Claims of legal blindness didn't stop one workers' compensation claimant from driving a golf cart. Another man with supposed injuries to his back, ankle, and heel was later seen pushing his stalled pickup truck. And one woman allegedly incapacitated by severe neck pain somehow managed to compete in a rodeo. Twice.
The problem with funny anecdotes like these is that they conceal real consequences for everyone.
Detective Paul Colbert, president and CEO of Meridian Investigative Group, has seen all these cases of workers' compensation fraud and more. Huge faceless insurance companies aren't the only victims in cases like these. According to Colbert, "Workers' comp fraud costs the average consumer about $900 a year through increased insurance rates, increased health care costs and revenue stolen from their employers, which reduces their paychecks and bonuses."
Big Talk and Funny Math
It's not surprising that the insurance industry and workers' compensation lawyers are sounding alarms about the high cost of workers' comp fraud. They're not exactly objective observers. But while worker compensation fraud does hurt us all, the pain may not be quite as big as these entities make it sound.
For historical reference, consider how the insurance industry reported the costs of fraud in the 1980s and 1990s:
- A 1998 study cited the American Insurance Association's estimate of fraud at 10% of the cost of claims paid, or about $3 billion. The Coalition Against Insurance Fraud adopted the AIA's estimate.
- The National Insurance Crime Bureau came up with an estimate that doubled the AIA's, at $6 billion.
- But one insurance company president put the cost of workers' compensation fraud at $30 billion a year.
Overall Claims Are Actually Shrinking
However, the total number of workers' compensation claims has fallen sharply since those reports. Workers' comp claims represented about 2% of private industry's gross earnings in 2010, according to the Workers' Compensation Resources Research Report. That's down from 3% in 1994.
According to the Bureau of Labor Statistics, workers' compensation insurance in 2009 amounted to 1.6% of total compensation costs. And per a study by the National Academy of Social Insurance (NASI), cash benefits to workers per $100 of payroll recently dropped to $0.48, the lowest level since 1980. The frequency of claims dropped by 55% between 1991 and 2008.
What's the Real Problem?
Several years ago, PBS' Frontline examined workers' comp fraud, and found that the popular image of widespread fraud didn't match up with reality. "Studies show that only 1% to 2% of workers' compensation claims are fraudulent," the program reported. By vilifying and magnifying the problem, we run the risk of stigmatizing the majority of people who truly do need workers' comp.
Workers' compensation insurance exists to protect us when we need it, and fraudulent claims against it don't appear to be an out-of-control problem. Indeed, with the proliferation of social networking, many employers, insurers, and detectives can ferret out fraud more easily than ever. That's bad news for claimants caught posting photos of their parasailing vacation -- or their rodeo ride on a bucking bronco.