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Thursday, Jul 7, 2022

Workers’ Comp Probes on the Increase As Instances of Fraud Continue

A long-anticipated crackdown on workers’ compensation insurance fraud is yielding some results as more local employers, contractors, insurance agents and medical providers have been targeted for investigation and prosecution.

In the last two weeks, arrests have been announced in two separate L.A.-area cases, one employer has been sentenced and one insurance agent fined. In all these cases, the defendants allegedly came up with schemes to lower workers’ compensation insurance premiums, which have remained stubbornly high despite two rounds of reforms in the last 18 months.

For the fiscal year ended this past June 30, there was a 25 percent jump in the number of claims reported to state insurance officials 5,122 claims in all while 868 new cases were opened for investigation. (Figures for new cases opened in the 2002-03 fiscal year were not available. A recent Department of Insurance report said that as of July 1, 2003, 955 cases were open, with many of those open more than a year.)

Over the next year, many of these cases are likely to be handed over to district attorneys throughout the state for prosecution.

While most cases still center on people filing injury claims, other fraud schemes have been targeted, including under-reporting of payrolls to lower premiums and employers going without workers’ compensation insurance altogether. These types of fraud typically involve more money than single individuals filing claims.

The war against workers’ compensation insurance fraud is also spreading to other fronts. Investigators and prosecutors say there’s been a re-emergence of schemes in which employers lease their employees to a third party that promises to provide workers’ compensation and other benefits for that employer at much lower rates.

Many of these third parties either do not have required licenses or fail to pay claims. When employers or investigators catch on, they close up shop and re-emerge under another name in another location.

Similar schemes cropped up in the early 1990s, but went away after the workers’ compensation insurance market was deregulated in 1995 and rates plummeted.

Howard Fine
Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.

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