Workers Compensation Fraud

(1)

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Workers’ Compensation Fraud

Martin Gonzalez

Chief Investigator

CA Department of Insurance CA Department of Insurance

Fraud Division Fraud Division 5999 E. Slauson Ave. 5999 E. Slauson Ave. Commerce, CA 90040 Commerce, CA 90040

(323) 278 (323) 278--50005000

2 2 State of California

State of California Department of Insurance Department of Insurance

Fraud Division Fraud Division MISSION OF CDI MISSION OF CDI

The mission of the California Department of The mission of the California Department of Insurance (CDI), Fraud Division, is to protect Insurance (CDI), Fraud Division, is to protect the public from economic loss and distress by the public from economic loss and distress by actively investigating and arresting those who actively investigating and arresting those who commit insurance fraud and to reduce the commit insurance fraud and to reduce the overall incidence of insurance fraud through overall incidence of insurance fraud through anti

anti--fraud outreach to the public, private and fraud outreach to the public, private and governmental sectors.

governmental sectors.

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CDI Fraud Investigators

Q

Q Sworn Peace OfficersSworn Peace Officers Q

Q Leading experts in the field of insurance fraudLeading experts in the field of insurance fraud Q

Q Trained Criminal InvestigatorsTrained Criminal Investigators Q

Q Provide training and assistance to:Provide training and assistance to:

O

O ConsumersConsumers O

O The insurance industryThe insurance industry O

O Law enforcement agenciesLaw enforcement agencies O

O Other State AgenciesOther State Agencies

Q

Q Carry firearmsCarry firearms Q

Q Make arrestsMake arrests Q

Q Investigate and present prosecutable fraud cases to: Investigate and present prosecutable fraud cases to: DA’s, CA Attorney General, and U.S. Attorney DA’s, CA Attorney General, and U.S. Attorney

(2)

4 4 State of California

State of California Department of Insurance Department of Insurance

Fraud Division Office Locations

Orange

Orange CommerceCommerce

Inland Empire

Inland Empire San DiegoSan Diego Morgan Hills

Morgan Hills FresnoFresno Silicon

Silicon ValleyValley Sacramento Sacramento Los Angeles

Los Angeles--AIFTF AIFTF ValenciaValencia Division Headquarters is located in Sacramento Division Headquarters is located in Sacramento

(916) 854 (916) 854--57605760

5 5 Fraud Division

Fraud Division REPORTING FRAUD REPORTING FRAUD

•

Referral’s Come From:Referral’s Come From:

•

•Insurance CompaniesInsurance Companies •

•Special Investigation UnitsSpecial Investigation Units •

•Third Party AdministratorsThird Party Administrators •

•WCABWCAB •

•Law EnforcementLaw Enforcement •

•Federal/State/Local AgenciesFederal/State/Local Agencies •

•CitizensCitizens

Workers’ Compensation

Reporting

Q

QCIC 1877.3 (b)(1) & CIC 1877.3 (b)(1) &

(d) When an insurer (d) When an insurer knows or reasonably knows or reasonably believes it knows the believes it knows the identity of a person identity of a person who has committed who has committed fraud they must fraud they must report it to CDI & DA report it to CDI & DA within a reasonable within a reasonable time not to exceed time not to exceed

(3)

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Insurer Defined

The California Insurance Code Defines an The California Insurance Code Defines an

Insurer as: Insurer as: •

•Any insurer admitted to transact workers’ Any insurer admitted to transact workers’ compensation insurance in this state compensation insurance in this state •

•State Compensation Insurance FundState Compensation Insurance Fund •

•Any employer that has secured a certificate of Any employer that has secured a certificate of consent to self

consent to self--insure pursuant to subdivision (b) or (c) insure pursuant to subdivision (b) or (c) of section 3700 of the Labor Code

of section 3700 of the Labor Code •

• A third party administrator that has secured a A third party administrator that has secured a certificate pursuant to section 3702.1 of the Labor certificate pursuant to section 3702.1 of the Labor Code

Code

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Immunity for Insurer and

Governmental Agency

CIC Section 1873.2 In the absence of CIC Section 1873.2 In the absence of fraud or malice, no insurer or no fraud or malice, no insurer or no governmental agency representatives governmental agency representatives shall be subject to any civil liability for shall be subject to any civil liability for libel, slander, or any other relevant libel, slander, or any other relevant cause of action by virtue of releasing or cause of action by virtue of releasing or receiving any information pursuant to receiving any information pursuant to 1873 or 1873.1.

