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[music] (Rick Plein: Enforcement Branch Chief California Department of Insurance) Did you know the Insurance Information Institute estimates that 10 cents out of each $1.00 paid in workers' compensation premiums is wasted on fraud. Unscrupulous medical providers and attorneys contribute to this waste. And in today's economy some employers evade insurance and taxes by paying workers in cash. This cash based payroll is known as the underground economy. In California it is estimated at $100 billion. This raises the price of goods and services you and I buy every day, and affects the ability of legitimate businesses to be competitive. As a result, legitimate lawfully operated companies are forced out of business. (Don Marshall - Chair Calif. Fraud Assessment Commission) Workers' compensation laws were designed to accomplish four goals: To provide medical care to injured workers. To sustain worker's income while injured. To provide benefits to families of workers who died as a result of on-the-job accidents or injuries. And, to protect employers from costly and unpredictable lawsuits by injured workers. As a general rule under this system, if an employer has workers' comp coverage, filing a claim is the injured worker's only recourse. If the employer doesn't have coverage then the worker can sue the employer directly. While most people involved in workers' compensation claims are trustworthy, some are dishonest. The California Insurance Code and penal code state: that any person making a false or fraudulent statement for the purpose of obtaining or denying workers' compensation benefits, can be convicted of a felony. Those who commit fraud, unfairly penalize all those who do not. California has mandated that the Department of Insurance and local district attorneys must actively: detect, investigate, and when necessary, prosecute workers' compensation fraud. (woman's voice) There are three main types of workers' compensation fraud: Employer fraud, where business owners lower or eliminate their insurance premiums by intentionally under-reporting their payroll; or by dissuading workers from making a claim. Employee fraud, in which workers knowingly deceived their employers about the extent, circumstances of, or even existence of a workplace injury in order to receive a benefit they would not otherwise be entitled to. And provider fraud, in which professionals such as medical providers, attorneys, and others either knowingly provide unnecessary treatments; knowingly bill for services they did not provide; or conspire with employers to not report injuries. All types of fraud entail considerable risks, and often very undesirable consequences. (Felicia Delores - Detective Sergeant California Department of Insurance) Those who commit workers' compensation fraud make it difficult for those who truly have injuries to obtain benefits, and receive fair treatment in the workers' compensation system. (John Mifsud - Dpty District Attorney Alameda County) If you are thinking about committing workers' compensation fraud, just remember the person next to you, may be the one that turns you in. (Rick Plein) At the California Department of Insurance we work with your local District Attorney to investigate and prosecute workers' compensation fraud. Please watch the information presented here for important tips about provider, applicant, and employer fraud, as well as what you can do if you suspect fraud. (music) (woman's voice) A recent review by the California Department of Industrial Relations revealed that nearly a third of employers lacked legally required workers' compensation coverage to pay the medical bills of employees hurt on the job. [Reenactment] (Investigator Diaz) Sir, how are you doing? I'm Investigator Diaz with the California Department of Insurance Fraud Division I'm here checking local businesses for proof of workers' comp insurance. Do you have yours with you? (Businessman) You know, I just have a couple guys and I didn't realize that-uh that was mandatory. (Inv. Diaz) I'm gonna give you warning today. Under Labor Code Section 3700.5 you are required to have workers' compensation insurance. If not you can spend some time in jail and pay fines over $10,000. Understand that? (Businessman) Yes sir. (Inv. Diaz) It's imperative you get that workers' compensation insurance. Thank you for the warning officer, and I will definitely take care of that immediately. (Inv. Diaz) Thank You. (Businessman) Thank You. (Erin Loback Alameda County Deputy DA) Employers are required to provide workers' compensation coverage for their employees. Failure to do so is a misdemeanor and violators face up to a year in jail. Additionally, a first-time offense carries with it a minimum $10,000 fine, or up to double the cost of the premiums the employer should have been paying during the uninsured period