v=uoyrQV7z-4s

http://www.youtube.com/watch?v=iU4hrzxc8c0&feature=endscreen&NR=1

http://www.youtube.com/watch?v=iU4hrzxc8c0&feature=endscreen&NR=1


LITIGATION PROCESS

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NOTICE TO DISCONTINUE BENEFITS • Written notice to injured workers due to:

• Release without restrictions • Maximum Medical Improvement (MMI) • Return-to-work at full or partial wage • Failure to diligently search for work • Refusal of valid job offer • Withdrawal from the job market • Reaches TTD maximum cap

LITIGATION PROCESS


DISCOVERY • Medical Records • Witnesses • Employee Statement • Depositions • Independent Medical Exam (IME) • Independent Vocational Exam (IVE) • Surveillance

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LITIGATION PROCESS


LITIGATION PROCESS SETTLEMENT CONFERENCE • Office of Administrative Hearings (OAH) • Informal • Certificate of Readiness (COR) • Approximately 9 months out from filing of Claim

Petition • Purpose: To discuss settlement, if impasses

refer to OAH for Hearing or reset settlement conference 30-60 days

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LITIGATION PROCESS HEARING • Both sides present evidence in support of their

respective positions • Generally the injured employee will provide testimony • Compensation Judge issues final & binding decision on

all parties within 60 days • Process = 6 months to a year or more

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LITIGATION PROCESS APPEALS

• 5 Judges

• 6 year terms appointed by the Governor, confirmed by Senate

• No term limit

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LITIGATION PROCESS

MEDIATION

• Neutral 3rd party assists disputing parties in reaching a

mutually acceptable resolution • Parties present summaries of their points of view • Mediator meets privately with each party to explore the

facts and issues of each side • Continue to caucus alternatively with each party,

carrying settlement proposals back & forth until an agreement is reached

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LITIGATION PROCESS


MEDIATION • Agreement is an enforceable, legally binding

contract • Types of disputes

• Medical • Change of doctor • Wage loss • Permanency • Causation • Retraining

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LITIGATION PROCESS


MEDIATION

Benefits • No cost • Parties have equal say in process and decide all

settlement terms • No determination of guilt or innocence • Voluntary & may be terminated at any time • Promotes better relationships

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LITIGATION PROCESS


LITIGATION PROCESS EMPLOYER INVOLVEMENT

• Attendance not required

• Why do you receive notices & other documents from the OAH?

• What if you disagree how the insurance company is handling the dispute?

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LITIGATION PREVENTION RETURN-TO-WORK JOB OFFER

• Should be in writing, not required • Within physical restrictions • At or near pre-injury wage • Employee obligated to respond within “reasonable” time • Unreasonable refusal = forfeiture of TTD benefits

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QUESTIONS

Legal/regional regulatory statement to be added here if required.

Cassandra Rudy Workers’ Compensation Consultant 763-746-8263 [email protected]

mailto:[email protected]

Documents

WORKERS’ COMPENSATION RED FLAGS... · 2018-11-29 · 2,476 referrals, 120 workers’ compensation related . 2010 $20,836,308 in losses investigated 1,106 cases closed due to insufficient