The scenario that is usually associated with the phrase “workers’ compensation fraud” involves an unscrupulous employee who schemes to collect insurance money. He does this by fabricating an injury, falsely reporting that he cannot return to any work while taking employment on the side, or other deceptive methods. The most insidious and costly form of workers’ compensation fraud, however, is “premium fraud,” which occurs when an employer attempts to cut costs by reporting inaccurate employee records.
In 2009, the owners of a drywall company in Lafayette, Louisiana were arrested on such charges. The employers avoided paying full insurance premiums by reporting that they had nearly 300 fewer workers on their books than were actually employed. Cases such as this are strong indicators as to why insurance premiums become exponentially more expensive, particularly for employers who are honest about their employment records. Premium fraud is more large-scale and costly for insurance companies to handle than simple claimant fraud. Financially, it makes sense that premiums would rise to cover the monetary loss that premium fraud creates.
Reporting an inaccurate number of employees is not the only way that some employers attempt to save money. Workers who are engaged in physically demanding or hazardous activities are more expensive to insure. The employee who spends more time sitting in front of a computer than operating a forklift is less expensive. In some cases of premium fraud, an employer may report that his employees are occupied crunching numbers in the office, when in reality they are using pallet jacks and lifting boxes. Premium fraud can occur on a purely financial level as well, if an employer pays his workers under the table rather than keeping accurate books. In the latter situation, insurance premiums would be cheaper for the employer who neglects to account for his “invisible” workers, who may be paid in cash or compensated in other ways.
Employers in Louisiana who strive for lower premiums, and use fraudulent means to achieve this end, continue to drive up the cost of insurance premiums for everyone else. Premium fraud should be reported to the Office of Workers’ Compensation Fraud Division or the Attorney General’s Office, so an investigation can ensue. If you are an employee, be vigilant about your employer’s method of payment how your job is classified. Premium fraud is a financially crippling practice that needs to be monitored and eliminated, in order to keep insurance premiums lower and help individuals who are honest in their approach to employment records and claim reporting.