1873 or 1873.1.

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Immunity for Insurer and

Governmental Agency

Governmental Agency -

-

Work. Comp.

CIC Section 1877.5 No insurer who CIC Section 1877.5 No insurer who

furnishes information and no governmental furnishes information and no governmental agency who furnishes or receives

agency who furnishes or receives information shall be subject to any civil information shall be subject to any civil liability in a cause or action of any kind liability in a cause or action of any kind where the insurer or agency acted in good where the insurer or agency acted in good faith, without malice and reasonably faith, without malice and reasonably believes that the action taken was believes that the action taken was

warranted by the then known facts obtained warranted by the then known facts obtained by reasonable effort.

(4)

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SUSPECTED FRAUDULENT CLAIM SUSPECTED FRAUDULENT CLAIM

(SFC)

(SFC) --FD1FD1REFERRAL FORMREFERRAL FORM

Q

Q Full completion of FDFull completion of FD--1 is needed to ensure proper 1 is needed to ensure proper

investigation resulting in possible conviction.

Carrier SIU CDI ConvictionConviction

TO

TO TOTO

11 11

Fraud Division

• • FD1FD1

–

–Case number assignedCase number assigned –

–Reviewed by Reviewed by Administrative Administrative supervisor supervisor –

–Forwarded to Forwarded to Operations supervisor Operations supervisor –

–Case assigned to Case assigned to investigator investigator

FRAUD VS. ABUSE

CONCEPTS

FRAUD: Fraud occurs when someone knowingly FRAUD: Fraud occurs when someone knowingly lies to obtain/deny compensation.

lies to obtain/deny compensation.

ABUSE: Workers’ compensation abuse is any ABUSE: Workers’ compensation abuse is any practice that uses the workers’ compensation practice that uses the workers’ compensation system in a way that is contrary to either the system in a way that is contrary to either the intended purpose of the system or the law. intended purpose of the system or the law.

(5)

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CRIMINAL LAW STATUTES

RELATED TO INSURANCE

FRAUD

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Ins. Code Sec. 1871.4 (c)

Any person who violates subdivision (a) and who has a Any person who violates subdivision (a) and who has a prior felony conviction of that subdivision, of former prior felony conviction of that subdivision, of former Section 556, of former Section 1871.1, or of Section 548 or Section 556, of former Section 1871.1, or of Section 548 or 550 of the Penal Code, shall receive a two

550 of the Penal Code, shall receive a two--year year

enhancement for each prior conviction in addition to the enhancement for each prior conviction in addition to the sentence provided in subdivision (b).

sentence provided in subdivision (b).

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Ins. Code Sec. 1871. 5

Any person convicted of workers' compensation fraud Any person convicted of workers' compensation fraud pursuant to Section 1871.4 or Section 550 of the Penal pursuant to Section 1871.4 or Section 550 of the Penal Code shall be ineligible to receive or retain any Code shall be ineligible to receive or retain any compensation, as defined in Section 3207 of the Labor compensation, as defined in Section 3207 of the Labor Code, where that compensation was owed or received as a Code, where that compensation was owed or received as a result of a violation of Section 1871.4 or Section 550 of the result of a violation of Section 1871.4 or Section 550 of the Penal Code for which the recipient of the compensation Penal Code for which the recipient of the compensation was convicted.

(6)

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Other Charges Considered

•

118 PC, Perjury118 PC, Perjury

•

487 PC, Grand Theft487 PC, Grand Theft

•

182 PC, Conspiracy182 PC, Conspiracy

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TYPES OF APPLICANT FRAUD

SCHEMES

APPLICANT FRAUD

1871.4 C.I.C.

•

• The main issue related to applicant fraud is The main issue related to applicant fraud is whether the applicant made a material whether the applicant made a material misrepresentation and how the material misrepresentation and how the material misrepresentation affected the claim process. misrepresentation affected the claim process. 550 P.C.

