Issues of Fraud and the New York Workers Comp System

Issues of Fraud and the New York Workers Comp System

Workplace injury fraud is a big concern all over the US and agents in the New York area are constantly trying to find solutions for their clients to many of the local problems surrounding New York Workers Comp issues. Many business owners blame the high cost of workers compensation insurance on employee fraud, which is prevalent in our society and it increases the cost to everyone in the system.

One company in New York, Compensation Risk Managers (CRM), acted as a self-insurance administrator for 900 small businesses was sued for $400 million dollars, accused of workers compensation fraud. Apparently they were underestimating business liabilities by making it appear that companies were saving money when in fact they actually weren’t reserving enough money for claims by injured employees, so when the time came to file claims there were not enough funds to pay workers.

The state attempted to recover $600 million dollars

When they filed bankruptcy, the state went after CRM’s clients to recover underpayments of almost $600 million. To date, $48 million has been recovered, but unfortunately in the aftermath many of the client businesses were forced to shut down.

Payments of fraudulent claims are a drain on the system

The truth is that independent medical exams are among the most disputed components of the often-troubled New York Workers Comp system. Under the system, workers with confirmed injuries are entitled to benefits that include medical care and replacement of lost wages, which under ordinary circumstances are paid for by the employer’s insurer.

There is no question that some workers exaggerate injuries or get unnecessary care and the independent exams are one way to expose this. As a way to prevent acts of fraud from occurring, insurers and their agents are allowed to order an ostensibly neutral exam by a doctor of their choosing. This is done with regularity, accounting for more than 100,000 exams being conducted each year.

The sad truth is that it’s honest workers and employers that are harmed the most by fraudulent claims. The major drawback is of course that when the system is taken advantage of it can ultimately raise rates and affect workers comp benefits for those who are actually injured.