The Workers' Comp Fraud Problem

The Workers' Comp Fraud Problem

It’s a topic we all wish we didn’t have to talk about. Yet it’s been commanding more and more headlines – California’s workers’ comp system has a fraud problem.[1] And the legislature is finally starting to fight back.

A pair of bills recently passed across Governor Brown’s desk, both with a clear focus on cutting down on fraud. Senate Bill 1160 places major restrictions on liens, and Assembly Bill 1244 doubles down with further regulations.[2] Their ultimate effectiveness – and the ripple effects for honest providers – remain to be seen.

SB 1160 was signed on the heels of a DIR report that over $600 million in workers’ comp liens between 2011 and 2015 were filed by convicted or criminally indicted parties. Liens filed by providers who have been indicted or charged with criminal activity will be stayed until the final settlement of the criminal case. In addition, the bill introduces new requirements to verify both the legitimacy of a lien and that it has been filed solely by the lien holder.

Under AB 1244, the DWC Administrative Director is required to “suspend any medical provider, physician or practitioner from participating in the workers’ compensation system when convicted of fraud,” per a September 30th DIR news release. Effective January 1, 2017, all liens must be filed with a declaration asserting the lien’s validity under penalty of perjury. Any lien filed without such a declaration will be dismissed.

Why the sudden focus on fraud? Fraud costs the state between $1 and $3 billion every year, and illegal operations often grow to disconcerting proportions before attracting the attention of law enforcement officials.[3]

In a conversation secretly recorded by a colleague seeking leniency in his own workers’ comp fraud case, indicted California businessman Kareem Ahmed doesn’t mince words. He summed up fraud in workers’ comp thusly: “nobody cares.”[4] 

That may have been the case for many years. But these new pieces of legislation are hoping to prove him wrong.[5]

For a comprehensive look at Senate Bills 1160 and 1175, which aim to speed payment and reduce fraud, watch our October webinar. We cover upcoming reforms to the workers’ comp system and leave time at the end to answer your questions

SENATE BILLS 1160 & 1175

[1] Read David DePaolo’s take here.

[2] Full text of SB 1160 here. Full text of AB 1244 here.

[3] Read this report by NBC Bay Area for more information.

[4] A detailed Reveal News report on this and other California workers’ comp fraud cases can be found here.

[5] Incidentally, issues in workers’ compensation are not just limited to California. So many states are struggling through embattled workers’ comp systems – riddled by fraud, bureaucracy, and more – that the Labor Department issued a report advocating federal intervention in state systems.

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