A second offense, carries a minimum $50,000 fine, or up to triple the cost of those unpaid premiums. (Reenactment 2) (Archie) So then I'm like, if i sub everything out I got no business left (Bill) Yeah. (Archie) Thanks Mikey, So, how is business with you Bill. (Bill) Yeah, it really sucks. I haven't won a bid in a month, and to top it all off my quarterly workers' comp bills is coming due. I can't believe how much that stuff's gone up in the last couple years. I going to have to start letting some guys go. (Archie) You know, mine's gone way up too. Why is it so freaking expensive? (Bill) You're asking a question of the day Archie. (Roy) Hi, Mikey. I'll have the usual. (Archie) Hey Roy, how are you doing? (Roy) Every day's a holiday, don't you know? Hey Bill, did he tell you how much I won off him on Sunday's game? (Archie) I still can't believe how the #### I could loose three in a row. (Roy) Bill you've barely said a word. What's up? (Bill) How do you do it Roy? Before you came in here, I was telling him, with the state of the construction industry in this town, and with the workers' comp premiums being so high, I'm going to have to start letting some people go. And, you come in hear without a care in the world. How in the heck do you do it? (Roy) You just have to learn how to play that whole insurance game man. I've been able to save a lot of money. (Bill) By knowing which carrier to use. Who- Which one do you use? (Roy) It's not the company, it's how you play it. (Bill) I like the sound of this, tell me more. (Roy) Well, as you guys know, the more hazardous the job, the higher the premium. The insurance only know what you put down on paper. So, instead of telling them that you have three roofers, and three carpenters you tell them you've got one carpenter, one roofer, and four laborers. (Archie) It's beautiful in its simplicity. (Bill) It doesn't sound right to me. (Roy) We pay a lot of money to insurance companies, they can afford to lose a buck or 2 here and there, so we can save a little. (Bill) Yeah, but what about the risk of getting busted? (Archie) Yeah, but you've got to weigh the risk against the reward. What do you figure that you're saving Roy? (Roy) Thousands, how do you think the wife and I paid for this trip to Fiji. See you in a couple weeks. My friends. (Archie) Have a good time Roy. No, doubt about it That Roy is a winner. (Bill) A winner! This stinks! It is totally unfair. (Archie) What, did you forget your Pepcid or something? (Bill) That's why our rates are so high, People like him. He submits the low bid because he cheats on his policy. No wonder I can't land a contract. (Archie) It's a good point. (Bill) There must be somebody we can call. (Archie) He didn't leave enough for the tip. Again. (Scott Zidbeck Asstistant DA Orange County]) Workers compensation fraud can occur when an employer intentionally miss classifies employees from a more expensive insurance category, to a less expensive insurance category in other words, for example, a roofing company could have 20 roofers and 10 office employees. And, they could intentionally misrepresented to their insurance company that they really have 10 roofers and 20 office employees. Thereby, they lower their insurance premium costs and gain an unfair business advantage over their competitors. (Roy) Nancy, did my airline tickets come in yet? (Nancy) Hm hmm. They are right here. (Roy) Oh thank you. Also, did you change the job categories for those guys on the workers' comp reporting forms, like I asked you too? (Nancy) They are ready for your signature. (Roy) Good. You know with all of the vacation, and sick time, and the hirings, and the firings, we have too many employees listed here. (Nancy) But I filled it out ing to the instructions. (Roy) You know the people who write these instructions they don't know what it's like out here in the real world. So, let's reduce it by one employee in each category, and then that will reflect the payroll appropriately, and then I'll sign it. (Nancy) But, you know that's not right. (Roy) And you know who the boss is. Just do it! (Scott Zidbeck) We also see employers committing workers' compensation fraud by either: under-reporting the number of employees they actually have; or, by declaring some of those employees to be independent contractors, when they're actually employees of the corporation. In this way the employer avoids the insurance costs, and gains and unfair business advantage. Workers compensation insurance premiums are partially determined by the amount of wages paid by an employer to the employees. Employers will sometimes commit insurance fraud by paying their employees in cash, and then under-reporting the amount of wages to the insurance carrier. This causes the insurance carrier to take on greater risk than what they're being compensated for. This is very much like if you have a auto insurance