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?
Senate Bill 1160 and Assembly Bill 1244, both of which became effective on January 1, 2017, added important new tools to combat workers’ compensation fraud in the State of California. These tools included a new automatic lien stay provision as well as a process for suspending (i.e. excluding) providers from the workers’ compensation system, and in some cases, consolidating and disposing of their liens.
Lien Stays During Criminal Prosecution
- Labor Code section 4615 places an automatic stay on liens filed by or on behalf of physicians and providers who are criminally charged with certain types of fraud. The automatic stay prevents those liens from being litigated or paid while the prosecution is pending. DIR publishes a list of physicians and providers whose liens are stayed pursuant to this statute.
- Criminally Charged Physicians and Providers Whose Liens are Stayed pursuant to Labor Code § 4615
To assist participants in the workers’ compensation system and the public, DIR tries to identify all liens filed by or on behalf of these physicians and providers and mark those liens as “stayed” in the Electronic Adjudication Management System (EAMS). However, EAMS may not reflect all liens that are subject to the automatic stay. If you have information about additional businesses that should be covered by the stay, please notify DIR’s Antifraud Unit.
Pursuant to Labor Code section 139.21, DIR suspends physicians, practitioners, and other providers from participating in the workers’ compensation system if they have been convicted of certain kinds of crimes, have been excluded from the Medicare system, or have lost their professional license. The Administrative Director of the Division of Workers Compensation issues a Notice of Suspension that becomes effective 30 days later unless appealed.
- Physicians, Practitioners and Providers Issued a Notice of Suspension
- Physicians, Practitioners or Providers Suspended Pursuant to Labor Code §139.21(a)(1)
Suspension from participating in the workers’ compensation system means that they may no longer provide or obtain payment for any treatment, evaluation, or other service related to a claim for workers’ compensation. A physician, practitioner, or provider who has been suspended due to conviction of a covered crime is also subject to having all pending lien claims consolidated and dismissed in a special lien proceeding, unless they can prove the liens did not arise from the conduct or activity that led to their suspension. For information about pending lien consolidations please visit the Special Adjudication Unit Calendar webpage.
Lien Dismissals by Operation of Law
Labor Code section 4903.05(c), as amended by SB 1160, requires lien claimants to file a declaration verifying the legitimacy of liens for medical treatment or medical-legal expenses. Claimants who had filed liens between January 1, 2013 and December 31, 2016, were required to file the declarations by July 1, 2017, to avoid having those liens dismissed.
Claimants failed to file the required declaration for approximately 292,000 liens, resulting in the automatic dismissal of those liens by operation of law.
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
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.
Combatting misclassification of employees as independent contractors
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.
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.
- See a list of the county district attorney offices awarded this grant funding to help them take on workers’ compensation insurance fraud cases
- RAND Report on Provider Fraud in California Workers' Compensation
- 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
Workers’ compensation fraud
- 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