Changes Could Be Coming to Workers' Comp Fraud Prosecution
Friday, April 14, 2017 | 1231 | 0 | 0 min read
Legislation under consideration in the Texas Legislature may sharpen the state's focus on workers' compensation fraud, while a separate bill would end a controversial partnership between Texas Mutual Insurance Co. and the Travis County District Attorney's Office.
Rep. Rene Oliveira, D-Brownsville, introduced a bill to transfer authority over insurance fraud investigations from the Texas Department of Insurance to the Texas Division of Workers' Compensation, codifying a switch made in September.
A budget rider proposed by Sen. Kirk Watson, D-Austin, would end the Texas Mutual-Travis County DA agreement, which critics said created a conflict of interest by allowing an insurer to direct prosecutions.
Since 2001, Texas Mutual has paid the District Attorney's Office in the state's capital to prosecute fraud cases initiated by the company. The arrangement came under scrutiny after a 2015 joint investigation by the Austin-American Statesman and the Texas Tribune.
The arrangement had been suspended in January 2017 "as a result of recent pressure brought about from local leaders and the press," the Texas House wrote in an interim report released that month.
In its place, the budget rider proposes a partnership between the Travis County District Attorney's Office and state insurance fraud investigators. The rider calls for $341,038 in fiscal year 2018 and $334,788 in fiscal year 2019 to go toward "workers' compensation fraud prosecution in cooperation with the Travis County District Attorney's Office." The money would come from the Texas Department of Insurance's operating fund.
"Basically … that would be used to fund a fraud prosecution unit, which would be DWC employees that would be embedded with Travis County," said Jeff Nelson, the DWC's director of external relations.
TDI has similar arrangements set up with prosecutors around the state, Nelson said.
Until last year, all insurance fraud was investigated by TDI, which is the DWC's parent agency. But TDI Commissioner David Mattax (who died Thursday, see separate story) and DWC Commissioner Ryan Brannan agreed that it would make more sense for DWC's investigators to handle workers' compensation insurance fraud cases, Nelson said.
TDI's latest annual fraud report to the Legislature states that the decision to move the investigators was made in May, and in September five investigators and one intake staff were transferred to the DWC's fraud unit.
The same report shows that work comp fraud made up only 2% of all insurance fraud cases opened in fiscal year 2016. The department opened 32 cases out of 1,289 referrals and referred 16 workers' comp fraud cases in prosecutors.
"The commissioner of insurance and the commissioner of workers' compensation agree that it would be more efficient and effective for the division to investigate workers' compensation insurance fraud," J.J. Garza, Oliveira's chief of staff, said in an email to WorkCompCentral Thursday.
Oliveira's bill would make the arrangement official, adding language to Texas' workers' compensation law stating that the DWC has authority over fraud investigations.
House Bill 2053 also states that the amount at issue in a fraud case must be at least $2,500 to result in felony charges. Currently, that figure is $1,500.
The change could result in reducing the demands on the state's correctional system, an impact statement released alongside the bill said. The impact on the criminal justice system is not expected to be significant, however, because "in fiscal year 2016, fewer than 10 individuals were arrested and fewer than 10 were placed under felony community supervision for offenses related to certain kinds of workers' compensation fraud," the statement says.
The American Insurance Association, Texas Association of Business, Combined Law Enforcement Associations of Texas, Texas AFL-CIO, Texas Mutual Insurance Co., National Federation of Independent Business' Texas chapter and Property Casualty Insurers Association of America have all publicly expressed support for the bill. No opponents had registered to speak at a March 27 hearing before the House Business and Industry Committee.
HB 2053 has been placed on the House's calendar for Wednesday. The Business and Industry Committee reported favorably on the bill on April 3.
View HB 2053 here.
View the budget rider here by searching for "workers' compensation fraud prosecution."