policy and you report to the carrier that you're driving 10,000 miles a year, when in fact you really driving 50,000 miles a year. (Nancy) Roy! Jake Williams fell off the ladder on the Madera job. He's on the phone, Should I send him to the Med clinic? (Roy) Naw, naw. I'll talk to him. Jake, are you okay? What happened? Now looky here, I want to go see Dr. Bentley. Yeah, He is a buddy of mine. Don't worry I'll take care of all your medical bills. If you need any med's or whatever, while I'm on vacation, you just bring in your receipts. Nancy will pay you back right away out of petty cash. I know Jake, the main thing is you're taken care of. Besides, I can write most of this stuff off as a business expense. Okay, take care. And, I'll see you when I get back. 0h, if you need any time off, we'll work it out. Hang on Jake. Nancy! I want you to give Jake the Chiro's address and phone number. Tell him to go out there right away. Oh and if he brings you any receipts in while I'm gone, while I'm gone, make sure you pay him out of petty-cash. (Nancy) So we're not going to send the workers comp report on this one either? (Roy) No, don't worry about it. (Nancy) But, you know you are suppose to report it. (Roy) Nancy we have been doing it this way for years. Don't start flipping out on me now. No buts about it. I'm not gonna allow my rates to go up. The wife is talking about going to the Mediterranean next year. Dr. Bentley please. Yes, it's Roy Miller. Hi Eric. Yeah, I've got another one for you. Jake Williams. He fell off a ladder. Okay thanks, just send the bill right- directly over to me, and I'll pay as soon as I get back from vacation. Oh, and one more thing doc. He's one of my best workers, I need him back as soon as I can. Okay? Okay. And, I'll pick up the green fees next time we play. Thanks (Office background sounds) (CDI Operator on phone) Department of Insurance, consumer hotline. (Nancy) Yes, is this number to call to report someone cheating on their workers comp insurance. (CDI Operator) Yes it is. (Vickie Hightower Chief DDA) When an employee's been injured on the job and the injury requires more than just first aid treatment; or the employee is going to be out of work for more than a day. the employer is required to report that claim to their insurance company. Failure to do so is a crime, and in addition creates an unfair business advantage. An employer's insurance premiums, are based in part on the number of claims that are made -- similar to in auto insurance. Your auto insurance premiums are based on your driving record. (Inv. Price) Roy Miller? (Roy) Yes. Can I help you guys? [Invst. Price] Yes my name is Investigator Price, I'm with the District Attorney's office. This is Investigator Williams, with State Department of Insurance, and we have a warrant for your arrest for insurance fraud. (Roy) You're kidding. (Invst. Wlliams) Stand-up please, Stand-up. Put your hands behind your back. (Roy) What's going on man? Do we have to do this at my work? (female voice) It is unlawful to make or cause to be made, any knowingly false or fraudulent statement, whether made orally or in writing of any fact material to the determination of the premium, rate, or cost of any policy of workers compensation insurance, for the purpose of reducing the premium rate, or cost of the insurance. (John Mifsud Deputy District Attorney - Alameda County) The penalty for employers who commit premium fraud is stiff. They face jail time of up to 5 years in state prison, and fines of up to $50,000, or double the unpaid premium. Additionally, they'll be ordered to pay restitution, for the amount that unpaid premium. Often times, court's order the seizure of assets owned by that individual; including homes, bank accounts, cars, etcetera. [In audible background conversation] (Mikey) Hey Roy, long-time no see. Where have you been? (Roy) Well now that's a story. (Mikey) I got about eight hours, go ahead. (Roy) Well I got caught changing some numbers, and I did some time. As a result, I lost my business. Now I'm having a really hard time finding a job. (Mikey) Why is that? (Roy) Seems like not many people want to give a guy a job with a felony on his record Nobody trusts you anymore. (Mikey) What a drag. (Roy) What's the tab, Mikey?. (Mikey) Let me check. Eleven bucks. (Roy) You want to know the hardest part, even worse than the TV and the newspaper stories? Fraudster arrested. The hardest part was fessing-up to my kids. Take it easy Mikey (Mikey) See you Roy. No, Tip. Now there goes a loser. (ADA Erin Loback) Liability extends to any person who aids or assists an employer in committing insurance fraud; where that person knows the employer is intending to commit fraud and does any actions that help further that fraud. (ADA Scott Zidbeck) Therefore, an office worker or an employee who with knowledge of an employers criminal actions, assist in those