Handling suspicious disability claims
April 20, 2009 by Bill MeltzerPosted in: Disability, In this week's e-newsletter, Latest News & Views
Over the course of your career as a benefits manager, odds are that you’ll eventually run into an employee with a paid disability claim that doesn’t seem to be on the up and up.
On a nationwide basis, fraudulent long-term disability claims are a $5.5 billion drain on employers. The cost includes claim payouts, subsequent premium increases, lost productivity and staffing problems. The good news: There are legal ways to fight back.
Common red flags
None of the following factors automatically justify a full-scale investigation. But they add up. The more factors in place, the greater the likelihood of a false disability claim:
- The worker is a new hire and has a history of short-term employment
- He or she was recently demoted or clashed with a supervisor
- The employee is unusually aggressive about the claim (e.g., hires a lawyer as a first step) and/or
- The story about the cause or severity of the injury keeps changing.
According to experts, either of the first two factors in combination with either one or both of the latter two could provide cause to probe a little deeper into the claim.
Go through your carrier
What should you do if think you smell a rat? Alert your plan carrier about
your suspicions and let the insurer’s investigation department handle it.
The biggest mistake that employers make in these circumstances is to simply take matters into their own hands. Why? Because even if you uncover evidence of fraud, the information might not hold up in court.
April 23rd, 2009 at 3:32 pm
We have had cases of disability claims that have three of the red flags. We have turned them over to our workers’ comp insurance company. The answer that we have gotten most often from them is that it takes a lot to prove the employee isn’t really as injured as he claims. They have told us that it costs them less to just pay the claim than it does to fight it. That’s fine for them. However, it makes our MOD rate go up and that increases our premiums. As an employer, we are left with no options.
April 29th, 2009 at 1:53 pm
Same experience as Lisa’s. Even provided evidence that they were “hamming” up the injury to the carrier and they still chose to do nothing about it! Meanwhile it’s the company that has to pay higher premiums becuase it’s easier for the carrier to pay out than fight back.
April 30th, 2009 at 10:12 am
At a former employer, I had a similar case as Lisa, but with all of the “flags. We even had a relative of the employee in question ( a cousin), who was this employee’s supervisor, who informed us at the time this employee filed his worker comp/disability claim due to an elevator he was riding in “jumped” up before proceeding down, had filed a fraudulent claim with a prior employer (the former employer had not been disclosed on his application for employment). We contacted the carrier because we had received information from 2 seperate/independant sources that he was at the track “betting”. The carrier gave us the impression that they would investigate, and indeed sent a fraud investigator. We were informed that the employee who claimed (and had a doctor certify) that he was unable to work, “carry a bag of groceries”, or even jog around the block due to his “on-the-job” injuries/disability was photographed and videotaped not only carrying multiple bags of groceries from the market/grocery store, but also jogging/running around the neighborhood he was living at the time. The W/C Carrier still not only paid out the claim to this individual, but also refused to do anything further (except raise our “MOD” and rate) regarding to either recoup their money already paid out or go after this former “employee” for an obviously fraudluent claim.
April 30th, 2009 at 4:10 pm
We had the same situation happen at our location a few years ago. The carrier did the investigation, interviewed the whole company several times, the investigator personally felt the employee was not telling the truth either and the carrier still paid out to the employee. Not only that but the investigator told us that he knew the doctor the employee was going to had many workers comp claim patients that he was investigating, all with the same symptoms. It was horrible!
May 1st, 2009 at 9:29 am
My experience has been a little bit different. I am the HR Manager/WC administrator for my company that is in the temp staffing industry. Red flags are a very big concern & I seem them on a steady basis from our temp employees who are injured on the job, not uncommon, but even more so during rough economic times such as what we are currently experiencing. On many occasions I have alerted the adjuster at our WC carrier regarding the concerns & have had pretty good outcomes as far as helping to solidify the red flagged concerns. I have come to believe that my relationship with the adjuster does a world of difference in getting this taken care of (unfortunately). Surveillance is not cheap by any means, so if there is true evidence, this is a pretty good way to go & is handled completely by that of the WC carrier (at a cost to the company of course). We have been able to prove illegitimate claims and win. The only instance where any of the managers of the company get involved in is documenting suspicions and even taking pictures of the supposed injured employee. These are helpful to the carrier when trying to prove a fraudulent claim.
May 1st, 2009 at 9:43 am
Alice- Sometimes carriers pay out to employees as a “settlement” just to get them to “go away” if you will. It is usually a lot more costly to have an attorney deal with the situation and go through litigation and depositions than it is to throw the employee a small amount of money. That is the very unfortunate part of things.
May 16th, 2009 at 9:45 am
We also have what we believe to be are false WC claims, but on top of that we have another issue. Our employees can collect WC payments and disability payments from flexible benefit plans (AFLAC, First Unum, etc) that they are allowed to sign up for. They are making sometimes double salaries than when they were working. The providers do not seem interested in pursuing the employees for fraud-as long as they keep selling the policies, it balances out. Approximately 25% of our entry-level staff are out due to disability issues & I would say that at least half are suspicious. We are unionized and civil service, so we can’t just terminate people. They are allowed to stay out of work for up to 1 year. You’d be surprised on how many are out 360 days, come back and within a week are “injured” again.
Any suggestions?
May 20th, 2009 at 3:49 pm
The key to reducing fraud in the disability claim world is to make sure that consistent and persistent claim management tactics are deployed during the adjudication process. In my experience fraudulent claims are typically identified after the initial liability decision is made. This makes it very difficult because you or someone on your behalf as already decided that the employee is disabled. If the appropriate practices and skillsets are used during the initial liability determination, fraudulent activity may become clear before liability is accepted.
May 21st, 2009 at 9:01 am
Nancy, it sounds like you have quite a problem on your hands. First, I am surprised that the disability carriers aren’t interested in this. Although I can’t tell without reading the contract language, most products these days protect against over insurance. That being said, I would suggest some type of claim analysis to see if you can determine through data what is going on. For example, are there certain locations that are problematic? Are there certain diagnosis or types of accidents that are more prevelant than others? Finally, I think your benefit plan needs to be revisited. I understand that this can be difficult in a unionized environment but that type of claim experience typically comes back to bite you with increased premiums down the road. Not to mention the reduced productivity of your workforce.