Please ensure Javascript is enabled for purposes of website accessibility

Insurers could face more fees in workers’ comp fraud fight

By: Dan Shaw, [email protected]//October 30, 2013//

Insurers could face more fees in workers’ comp fraud fight

By: Dan Shaw, [email protected]//October 30, 2013//

Listen to this article

Lawmakers are considering special fees for insurers as the price to prevent fraud in the state’s workers’ compensation system.

At recent meetings on workplace-injury law, legislators have asserted that county prosecutors are letting allegations of fraud drop. A proposed solution arose at an October meeting of the Worker’s Compensation Advisory Council, the starting point for legislative changes to workers’ comp law, when nine Republican lawmakers submitted a letter suggesting letting other state agencies take up the cases, particularly the state Department of Justice and the Office of the Commissioner of Insurance.

BJ Dernbach, staff adviser to state Rep. Dan Knodl, R-Germantown, said the lawmakers are aware that shifting some of the responsibility for fraud cases onto state agencies could mean a need for more lawyers. One way to pay for those lawyers, he said, would be through a fee on insurance providers that sell workers’ comp policies, which companies must buy unless they insure themselves.

“Just giving the DOJ the ability to do it, that doesn’t solve the problem,” Dernbach said. “We’ve got to have the funding.”

But Andy Franken, president of the Wisconsin Insurance Alliance, said that if lawmakers call on insurers to pay more to root out fraud, there should be a reasonable expectation that the projected savings will outweigh the additional cost. All the evidence, though, suggests deliberate deception and malfeasance are uncommon in Wisconsin’s workers’ comp system, he said.

Franken said insurers that are subjected to new fees would be inclined to build the additional cost into the premiums they charge for workers’ comp insurance. That tendency, he said, should be kept in mind by lawmakers who believe that eliminating fraud will result in lower costs for businesses.

“In some states, these anti-fraud mechanisms have actually generated a high rate of return if they’re done right,” Franken said. “But I think, given the fact that the goal of the process is to save employers money, I think they should start out conservatively. Add a position and see if there is enough of a workload to justify any further expansion.”

But one of the main reasons prosecutors drop allegations of workers’ comp fraud, according to a 1999 study conducted by the state Department of Workforce Development, is a lack of technical expertise. The report, the most recent of its kind in the state, concluded, “Few district attorneys have formal legal training in the obscure legal principles, the state-of-the-art medical issues or the arcane insurance jargon.”

Milwaukee County District Attorney John Chisholm acknowledged the difficulties involved in pursuing allegations of fraudulent workers’ comp claims. No government agency, whether the DOJ or a county prosecutor’s office, is successful at prosecuting those cases unless it has specialists who are assigned the task, he said.

“Those are always complex cases,” Chisholm said, “that require an awful lot of investigative legwork.”

The DOJ has taken on some responsibility for prosecuting fraud in the state’s unemployment insurance system, which provides benefits to unemployed workers. Perhaps some of the attorneys who do that work, Franken said, also could help fight abuse of workers’ comp.

Dana Brueck, DOJ spokeswoman, said the department began prosecuting cases involving unemployment insurance in 2006, and two staff lawyers now have duties related to those cases. She declined to comment on the possibility of adding workers’ comp fraud to DOJ’s responsibilities.

The DWD’s 1999 report found little evidence to suggest a transfer of duties would entail a great burden. For each of the five years preceding the report, insurers reported an average of 65,000 injuries that led to lost time at work; the department forwarded only 15 cases of alleged fraud on average annually to county district attorneys.

Of the cases that were sent, the majority were dropped after prosecutors determined insurers had not provided sufficient support for their claims.

The report was compiled to determine the effects of a state hotline that informants could call to allege incidences of workers’ comp fraud. In its conclusions, the Department of Workforce Development found that many of the allegations callers made resulted from misunderstandings.

Informants, for instance, would assume someone was still collecting disability benefits after returning to work when the person actually was getting another sort of social-welfare payment. Also, the report noted, injured workers are permitted at times to continue receiving workers’ comp even after returning to the job.

Since the report’s release in 1999, the number of fraud allegations forwarded to district attorneys has decreased. This year, for instance, the DWD had sent only one case for prosecution by June 30.

Charles Domer, a Milwaukee lawyer who represents employees in workers’ comp cases, said lawmakers are not wrong to fight fraud in the workers’ comp system, but they seem to be looking for instances of abuse in the wrong places. Rather than workers, he said, companies are far more likely to be the cheaters.

Businesses most often commit fraud, Domer said, by mislabeling employees as independent contractors. That practice, he said, saves the dishonest employers money because it prevents them from having to pay to have the mislabeled employees covered under workers’ comp insurance. But it harms honest employers, whose premiums would fall if more companies were paying into the system.

Franken said district attorneys’ reluctance to prosecute workers’ comp cases is undoubtedly one reason why few insurers pursue allegations of fraud. If there were more assurance of a legal remedy, he said, insurance companies would be more zealous in trying to prevent abuse.

Still, he said, he doubts increased scrutiny would reveal that fraud in Wisconsin is widespread or particularly harmful.

“Fraud is not rampant,” he said. “We are much better off than most of our counterparts in other states. However, there are cases that we feel should be brought forward and prosecuted.”

— Follow Dan on Twitter

Polls

Should Steven Avery be granted a new evidentiary hearing?

View Results

Loading ... Loading ...

Legal News

See All Legal News

WLJ People

Sea all WLJ People

Opinion Digests