Kate McGinn XL Insurance — Environmental www.xlinsurance.com Exton, Pa.

THERE ARE MANY LEGITIMATE risks and a real need for workers' compensation (workers' comp) in the waste business. Yet fraud costs billions of dollars each year. Although the U.S. Chamber of Commerce, Washington, D.C., estimates that about 10 percent of workers' comp claims are fraudulent, some sources estimate 25 percent is more accurate.

For example, in August, investigators arrested three people from a chiropractic office and charged them with numerous felony charges. If convicted, each accused individual could face up to five years in prison and/or a fine of $50,000.

The arrest resulted from a three-year California Department of Insurance investigation into the chiropractic office that uncovered numerous alleged auto insurance and workers' comp insurance violations.

On one occasion, an undercover officer even brought in a Jack Russell terrier for chiropractic treatment. The dog was treated and the office billed an insurance company as if the officer received the treatment.

Waste companies are not immune to similar workers' comp violations. Workers' comp fraud can be committed by employees, employers, health care providers, attorneys and others.

Employees may try to extend workers' comp benefits unnecessarily or claim an injury happened on the job when, in fact, it didn't. In a recent case, a Charleston, W. Va., woman was sentenced to five years of supervised probation and ordered to pay full restitution to West Virginia's Workers' Compensation Commission — $113.97 each month until she reaches $6,838.04 — after pleading guilty to conducting a fraudulent scheme. The commission discovered the woman forged medical reports to lengthen her disability period.

Creative billing, such as in the case of treating a dog and billing an insurance company for it, is seen as a common abuse among medical providers.

Even employers can contribute to workers' comp fraud by under-reporting payroll, misclassifying workers or misleading insurance companies about their prior workers' comp claims.

Unfortunately, employers, employees, insurance carriers and consumers pay the cost of fraud in lost jobs and profit, lower wages and benefits, and higher costs for services and premiums. There are a number of proactive steps, however, that waste companies can take to help minimize their exposure to workers' comp fraud.

Safety is the obvious first step to minimize injuries that could develop into prolonged disability cases. Companies continually need to ensure that each worker has a safety manual and knows the written road and safety procedures of the company.

Sometimes, employers hesitate to tell employees how the workers' comp system works because they fear that employees will take advantage of it. But it is important to spread the word on workers' comp benefits and also on how fraudulent claims can cost everyone.

A workers' comp claim requires proactive attention, not reactive. An employer should remain involved in the entire claim process from injury to return to gainful employment. Managing the risks of workers' comp claims and potential fraud relies on recurrent communication — communicating the importance of safety on the job, demonstrating a “zero tolerance” for fraud and giving managers tools and procedures such as for recordkeeping.

Companies should offer employees temporary modified-duty whenever possible: Creating a return-to-work program that gets employees back to work, perhaps with reduced workloads or lighter duty, can be a compromise that boosts employee morale and reduces costs.

It's a dog eat dog world in business. There is no guarantee that everyone will play fair. But until Jack Russell Terriers start hauling garbage, it can't hurt to be on the lookout for potential fraud.