550 P.C.

•

• The main issue is whether the applicant The main issue is whether the applicant concealed or knowingly failed to disclose a fact concealed or knowingly failed to disclose a fact and how it affected the claim and/or benefits. and how it affected the claim and/or benefits.

(7)

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550 (a) and (b) PC

550 (a) and (b) PC –

–

False or

Fraudulent Claims

Key elements:

•

Knowingly present false written or Knowingly present false written or

oral statements for the payment of a

claim.

•

Conceal or knowingly omit facts that Conceal or knowingly omit facts that

may affect claim benefits.

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Areas for Potential Fraudulent

Claims

Q

QWorkers’ Compensation FraudWorkers’ Compensation Fraud

O

O Claimant FraudClaimant Fraud O

O Attorneys/Medical ProvidersAttorneys/Medical Providers

8

8Use of CappersUse of Cappers

O

O Provider FraudProvider Fraud

4

4Medical MillsMedical Mills

4

4InterpretersInterpreters

4

4Vocation Rehabilitation Vocation Rehabilitation

O

O Employer FraudEmployer Fraud

4

4Premium FraudPremium Fraud

4

4Uninsured EmployerUninsured Employer

O

O Insider Fraud/Insurance Company FraudInsider Fraud/Insurance Company Fraud

4

4Embezzlement of Claim FileEmbezzlement of Claim File

4

4Agent/Broker FraudAgent/Broker Fraud

4

4Claim handling FraudClaim handling Fraud

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WHO’S WHO IN THE SYSTEM

•

•EmployerEmployer

–

– SupervisorSupervisor

–

– Owner/EmployerOwner/Employer

– – H/RH/R

– – UnionUnion

•

•EmployeeEmployee

–

–Claimant/ApplicantClaimant/Applicant

•

•Legal ProvidersLegal Providers

•

•Healthcare ProvidersHealthcare Providers

– –DoctorsDoctors –

– ChiropractorsChiropractors –

– NursesNurses –

– Physical TherapistPhysical Therapist –

– Mental Health CareMental Health Care

•

• MiscellaneousMiscellaneous

–

– InterpretersInterpreters –

– Vocational Vocational Rehabilitation Rehabilitation –

(8)

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MATERIAL

MISREPRESENTATIONS

•

• Common forums where the applicant makes Common forums where the applicant makes material misrepresentations:

material misrepresentations:

–

–Medical examsMedical exams •

• Chiropractors, Physical Therapists, nurses, MD’s, Etc.Chiropractors, Physical Therapists, nurses, MD’s, Etc.

–

–DepositionsDepositions –

–WCAB hearingsWCAB hearings –

–Interviews with insurance company personnelInterviews with insurance company personnel –

–Vocational rehabilitation interviews (Vouchers: Vocational rehabilitation interviews (Vouchers: Possible new area for Fraud

Possible new area for Fraud ––Not yet tested)Not yet tested)

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TYPES OF APPLICANT FRAUD

SCHEMES

SCHEMES COMMON TO

APPLICANT FRAUD

•

DenyingDenying prior injuries to the same prior injuries to the same

body part

•

DenyingDenying working while collecting working while collecting

disability benefits

•

DenyingDenying the ability to do various the ability to do various activities or functions that the

activities or functions that the

applicant actually can do

(9)

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SCHEMES COMMON TO

APPLICANT FRAUD

•

Being injured away from work and Being injured away from work and

reporting it as a workers’

compensation claim

•

Claiming an injury occurred at work in Claiming an injury occurred at work in

an manner that is normally covered by

workers’ compensation, but it actually

happened in a manner that would not

be covered. For Ex. Horseplay

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DEPOSITIONS

O

O Signed vs. UnsignedSigned vs. Unsigned

O

O Questioning the applicantQuestioning the applicant

O

O Deposition summariesDeposition summaries

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VIDEOS

O

O Applicant IdentificationApplicant Identification

O

O Who conducted the videotapingWho conducted the videotaping

O

O How do they know their filming the How do they know their filming the right individual

right individual O

O What activities are depicted in the tapeWhat activities are depicted in the tape

O

(10)

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Insurance Fraud Can Be a Felony