crimes, can be held criminally liable. (Rick Plein) If you have information about, or think you might be a victim of employer fraud, we strongly urge you to contact your local District Attorney, or the California Department of Insurance. (female voice) This truck driver used crutches at his hearing and deposition saying his knee was injured so badly he generally used the crutches all the time. But when arriving at the airport to fly to the hearing, the crutches seemed more like luggage that needed carrying. He also said he was never able to play sports with his kids. In addition, he was observed many times walking, riding a motorcycle, and going on several errands - never once using his crutches. This carpenter claimed in his deposition that he had severe back pain; hadn't worked at all since his injury; and couldn't stand more than 20 minutes without using a cane. But, just 3 days prior to his deposition, here he was working on this roof, for over an hour. Somehow managing without his cane. After an alleged lower back injury that put him on total-temporary disability this security guard arrived for his deposition moving gingerly and using a cane; claiming he was in a lot of pain, and had a hard time moving around. Yet, in the minutes and hours following his deposition, seemingly had no trouble at all demonstrating a complete range of pain free motion. This dock worker claimed he was injured at his trucking company job, and couldn't work because bending his back caused considerable pain. He said he mainly sat around his house all day. Then a coworker saw him on the news, as part of this story on boating safety. The day before, and 5 days after swearing he didn't take part in boating activities he was videotaped jet skiing. (CDI DSgt. Dolores) Employee or applicant fraud occurs when an employee knowingly and intentionally lies to obtain a benefit that they would not otherwise be entitled to. Misrepresentations regarding the claim can surround: The how, when, where the injury occurred. For example: the employee may have reported to the insurance carrier that the injury happened during the regular course of duties. However come to find out, the injury actually happened on their day off while at home or engaged in a recreational activity. The employee may also lie in regards to the extent or duration of the injury. Often-times this is done to prolong, the amount of time they are off work, or the disability benefits coming to them. Employees may also lie as to the existence of prior injuries which may be material in determining future benefits during the course of their claim; or they may lie in regards to additional income that they are receiving during the time that hey are receiving benefits. Therefore, not allowing the insurance company to make an accurate assessment on benefits owed based on total income received, as well as potential activities that they might be engaged in during other employment. Penalties for applicant fraud can be up to 5 years in state prison and fines of up to $150,000 or double the fraud whichever is greater. Additionally, the court can order that the individual pay restitution, the amount of the actual fraud for benefits un-rightfully obtained and also investigative costs. Investigate costs, oftentimes can be 4 or 5 times the amount of the actual fraud. (Voice Over) The consequences for the truck driver who said he used crutches all the time; were 6 months in jail, 5 years probation, and paying restitution of $42,000. The carpenter who said he wasn't able to work at all, was sentenced to time served in jail, 5 years probation, and over $10,000 in restitution. The security guard who said he needed a cane to walk received a sentence of 5 years probation 600 hours of community service, and restitution of almost $54,000. The dock worker with a bad back who love jet-skiing, was sentenced to 90 days in jail, and restitution of almost $23,000. (Don Marshall) As you can see by these examples fraudulent employees can come in all shapes and sizes. There are, however, some red flags that can indicate possible applicant fraud. The first category includes circumstances regarding employees: They are disgruntled, soon to retire, or facing imminent firing, or layoff. They are involved in seasonal work that is about to end. They are nomadic and have a history of short-term employment. They are new on the job. They have a history of reporting subjective injuries. They protest about returning to work, and never seem to improve. The first notification of injury or claim, is made after the employee is terminated or laid-off. A tip in the case, that the totally disabled worker is currently employed elsewhere; Or, after injury, the employee is never home; or the spouse, or relative answering the phone states, the employee just stepped out. The second category includes circumstances regarding the accident or the injury: The accident occurs late Friday afternoon, or shortly after the employee reports to work on Monday. The accident is not witnessed, or witnesses versions of the accident conflict with the applicant's version, or with one another's. Fellow workers hear rumors circulating that the accident was not legitimate. The accident occurs just prior to a disciplinary action, or near the end of a probationary period. Details of the accident are vague or contradictory, have inconsistencies, or are not credible. Or, the incident is not promptly reported by the employee, to their supervisor. Keep in mind that these are not conclusive indicators of fraudulent behavior; just some things to keep an eye out for. (Rick Plein) If you have information about, or think you might be the victim of applicant fraud, we strongly urge you to contact your local District Attorney, or the California Department of Insurance (music) (Vicki Hightower) Provider fraud is a huge cost driver, to the workers' compensation system, and cost the industry millions of dollars. Examples of provider fraud include: Medical providers billing for services that were never rendered; Billing for excessive or unnecessary treatments; Conspiring with other providers for illegal kickbacks or illegal referral schemes; Operating outside the scope of one's license; and conspiring with employers to deny employees benefits that they are entitled to. (voice over) Dishonest medical providers will sometimes coach workers on how to act, and how to answer questions during a medical exam, or legal deposition in order to get the largest settlement possible. (doctor) And he's going to ask you to rotate this way; and rotate this way. Now when you rotate this way, to your left, you feel the pain pulling in here. You fee the pulling. Lay flat on your back. Of course your not going to do it that easy. Dan, you move like that... (laughter) I-I-I- I'm just going through the motions on the rest of this exam. Good. Help yourself down. Good. I was going to say keep your legs together, raise them both up. Okay, and then let it down. You can't do anymore. Why? You feel the pulling. You're uncomfortable in your upper back. Chiropractors like to fool people. Believe me they like to fool people. They're like, its a game and we want to see who's B.S.-ing and who's telling the truth. But the thing is, a lot of these guys are so stupid, that they don't tell their patients what to do. Alright, so I'm trying to tell you the things where I know how they're going to try to trick you up. (Dan Reese) Okay. (doctor) He may say to you, okay Mr. Reese, turn over. Don't you be bopping over like a worn tooth brush. I love when a person tells me, they can't move like this, which means they basically can't do a sit-up. And then, I say to them "okay you're finished come up. and see them get up like this. You'll get the Oscar here, so don't worry. (Felicia Dolores) In some cases workers' compensation claims involve individuals who will recruit workers to submit claims. These individuals are called cappers. Cappers are involved with an attorney and/or medical provider, and usually receive a kickback in the form of a fee or predetermined percentage for each injured employee they bring to the attorney and medical provider. This practice is illegal. (capper) Hi. (Guy) Hi. (capper) You can come over and talk to me if you want. What line of work are you in? (Guy) Uh, Construction (capper) And, are you experiencing any pain currently? (Guy) Um Sometimes my shoulder hurts, a little bit. (Capper) Okay. Have you filed a workers' comp. claim for that? [Guy] No, I don't even know if it's work-related. (capper) Well, it really doesn't matter. Actually, if I can just get you to sign these papers right here, I can get you a free attorney, a free doctor, time off from work, and money. [Guy] Really? (capper) Really! [Guy] Just sign the papers. (Capper) Mhmm simple as that [Guy] Alright! Sounds good. (capper) Alright, here you go! (Sgt. Shawn Conner) Worker's Compensation Attorneys are paid based on the amount of the settlement for the client. Dishonest attorneys, will sometimes commit fraud by referring their patients to medical providers who will add uninjured body parts to the claim. This results in an attorney being paid more for the settlement. (DDA Loback) It is illegal for various providers such as a chiropractor, medical doctor, an attorney, to refer injured workers to each other in exchange for a kickback. It's also illegal for those various providers to share a common fee. (Chief DDA Hightower) Some people may not realize that you could be held equally responsible for provide a fraud if you assist in perpetrating the fraud. For instance the office worker in a medical office, who knowingly bills for services that are not rendered, is assisting in the perpetration of the fraud, and can be held equally responsible as the provider