Accident, STD insurance can help lower illegitimate workers' comp claims

There are three primary forms of illegitimate claims: bogus claims, double-dipping and embellishment.

Thanks to improvements in workplace safety measures and a spike in workplace technology, workers’ compensation insurance claims have been on a downward trend. However, illegitimate claims have been rising in the past few years — especially among certain workforce segments.

According to new research from The Guardian Life Insurance Company of America, workers in high deductible health plans (HDHPs) have a greater likelihood of reporting off-the-job injuries as workers’ compensation claims. Nearly one in five employers with an HDHP reported an increase in illegitimate workers’ compensation claims since 2017, almost three times as many as those without an HDHP.

One in four employers believes that the Affordable Care Act has contributed to more suspicious workers’ compensation claims, particularly among lower-income workers with high medical deductibles.

The study notes that while most of the nearly 3 million annual workers’ compensation insurance claims are legitimate, research suggests at least 2% are questionable.

There are three primary forms of illegitimate claims:

1. Bogus claims: The injury never occurred or was misrepresented as a work-related injury when it occurred off the job.
2. Double-dipping: A claimant collects workers’ compensation benefits from one employer while working at another job.
3. Embellishment: A worker with a legitimate injury exaggerates its severity to extend their workers’ compensation benefits.

Accident, STD insurance can help

Eliminating fraud completely will likely never happen in insurance, but the study found that 46% of employers reported a decline in workers’ compensation claims after offering accident or short-term disability (STD) insurance. Forty-two percent reported declines of 50% or more, while another 22% cited declines between 25% to 49%.

A majority of employers in the United States (61%) offer STD insurance to their workforce, generally on a contributory basis with the employer paying most of the cost. More than four in 10 employers offer accident insurance, and about half of those plans are employee-paid.

Upon offering an accident or STD insurance plan, the study highlights that many organizations experienced an overall decline in workers’ compensation claims. Nearly 40% of those reporting lower workers’ compensation claims saw a reduction in questionable claims and attributed much of the decline to implementing an accident or short-term disability plan.

The report notes that voluntary benefit strategies designed to improve risk management are linked to better outcomes on workers’ compensation abuse. It highlights that employer-funded accident and disability plans have much higher participation than employee-pay-all plans, meaning they have even greater potential to reduce illegitimate workers’ compensation claims.

“Brokers and benefits consultants have an opportunity to coordinate their services between the group benefits and risk management sides for their clients by proposing voluntary accident and disability insurance as a solution,” Michael Naumann, Western U.S. practice leader at Guardian Life, said in a statement. “We’ve seen this voluntary benefits strategy work, particularly among industries with a higher than normal workers’ comp frequency and costs.”