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?
How does DIR combat workers’ compensation fraud?
How does DIR combat other types of fraud?
Related resources
Report fraud

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
  • Employers
    • 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.

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How does DIR combat workers’ compensation fraud?

Effective Jan. 1, 2017, DIR prevents payment of the existing liens of medical providers who are criminally charged with certain types of fraud by placing a stay on the litigation of those liens. (See Senate Bill 1160)

View list of criminally charged providers (updated regularly)

Effective Jan. 1, 2017, DIR excludes medical providers convicted of fraud from participating in the workers’ compensation system.  (See Assembly Bill 1244)

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))

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How does DIR combat other forms of fraud (i.e., wage theft, payroll tax fraud, and misclassification of employees as independent contractors)?

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Related resources

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January 2017