Nevadans have been convinced over the years that there are many workers who try to take advantage of the system, either by filing false claims or by prolonging their time off work, or by collecting undeserved permanent partial disability awards. What the public in Nevada rarely hears or reads about however, are the employers caught committing workers’ compensation fraud, or the insurers who intentionally fail to pay legitimate claims. This type of fraud may be far more prevalent than fraud by employees.
In October, 2011, a national, non-profit group of mostly claimants’ attorneys, the Workers Injury Law and Advocacy Group (WILG), published a paper entitled "Employer and Insurer Fraud: Boosting Bottom Line profits at the Expense of Workers and Society". The premise of the report is that workers’ comp insurers and their administrators have successfully misinformed the public and elected lawmakers that employee fraud costs the insurance industry more money than employer or insurer fraud in uncollected taxes and uncollected premiums. WILG states that the insurance industry writes or funds most of the reports on workers’ comp fraud, and therefore wants the public to believe that injured worker fraud is rampant. Insurers are able to charge higher premiums and advocate for legislative changes to reduce compensation benefits to injured workers if the public is convinced that injured workers are defrauding the system.
WILG states that the actual statistics show that both employer and insurer fraud are a far greater problem, involving much larger sums of money, than fraud by injured workers . The statistics on the number of employers who are caught misclassifying employees to pay a lower premium or to avoid paying a premium at all are usually based on employer audits conducted by state agencies that oversee each state’s workers’ compensation system. Less than 2% of Nevada employers were audited in Nevada in 2010 according the WILG report.
In an effort to obtain unbiased information on whether employer or employee fraud is the greater problem in Nevada, I contacted Jennifer Lopez, Public Information Officer, of the Nevada Attorney General’s Office. I asked Ms. Lopez for figures on injured workers who were prosecuted for fraud, and statistics on employers who were prosecuted for under-reporting premiums or misclassifying employees. The Nevada Attorney General’s Office is statutorily responsible for prosecuting both injured worker fraud and employer fraud under the Nevada Industrial Insurance Act.
Ms. Lopez explained that in order to prove injured worker fraud, it is more difficult for a prosecutor to prove beyond a reasonable doubt that the employee criminally intended to cheat the insurer or self-insured employer of undeserved benefits. For fiscal year 2011 (7/1/10 through 6/30/11), only 19 of the 93 cases that were investigated were prosecuted. In contrast, during fiscal year 2011, the Nevada Attorney General’s Office opened 246 employer cases for investigation, and prosecuted 142 of those employers.
Ms. Lopez noted that employer cases are usually misdemeanor offenses that involve less than $250 pertaining to employee misclassification or under-reporting of payroll. She emphasized that it is easier to prove employer fraud using the national insurance database information. Ms. Lopez did not elaborate on how many employer cases involved misdemeanors versus felonies.
Given the different standards of proof applicable to prosecuting employee fraud versus employer fraud, I’m not reaching any conclusions as to which type of fraud is the greater problem in Nevada based only on statistics from the Nevada A. G.’s Office on the the number of each cases prosecuted.
As I was gathering this information from the Nevada AG’s Office and looking at various reports from both insurance industry groups and injured worker advocacy groups, I read a recent Fox News 5 article about the Nevada AG’s prosecution of a Maryland woman for workers’ compensation fraud in Nevada. Nevada Attorney General Catherine Cortez Masto was quoted as saying, "Workers’ compensation fraud is insidious. It quietly drives up the cost of coverage, a bill that nearly every employer in every sector will have to foot, " said Attorney General Masto. "My office will continue to aggressively prosecute these cases."
I don’t think the statistics from Attorney General Masto’s office support her comment that workers’ compensation fraud in Nevada, at least by injured workers, is insidious. Over 58,000 claims were filed in fiscal year 2009 according to Nevada’s DIR Research and Analysis Supervisor, and the U.S. Bureau of Labor’s website shows that 42,300 Nevada claims were filed in fiscal year 2010. If less than 100 cases of possible fraud by employees are referred to the Nevada Attorney General’s Office each year, and less than 20% of those cases are prosecuted, I don’t know what information Ms. Masto was relying upon.
It makes for more interesting reading in the media to hear about someone getting caught red-handed on surveillance video faking an injury than it is to read about an employer not paying premiums on undocumented workers, or employers claiming that workers are independent contractors when they are really employees. I think it is unfortunate that we don’t have a true picture of the extent to which employee or employer fraud costs all Nevadans. Exaggerating what information we do have doesn’t help.