In the United States, Workers’ Compensation Insurance is a $53 billion market that encompasses 287 businesses and employs over 54,000 workers. In 2017, the market grew 2.7%, and with an improving employment market and rising interest rates, the industry is projected to experience continued growth.
That’s the good news for Workers’ Compensation carriers. The bad news is that carriers cannot rely on investment income to be profitable. Despite the potential of rising interest rates, bonds have not risen as strongly as the insurance industry has hoped, leaving carriers forced to be selective about its underwriting and to manage risk very closely.
One area that requires risk management is fraud prevention. According to the Coalition Against Insurance Fraud, workers compensation scams are a high concern, particularly for small business owners. The Coalition reports that more than one in ten small business owners are concerned about faked injury or illness to steal workers compensation benefits, and one in five owners are unsure how to identify workers compensation scams.
The other fraud area impacting the industry is payroll underreporting or misclassifications. Many industries are now classifying workers as contingent or independent contractors to avoid paying for workers’ compensation coverage. This leads to lower premiums, claiming incentives, cost shifting and outright fraud.
To fight potential fraud, carriers are taking a close look at facility and hospital claims, as hospitals may be looking to commercial payers to make up for revenue uncertainty from government program reimbursements such as Medicare. Additionally, while telehealth can be a great way to reduce medical costs, it is also subject to high fraud potential and billing for services not delivered, requiring these claims to be scrutinized. And because of labor market dynamics, carriers will need to focus on coverage eligibility and understanding whether the responsibility for workplace injuries truly lies with the workers’ compensation plan, as the “gig economy” is resulting in workers having more than one job, and therefore exposure to injuries from multiple sources.
With the ongoing changes in the labor market and healthcare policy, having a comprehensive fraud monitoring program is a prudent approach for today’s workers’ comp carriers.