Agency Created to Combat Fraud Had Just Six Convictions in Past Two Years

Tuesday, February 14, 2017 | 0

More than a decade after Illinois criminalized workers’ compensation fraud and noncompliance, the agency created to lead the charge has managed only 42 convictions, or fewer than five a year.

The Illinois Workers’ Compensation Fraud Unit had three convictions in each of 2015 and 2016, while Ohio, with 1.3 million fewer residents than Illinois, averages 11 convictions a month.

In 2015, the Illinois unit dropped to two investigators, its lowest staffing level in five years, as the number of complaints more than tripled from 100 to 331.

“The WCFU is already in the process of hiring additional investigators; however, this decrease in staff, coupled with the length of time it takes to bring new investigators on board, has already negatively affected the number of investigations opened,” the unit’s 2016 annual report states.

“An increase in the WCFU’s appropriation would allow for the hiring of more investigators, allow for more investigations to be completed, and lessen the impact the departure of a single investigator has on the unit,” it states.

The Florida Bureau of Workers’ Compensation, by contrast, has 21 detectives and four supervisors in Miami, West Palm Beach, Orlando and Tampa. Investigators in six other cities also investigate comp fraud.

The result since 2008 has been 2,466 convictions, or an average of 274 a year. In fiscal year 2015 alone, Florida recorded 452 workers’ compensation fraud convictions, the agency said.

The Ohio Bureau of Workers’ Compensation’s Special Investigations Department has 1,160 convictions over the past nine years, or an average of 129 a year, BWC Media Relations Manager Melissa Vince said.

“BWC takes very seriously its responsibility to be careful stewards of the money employers pay to protect Ohioans who are injured on the job,” BWC Administrator/CEO Sarah Morrison said in an emailed statement. “That includes identifying and prosecuting employers, claimants and health care providers who cheat the system.”

Illinois has been hampered by the lack of a full state spending plan for the past 19 months, the American Insurance Association said.

“The budget impasse over the last couple of years, I believe, has restricted the department’s ability to prosecute workers’ compensation fraud,” said Stephen Schneider, AIA Midwest region vice president. “Anything in terms of resources that can assist them ought to be done.”

Schneider added that it’s difficult getting local prosecutors to act on workers’ compensation cases because those crimes are much lower profile with smaller dollar amounts.

“We think Illinois should do it tougher and bigger and bolder in pursuing workers’ compensation fraud,” he said. “There’s certainly a lot more that can be done. When you look at states like Florida and Ohio, obviously they’re doing something right.”

Illinois state government was shut down Monday in observance of President Lincoln’s birthday, and no one with the unit or Department of Insurance was available to comment.

The National Crime Insurance Bureau estimates workers’ compensation fraud at $30 billion annually across the United States, including $1 billion to $3 billion a year in California, the California Department of Insurance says.

And many states have launched innovative programs to combat comp fraud. Florida investigators implemented an online check-cashing database in September to detect underreporting of payroll and premium evasion because many employers that submit fraudulent payroll reports to avoid premiums use check-cashing companies to pay their workers.

Florida also has a Construction Policy Tracking Database, which allows employers to follow their subcontractors’ policies and exemption statuses, and it notifies them electronically whenever there are changes.

Illinois criminalized workers’ compensation fraud and noncompliance for the first time with House Bill 2137 in 2005. HB 2137, which became Public Act 94-277, required the Illinois Department of Insurance to create the Workers’ Compensation Fraud Unit and identified eight specific fraudulent acts, whereas before they were not specifically defined as unlawful. (Those acts are described here.)

The General Assembly beefed up fraud enforcement again in 2011 with HB 1698, which became Public Act 97-18.

The act added a ninth prohibition, making it illegal to “intentionally present a bill or statement for the payment for medical services that were not provided.” It introduced a new criminal penalty scheme, gave the WCFU subpoena power and removed the 120-day time limit for the unit to complete an investigation.

The 2011 reforms also removed a requirement that the unit notify targets of potential investigations immediately when receiving a complaint, thus tipping off the targets and rendering surveillance futile. And it required the unit to purchase and implement a system using advanced analytics that included predictive modeling, data mining, social network analysis and algorithms for the detection of fraud, waste and abuse.

The analytics mandate never happened because “no funding has ever been provided for this mandate,” the unit’s 2016 annual report states. The unit asks that the General Assembly repeal the analytics initiative.

“The department believes the state would be better served by expanding the WCFU by hiring additional investigators to investigate actual or suspected fraud,” the unit states.

Ohio investigators rely on those same predictive modeling methods to pinpoint suspicious behavior patterns that could be indicative of fraud, the BWC’s Morrison said. She said the BWC has raised fraud awareness among agency employees, who provide 25% of the fraud tips each year.

“We work closely with local, state and federal investigative agencies, and we cross-check names of those we investigate through various state databases to get as complete a profile on a subject as possible,” Morrison said. “Employment records at the Ohio Department of Job and Family Services, for example, have revealed claimants who are working without informing BWC, and therefore still receiving BWC benefits.” 

Chicago defense attorney Gene Keefe blames a lack of fraud convictions on Illinois' focus on targeting and penalizing businesses that don’t purchase coverage.

“They aren’t focused on stopping workers’ compensation fraud by workers and punishing and preventing such behavior,” Keefe said. “What is irritating is the chairperson and [Illinois Workers' Compensation Commission] won’t ever say anything about workers’ comp fraud by workers. Trust me, call and ask, they will all hide under rocks and pray you disappear.”

The “oddest” thing about workers’ compensation fraud investigations in Illinois, Keefe said, is that the concept was pushed in 2005 by Gov. Rod Blagojevich.

Blagojevich is serving a 14-year prison sentence for corruption. The Democrat was impeached and convicted of taking bribes for political appointments, including Barack Obama’s vacant U.S. Senate seat after he was elected president in 2008.

Christopher Hurley, president of the Illinois Trial Lawyers Association, compared claims of workers’ compensation fraud to President Donald Trump's claims of voter fraud extending to 3 million to 5 million illegals.

“Where are they? Where’s the evidence?” he asked. “I don’t think fraud is a major problem in Illinois. If it happens, it should be punished. I just don’t think it happens too often.”

Illinois has not had a full budget since fiscal 2015 ended June 30, 2015. Republican Gov. Bruce Rauner has pushed for workers’ compensation and pensions reforms, and refused to raise taxes without union concessions opposed by Democrats, who dominate both houses in the General Assembly.

The stalemate has created a backlog of $11 billion in unpaid bills and $130 billion in unfunded pension liabilities, forcing the state to fund basic services through stopgap measures, consent decrees and court decisions.

Senate leaders working across party lines have crafted a dozen bills aimed at breaking the budget impasse. One of those is SB 12, which would create a closed drug formulary, cap the maximum weekly compensation rates for permanent partial disabilities and reduce medical fees by 10% to 15%.

SB 12 also would bar professional athletes from permanent disability awards after they reach age 35; the maximum age for other workers is 67.

The legislation also would exempt from public inspection records related to workers’ compensation fraud investigations and add penalties to the state’s Criminal Code for fraud listed in the Workers’ Compensation Act.

Each of the dozen bills would have to pass before any of them could move to the House. Senators have approved three of the bills and rejected one, SB 11, which would have affected workers hired before January 2011. They would not have future pay raises factored into their pensions unless they agreed to less-generous packages.