When it comes to the unrelenting fraud cases in California workers’ compensation, the hope for mere restitution after convictions of fraudulent actors is not satisfactory. Insurers, TPAs and employers deserve Exposure-Relief via immediate dispositions and limits to involved claims.
The news in early June, 2017 of a massive workers’ compensation-referral scheme uncovered in Orange County California is not really news. California has been a hotbed of innovative workers' compensation claims fraud for decades. Just two months prior, in April of 2017, a $40 million-dollar medical fraud ring was uncovered operating across southern California. WC fraud statistics available on the California Department of Insurance Website for the fiscal year 2014-15 summarize the District Attorney’s data as follows:
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1,645 suspects
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1,409 prosecutions
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650 convictions
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$646,186,555 total chargeable fraud
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$32,065,839 restitution ordered
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$8,647,532 restitution collected
A notation with this data reads “The total chargeable fraud was $646,186,555 representing only a small portion of actual fraud since so many fraudulent activities remain to be identified or investigated”.
How Does This Affect Our Industry?
Three takeaways from this are quite stunning:
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This represents only one fiscal year -
Restitution is only 1.3 cents-per-dollar
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Law enforcement admits that there are methods, dynamics and vastness of fraud that they cannot address
The immediately affected parties include employers, insurers and TPAs all representing various coverage and financing situations. Restitution is only a small part of their problem. The larger issue is future exposure for claims that have assorted degrees of impact from the bad actors. These open claims require real dollar reserves and the mostly complicit claimants are afforded the low-threshold luxury and lacking burden of proof found in WC law.
Throwing a WC case out in total due to fraud is not easy in CA or any other jurisdiction. In a one-off circumstance, I can agree to this scrutiny. However, in the event there is connection to a bona-fide fraud ring, legislators should find a way to provide immediate relief to affected parties.
Each incidence of a fraud ring should require a committee of experts to segment the claimant population by certain degrees of involvement and allow dispositions accordingly. For example, claimants with no real proof of incident who were cultivated by “cappers” and diagnosed by complicit doctors should be immediately dismissed without any further defense effort or legal cost.
Claimants with obvious and verified traumatic injuries that might have been caught up only in compounded drug schemes should have further Rx and treatment denied immediately without litigated debate. If these claimants so choose they can re-start their claim for treatment with commission-selected physicians. Other levels of immediate disposition can be set as segmentation may warrant.
Conclusion
Employers, insurers and TPAs should band together and lobby for exposure-relief after found-fraud. Funding for oversight of situation-by-situation relief plans should come from the California Fraud Assessment Commission, which already takes a surcharge from all CA employers with WC risk.
In fiscal year 2014-15 total surcharges were $52,055,400. I submit that most of this money should go to orchestrating exposure relief after fraud rather than the usual commission activity of identifying fraud. Identification of workers' compensation claims fraud is arguably redundant among other entities, not to mention that the possibility for “Exposure-Relief” will incentivize potentially affected parties to be vigilant in alerting the DA to suspected fraud and helping to build evidence.
