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Workers’ compensation exists to ensure that any employee who suffers injuries at work will not have to shoulder the costs of medical treatment or lose expected income from time spent out of work. When employees file for workers’ compensation, their insurance company (typically the employer’s insurance group that provides medical coverage to the employer’s employees) will refer injured employees to a specific group of doctors and facilities.
Predatory medical providers often sway individuals by using aggressive marketing tactics to catch employees’ attention and subject them to unnecessary or ineffective treatments, prescribe costly medications, and essentially defraud the health care system for personal gain.
In California, every employer must carry workers’ compensation insurance – even if it has only one employee. While workers’ compensation exists for the benefit of injured employees, some individuals use workers’ compensation in fraud schemes. California’s new workers’ compensation laws aim to reduce fraud and improve injured employees’ access to necessary treatments.
Due to easily exploitable loopholes, some individuals used workers’ compensation to defraud insurance agencies. Such a provider would charge a patient with exorbitant treatment costs and simply send the bill along to the insurance companies. Since the employees are covered by workers’ compensation, they typically never see their bills. Individuals intent on committing fraud would essentially fabricate treatment records and bill for medical care that the employee never received, and in most cases, never needed.
Most of the people found guilty of these scams were medical doctors who had been banned from billing Medicare for malfeasance. These individuals would file a lien after an insurer refused to pay. Eventually, these liens would result in astronomical workers’ compensation insurance rates, and many businesses collapsed because of the costs of this kind of fraud.
This past August, the Department of Industrial Relations announced that more than $600 million in liens were filed between 2011 and 2015, by parties who had either been criminally indicted or convicted. The new laws require verification on every lien to ensure its legitimacy. Additionally, only the holder can file a lien, and any liens that are owned by anyone charged or indicted with criminal activity must be held until all criminal proceedings conclude.
AB 1244 requires the Division of Workers’ Compensation Administrative Director to restrict who may file these liens and prevent medical providers with criminal records from providing treatment to injured workers. These fraudulent charges are costly for the workers’ compensation system, and the new aim to reduce the costs of fraudulent activity, which in turn means better care for legitimate claims. Lackluster oversight has been cited as a leading cause of workers’ compensation fraud, enabling criminals to collect millions through illegitimate liens. The new laws entail a much stricter process for filing liens, such as a new requirement that every lien must have a declaration that affirms eligibility to be considered.
The fraudulent activity that has plagued the workers’ compensation insurance landscape for years has bogged down resources that could have been used to handle legitimate claims. California lawmakers hope that the new lien restrictions prevent fraudulent medical providers from exploiting injured workers for personal gain.
Additionally, these new laws also prohibit any practitioners from handling any workers’ compensation cases if they have been indicted or convicted of fraud in the past, preventing criminals from re-entering the system and exploiting new patients.
Essentially, these new laws allow the workers’ compensation system to function as intended and help employers stay in compliance with state labor laws and workers’ compensation requirements, without incurring undue expense due to fraud. These new measures should alleviate pressure on the health care system, the judicial system, and greatly reduce the administrative costs associated with handling fraudulent liens.