Q

QCIC 1871.4(a)(1)CIC 1871.4(a)(1)

O

O 5 years in state prison and/or5 years in state prison and/or O

O $150,000 fine or double the amount $150,000 fine or double the amount of the fraud, which ever is greater

of the fraud, which ever is greater

and/or

O

O RestitutionRestitution O

O 2 year enhancement2 year enhancement for prior conviction

for prior conviction

of same crime

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Senate Bill 899

–

–Allows an employee to be entitled to no more than 24 Allows an employee to be entitled to no more than 24 occupational therapy visits per industrial injury. occupational therapy visits per industrial injury. –

–Prohibit aggregate disability payments for a single injury Prohibit aggregate disability payments for a single injury occurring on or after the effective date of this bill, causing occurring on or after the effective date of this bill, causing temporary disability, from extending for more than 104 temporary disability, from extending for more than 104 compensable weeks within a period of 2 years from the date compensable weeks within a period of 2 years from the date of commencement of temporary disability payment, except if of commencement of temporary disability payment, except if an employee suffers from certain injuries or conditions. an employee suffers from certain injuries or conditions. –

–Eliminates the requirement to consider the ability of the Eliminates the requirement to consider the ability of the injured employee to compete in the open labor market and, injured employee to compete in the open labor market and, instead, would require that consideration be given to an instead, would require that consideration be given to an employee’s diminished future earning capacity, which would employee’s diminished future earning capacity, which would be a numeric formula based on criteria established by this be a numeric formula based on criteria established by this bill.

bill.

EMPLOYER FRAUD

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EMPLOYER FRAUD

Ways employer(s) makes material misrepresentations: Ways employer(s) makes material misrepresentations:

•

•Lies about the way the injury happened so it is not covered by Lies about the way the injury happened so it is not covered by workers’ compensation

workers’ compensation •

•Denies the employee is really an employeeDenies the employee is really an employee •

•Falsification of employment records and time keeping informationFalsification of employment records and time keeping information •

•Falsification of workers’ compensation documentsFalsification of workers’ compensation documents •

•Threatens employee with termination or other action if a claim is Threatens employee with termination or other action if a claim is filed

filed •

•Threatens or intimidates co-Threatens or intimidates co-worker(s) that may have knowledge of worker(s) that may have knowledge of injury

injury

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EMPLOYER FRAUD

E

Employer(s) may make material misrepresentations in mployer(s) may make material misrepresentations in support of a claim:

support of a claim:

•

•Lies about the way the injury happened so it is covered by Lies about the way the injury happened so it is covered by workers’ compensation

workers’ compensation •

•Claims the injured person as an employee when they really are notClaims the injured person as an employee when they really are not •

•Falsification of employment records and time keeping informationFalsification of employment records and time keeping information •

•Falsification of workers’ compensation documents Falsification of workers’ compensation documents

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EMPLOYER FRAUD

-

FELONY

Ins. Code Sec. 1871.4 (a) (1) & 1871.4 (b) (1) apply to ER’s:

Ins. Code Sec. 1871.4 (a) (1) & 1871.4 (b) (1) apply to ER’s: •

•Making knowingly false,Making knowingly false, •

•fraudulent material statement(s), written or oralfraudulent material statement(s), written or oral •

•or material misrepresentation(s)or material misrepresentation(s) •

•in opposition to any claimin opposition to any claim •

•for the purpose of denying any compensation as defined in 3207 Lfor the purpose of denying any compensation as defined in 3207 LCC

Ins. Code Sec. 1871.4 (a) (3) & 1871.4 (a) (4) apply to ER’s:

(3) Knowingly assist, abet, conspire with, or solicit any perso

(3) Knowingly assist, abet, conspire with, or solicit any person in an unlawful act n in an unlawful act

under this section.

(4) Make or cause to be made any knowingly false or fraudulent

statements with regard to entitlement to benefits with the inten

statements with regard to entitlement to benefits with the intent tot to

discourage an injured worker from claiming benefits or pursuing

discourage an injured worker from claiming benefits or pursuing aa

claim.

(12)

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MEDICAL MILLS/PROVIDER

FRAUD

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PROVIDER FRAUD

RED FLAGS

•

Immediate representation following the Immediate representation following the accident.

accident.