themselves. [Video representation] (Dr. Write) Tom, how are you? I'm Dr. Write. (Tom) Nice to meet you. [Dr. Write] Nice to meet you, how are you doing today? [Tom] I'm doing okay. [Dr. Write] I see here on the chart that you were referred to us by Rachel, down at and the Swap meet. [Tom] Yes, [Dr. Write] Okay and, do you have a lawyer? [Tom] I don't have one. [Dr. Write] You don't have a lawyer? Okay, can refer you a very good lawyer. That's no problem at all. [Tom] okay. [Dr. Write] She had you fill out the paperwork Rachel a the swap meet? [Tom] Yes [Dr. Write] Okay, good. So you have shoulder... shoulder pains huh? You have, your getting a lot of pain in your shoulder? [Tom] Yeah [Dr Write] Yeah, feeling a little tingling in your in your fingers? Shooting down your leg? Lower, back lower back? Lower back problems as well? [Tom] Sure. [Dr. Write] So we're going to do some nerve testing okay, and you're going tohave an MRI. Alright, and a probably having some trouble sleeping because of all of this pain, so we're going to go into a sleep study as well okay? that will be a... [Tom ] All of this sounds kinda pricey. [Dr. Write] Don't worry about that, It will be taken care of. There's no problem with that. [Tom] Okay. [Dr. Write] And you and you'll see a doctor in about a week. Right now, I have some medication for you. You rub this on your shoulder your back or you know your leg, wherever hurts. as much as you much you need to [Tom] Okay. [Dr. Write] Don't worry about that cause workers comp...No workers comp will take care of all that. [Tom] Gotcha. [Dr.Write] You'll be alright with that. But this way you can get started right away. [Don Marshall ] As with any crime there are no hard and fast rules about who is perpetrating provider fraud. There are however some red flags, that can indicate possible provider fraud. In the area patient recruiting look for: The attorney representative went to the employee's home and had the employee sign blank claim documents. The same provider and attorney being repeatedly associated with questionable claims. Various reports by a doctor on different patients, read either identically, or similarly; or the doctor's report never identifies the patient by gender; or gets the gender wrong. The next category of indicators: is the injury reported, or the treatment provided? The treatment is inconsistent with the diagnosis, or with the injuries originally alleged by the patient. The treatment as reported by the patient is different from the doctor statements in the medical report. The worker is directed to a separate treatment facility in which the referring doctor has a financial interest, especially if this is not disclosed in advance. Or, diagnostic tests are performed by vendor not in close proximity to the doctor's office, or patient's home. Our last category of indicators is regarding the billing for the treatment. Billings a received for unnecessary or not rendered services. The worker reports seeing a doctor for a very brief period of time, however reports and billing indicate a lengthy visit. Or, the workers description of treatment indicates non-medical personnel rendering medical treatment. Keep in mind that these are not conclusive indicators of fraudulent behavior. 'Just some things to be on the lookout for. [Dr. Write] Tom how are you. [Tom] Good how are you doing. [Dr. Write] Good to see you again [Tom] You too [Dr. White] Okay, I see by your chart here that the shockwave therapy was successful. [Tom] I haven't had time to actually go yet. [Dr. White] That's okay don't worry about it, I've got some more medication or you. And, I want you to see the doctor to give you a prescription for it okay? [Tom] I haven't used up the other medicine you gave me. [Dr. White] Don't worry take these anyway. [Tom] Okay. [Dr. White] Alright, good to see you. [Tom] You too. [Sgt Conner] A provider convicted of insurance fraud is convicted of a felony; subject to five years in prison; fines of $50,000, or double the amount of the fraud whichever is greater; responsibility to pay restitution on all benefits illegally obtained; loss of license; as well as seizure assets, including bank accounts, residences and vehicles. [Officer] That's Him [Officer] Dr. Write, how are you doing? Police officers, got a warrant for your arrest. [Dr. Write] What is this about? [Officer] Go ahead and turn around for me. [Dr. Write] What is this about? [Officer] Put your hands behind your back. We'll explain everything to you in a minute. [Dr. Write] Right her in front of my work. You guys have to do this right here? Ah jeez, I should have known. [Officer] Don't move [Dr. Write] Ahh man.. You've got to be kidding me. [Officer] go back towards the car. [Rick Plein] If you suspect provider fraud or want more information please contact your local District Attorney, or the California Department of Insurance [Closing Credits ]