DIR Fraud Prevention
DIR works to identify and prevent fraud in the workers’ compensation system, as well as wage theft and other types of fraud that affect California’s workers and law-abiding employers.
Topics covered in this Fraud Prevention page include:
What is workers’ compensation insurance fraud?
Workers’ compensation insurance fraud system takes many forms, including the following:
- Medical providers
- bill for inappropriate or unnecessary treatment
- submit bills with improper medical codes
- bribe indigent individuals to be “injured worker” patients
- Insurers / claims administrators / third-party administrators (for self-insured employers)
- cause payments to be made to nonexistent claimants or medical providers
- refer patients or clients to medical providers or attorneys for compensation
- issue excessive payments to an attorney or medical provider in return for a kick-back
- backdate documents in an attempt to avoid penalties for delays in benefit payments or alter documents to support an unjustified denial of a claim
- misclassify workers to lower premium rates (high-risk jobs classified as low-risk)
- report inaccurate payroll to lower premium rates (either under-report payroll to imply fewer employees, or over-report payroll as if workers were experienced journeymen with lower risk of injury).
- misreport claims history (omit work injuries) to lower premium rates.
- Workers submit fraudulent claims for fabricated or exaggerated work-related injuries or illnesses.
How does DIR combat workers’ compensation fraud?
List of medical providers excluded from the workers’ compensation system – will be posted soon.
Senate Bill 1160. Effective Jan. 1, 2017, liens of medical providers indicted or criminally charged for an offense involving fraud against the WC system, medical billing fraud, insurance fraud, or fraud against the Medicare or Medi-Cal programs are automatically stayed, thereby preventing payment of the liens. This law also discourages the filing of new liens on behalf of these providers as those liens will also be stayed automatically.
The types of fraud leading to nonpayment of liens:
- Medical billing fraud
- Insurance fraud
- Fraud against the workers’ compensation system
- Fraud against Medicare or Medi-Cal programs
Assembly Bill 1244. Effective Jan. 1, 2017, DIR excludes certain medical providers from participating in the workers’ compensation system (i.e., DIR “suspends their participation”). Exclusion from the system will apply to the following medical providers:
- those with a conviction for felony or misdemeanor involving fraud or abuse in the Medi-Cal, Medicare or workers’ compensation systems or fraud or abuse of any patient (Labor Code section 139.21(a)(1)(A))*
- those already suspended from the Medicare or Medicaid programs due to fraud or abuse (Labor Code section139.21(B))
- those whose professional license, certificate, or approval has been surrendered or revoked (Labor Code section 139.21(C))
*For a complete list of those subject to exclusion from the workers’ compensation system, please refer to the text of AB 1244.
Pursuant to this law, when a medical provider is excluded from the workers’ compensation system, the DIR makes this information available to the public online. (Labor Code section 139.21(d))
How does DIR combat other forms of fraud (i.e., wage theft, payroll tax fraud, and misclassification of employees as independent contractors)?
- Combatting wage theft and the underground economy
- Combatting misclassification of employees as independent contractors
- Funding district attorney offices in efforts to combat fraud
The California Department of Insurance provides grant funding to local district attorneys to combat workers' compensation insurance fraud. Funding is providing through assessments from California insurers and self-insured employers. The Insurance Commissioner's Fraud Assessment Panel (on which the DIR holds one of five seats) reviews the grant applications and makes funding recommendations that the Insurance Commissioner either approves or amends.
The Labor Enforcement Task Force (LETF) under the direction of DIR, is a coalition of California state government agencies, including partners with the Contractors State License Board, the Employment Development Department, and other agencies. The LETF partners work together to combat many forms of fraud associated with the underground economy, in particular, wage theft, licensing and payroll tax fraud.
The Bureau of Field Enforcement (BOFE) investigates labor law violations affecting groups of employees. Violations BOFE investigates include misclassification of workers. Employees who feel they have been misclassified may also file an individual wage claim with their local Labor Commissioner’s Office.
- Workers’ compensation fraud
- Letter to Labor Secretary David M. Lanier from DIR Director Christine Baker on DIR’s anti-fraud efforts
- Report on DIR’s Anti-Fraud Efforts
- California Department of Insurance Fraud Division – general information
- California Department of Insurance: See list of workers’ compensation fraud convictions
- Workers' Compensation Insurance Rating Bureau of California (WCIRB): Look up insurers who wrote a California workers’ compensation insurance policy for a specific employer on a specific date within the last five years.
- Reporting other types of fraud
- Report Medi-Cal fraud and elder abuse
- Employment Development Department
- Report a scam or rip-off, including someone posing as a federal government agency
- Report a complaint against a professional or a business, including medical providers and general contractors
- Report Social Security Insurance fraud: call the Social Security Administration at 1-800-269-0271.
- DIR and Division of Workers’ Compensation Suspend Seven Providers for Fraud
Liens associated with the suspended providers total $59 million
- DIR Combats Workers’ Compensation Fraud, Stays 200,000 Liens with Claim Value of Over $1 Billion
Issues report on efforts to reduce medical provider and premium fraud