•

Minor injury produces major medical Minor injury produces major medical costs and excessive time off from work. costs and excessive time off from work.

•

Medical reports, even though for Medical reports, even though for different patients are identical or read different patients are identical or read the same (Boiler

the same (Boiler--Plated).Plated).

•

Bills reflect unusual dates of treatment Bills reflect unusual dates of treatment (i.e., holidays and Sundays).

(i.e., holidays and Sundays).

PROVIDER FRAUD

RED FLAGS

•Treatment does not match diagnosis.Treatment does not match diagnosis. •

•Doctor has handled questionable claims in the Doctor has handled questionable claims in the past.

past. •

•Both the W/C and private health insurance Both the W/C and private health insurance companies are billed without the medical office companies are billed without the medical office notifying either insurance provider.

notifying either insurance provider. •

(13)

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PROVIDER FRAUD

RED FLAGS

•

•A check of the amount billed through the A check of the amount billed through the doctor’s Tax ID number is for an amount that doctor’s Tax ID number is for an amount that reflects an improbability that the doctor reflects an improbability that the doctor examined all the patients in one day. examined all the patients in one day. •

•Medical treatment/therapy not provided but Medical treatment/therapy not provided but was billed (billing for services not provided). was billed (billing for services not provided).

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USE OF CAPPERS

It is unlawful to knowingly employ runners, cappers, It is unlawful to knowingly employ runners, cappers, steerers

steerers, or other persons to procure clients or patients , or other persons to procure clients or patients to perform or obtain services or benefits pursuant to to perform or obtain services or benefits pursuant to Division 4 (commencing with Section 3200) of the Division 4 (commencing with Section 3200) of the Labor Code or to procure clients or patients to Labor Code or to procure clients or patients to perform or obtain services or benefits under a contract perform or obtain services or benefits under a contract of insurance or that will be the basis for a claim of insurance or that will be the basis for a claim against an insured individual or his or her insurer. against an insured individual or his or her insurer.

1871.7 (a) C.I.C. 1871.7 (a) C.I.C.

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PREMIUM FRAUD

(14)

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COMMON SCHEMES OF PREMIUM

FRAUD

•

•Under-Under-reporting of payroll to the insurance reporting of payroll to the insurance carrier

carrier •

•Employee job misclassificationEmployee job misclassification •

•Experience modification evasionExperience modification evasion •

•Cash payCash pay •

•Any combination of the aboveAny combination of the above •

•Conspiring with an insurance agent to commit any Conspiring with an insurance agent to commit any of these schemes

of these schemes

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INSURANCE COMPANY

FRAUD

INSURANCE CARRIER FRAUD

O

OInsurance company personnel deny claim even Insurance company personnel deny claim even though evidence shows claim is legitimate though evidence shows claim is legitimate O

OInsurance company makes material Insurance company makes material

misrepresentations that deny benefits or misrepresentations that deny benefits or discourages the filing of a claim

discourages the filing of a claim O

ONot paying benefits by altering and falsifying Not paying benefits by altering and falsifying

documents documents

(15)

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YOU the consumer

Q

QEach of us is a victim Each of us is a victim

because widespread because widespread insurance fraud insurance fraud ultimately translates ultimately translates into higher premiums into higher premiums for each of us and for each of us and results in elevated results in elevated costs of goods and costs of goods and services.

services.

INCREASED COSTS OF INSURANCE, OTHER GOODS AND

SERVICES DUE TO

FRAUD FRAUD

WHY ARE MY INSURANCE

PREMIUMS GOING UP???

44 44

Goal

Q

Q The CDI, Fraud Division will review all The CDI, Fraud Division will review all SFCs received, and together with local SFCs received, and together with local District Attorneys, insurers and District Attorneys, insurers and employers, attempt to identify current employers, attempt to identify current patterns and trends of insurance fraud. patterns and trends of insurance fraud. Utilizing that information and all Utilizing that information and all available manpower, our goal is to available manpower, our goal is to investigate and prosecute persons investigate and prosecute persons suspected of insurance fraud crimes. suspected of insurance fraud crimes.

Q

Q Report it!Report it!