VIAW.org SKEPTICAL ABOUT STATE INSURANCE INVESTIGATION FUND SPENDING
By TA, VIAW
Voters Injured at Work (VIAW.org), an advocacy group representing California’s injured workers reacted to the decision by State Compensation Insurance Fund’s Communications Director, Gina Simons, for a request for proposals from private insurance firms to conduct investigations. Thursday’s announcement also gave a timeline of the first quarter of 2012 to concretize an arrangement and sign a contract. According to VIAW’s President, Jesse Ceniceros, the move demonstrates that a reduction in the number of investigations could result in substantial savings for the California Workers’ Compensation system.
Jesse Ceniceros, president of Voter’s Injured at Work, recently spoke with WorkCompCentral, and indicated that if insurance companies are trying to cut costs associated with investigations, then it probably is a significant cost. In line with the mission of Governor Brown to reduce costs in the workers’ comp system, VIAW has been monitoring the cost of investigations particularly carefully since October.
Since the end of the legislative session Ceniceros has been collecting data on the cost to the system of private investigations as well as speaking directly with private investigation companies at conferences. What has come to light is that the money spent on these investigations could be as high as in the hundreds of millions but the exact number has yet to be pinpointed and merits more research. And in line with Governor Brown, “The governor said he wants to be cutting costs and this an area we think is flying under the radar, ” stated Ceniceros.
The difficulty in acquiring accurate figures on the money spent on investigations has to do with the manner in which they are reported. According to Jack Hanna, spokesman of the Workers’ Compensation Insurance Rating Bureau, they are reported as an insurance carriers’ allocated loss adjustment expenses with no further details. Likewise, the California Workers’ Compensation Institute does not track the cost of investigations as per their Research Chief, Alex Swedlow.
On the opposite end of the spectrum is the analysis by Jerry Azevedo, spokesman for the Workers’ Compensation Action Network, who claims that without concrete data on expenditures for investigations one cannot determine if insurance carriers overspend on investigations according to comments made to WorkCompCentral. He added that there is not data in existence to support the over spending scenario, and since fraud does occur and escalates costs, channels must be put in place to dissuade others from committing fraud.
One needs simply to review statistics by the California Department of Insurance’s Annual Report 201 of August 2011 to understand that fraud cases are not rampant. There were 1,497 fraud cases that were prosecuted during fiscal year 2009-2010. Of these cases 638 were for claimant fraud, 408 cases for employers without insurance, 205 cases underreporting of wages and 67 cases of medical provider fraud. The total amount for restitution determined was $121 million and of that $73.5 has been collected.
The California Insurance Code and the California Code of Regulations require insurance carriers to have special investigation units for fraud investigation and reporting of cases wherein there is reasonable belief of fraud to the insurance department. President Dale Banda of the Northern California Fraud Investigators Association made statements to WorkCompCentral about investigations and the reasons for them. Investigations are conducted to determine that an employer carries workers’ compensation insurance and also if an employee’s injury occurred during the course of employment and not specifically to find cases of fraud.
Additionally, Banda claimed that investigations are for the benefit of all stakeholders in the workers’ compensation process. Claims must be seen from the viewpoint of all those concerned, the injured worker, the employer, the medical provider and the insurance carrier. Injured workers with legitimate claims will eventually receiver their benefits and those who commit fraud will also eventually be discovered and be penalized with payment restitution. Banda concluded that via investigations all parties will benefit because costs will be kept lower and that insurance companies do not conduct enough investigations.
Jesse Ceniceros of Voter’s Injured at work believes that too much money is being spent on investigations. As such, he sent a letter to the Division of Workers’ Compensation to express his concerns. Ceniceros is committed to exposing this overspending and stated that VIAW will continue to monitor these expenditures in order to adequately identify savings for the system. The savings mean more than increases in permanent disability or medical care for injured workers. Cost savings should come from both sides in order to aid an ailing workers’ compensation system.