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?
As of Jan. 1, 2017, Labor Code section 4615 places an automatic stay on liens filed by or on behalf of 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. (See Senate Bill 1160)
Effective Jan. 1, 2017, DIR excludes medical providers convicted of fraud and others from participating in the workers’ compensation system. The Administrative Director of the Division of Workers’ Compensation issues a Notice of Suspension that becomes effective 30 days later unless appealed. (See Assembly Bill 1244)
- Physicians, Practitioners and Providers Issued a Notice of Suspension
- Physicians, Practitioners or Providers Suspended Pursuant to Labor Code §139.21(a)(1)
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