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Workers comp fraud still a problem

By Mary Fricker
Press Democrat staff writer
April 21, 1998

California employers are expected to get the go-ahead Thursday to continue funding their six-year fight against workers compensation fraud after they concluded fraud remains a serious problem within the state program.

State Insurance Commissioner Charles Quackenbush is expected to approve an employers' plan to assess themselves $28.5 million next year to fund fraud prosecutions based on a state insurance department report that the program has been effective, but that much remains to be done.

"It was felt by the commission that the amount of fraud in workers compensation has not diminished, merely changed venue and type,"' said Joseph Markey, chairman of the Fraud Assessment Commission, created by the Legislature to tell Quackenbush how much employers are willing to pay and how they hope the money will be spent.

"We feel there is a great deal of work yet to be done in the area of identification, investigation and prosecution,"' Markey said.

Employers have been funding the fraud fight since 1992, after the state Legislature concluded fraud was an important reason employers' workers compensation premiums were rising. The program was a key element of the Legislature's restructuring of workers compensation between 1989 and 1993.

The first-year assessment was $3 million, gradually increased to $28.5 million. At least 40 percent must go to district attorneys, and the rest goes to the Department of Insurance Fraud Division. This year the commission is recommending $16 million for district attorneys and $12.5 million for the Department of Insurance, Markey said.

The annual cost per insured employer can range from almost nothing to hundreds of thousands of dollars, Markey said -- based in general on the employer's workers compensation premium multiplied by 0.003226. Self-insured employers have a different formula. For a framer with two employees, the fraud program might cost $50 a year, whereas Markey said he knew a self-insured employer whose fraud assessment was $140,000.

The program has been controversial because the conviction rate has been lower than many expected and because worker advocates say it unfairly targets injured workers.

Although some insurers have said up to 30 percent of workers compensation claims are fraudulent, California insurers are reporting fraud in less than 1 percent of claims.

Markey said convictions aren't the only important outcome of the high-profile fraud campaign. Deterrence is valuable, too, he said.

Out of approximately 5 million claims filed in California from 1993 through 1997 -- the years for which fraud statistics are available- 25,997 suspicious claims were reported and 784 resulted in convictions, according to the state Department of Insurance. That's a suspected fraud rate of 0.5 percent.

State law requires carriers and self-insured employers to report all cases of suspected fraud. But some advocates of the fraud program say carriers and self-insured employers are not committing adequate resources to the fraud fight.

Some worker advocates claim workers bear the brunt of the fraud campaign.

Of suspicious claims referred to district attorneys statewide for prosecution between June 1996 and June 1997, the most recent data available, 72 percent were workers, 12 percent were employers and 7 percent were doctors, according to the state Department of Insurance. Four cases were brought against claims adjustors.

Workers compensation fraud statutes treat all fraud alike, whether it's a worker trying to get higher benefits, an employer trying to get lower premiums, a doctor trying to get higher payments or a claims adjustor trying to deny benefits.

It's illegal "`to lie to obtain or deny benefits."'

State Compensation Insurance Fund, the state's largest workers compensation carrier, said it is committed to fighting fraud of all kinds.

"Unlike most other carriers, State Fund recognizes that all types of fraud -- claims, premium and internal -- have a significant impact on the workers compensation system,'' State Fund said in a prepared statement.

State Fund reports its investigations resulted in 170 convictions between January 1992 and April 1998. During that time, State Fund processed about 830,000 claims. A breakdown of convictions by type was not available.

Sonoma County Deputy District Attorney Bruce Enos runs the program in Sonoma County, which started in January 1997. He reported one arrest in the 1996-97 fiscal year, two prosecutions and no convictions. Eight prosecutions were continued into this year. Ongoing investigations in the 1996-1997 fiscal year included 17 against workers, four against employers, one against a doctor and one against a doctor's bill collector.

©1997 The Press Democrat