The California Department of Insurance has dedicated $34.95 million in grant money to district attorneys’ offices across the state in order to curb rampant workers’ compensation fraud.
According to a statement from Insurance Commissioner Dave Jones, the grants are funded by employer fees and aim to help law enforcement officials investigate and prosecute fraud in the workers’ comp system during the 2015-2016 fiscal year.
Interested district attorneys applied for a grant through an application that was reviewed by a department panel and approved by the California Fraud Assessment Commission. Thirty-seven district attorneys in 42 counties received grants, including $6.4 million given to Los Angeles County and $4.9 million granted to San Diego County.
The efforts to root out workers’ comp fraud are part of a larger series of moves by Jones and the California Department of Insurance to curb costs in the state, which are currently the highest in the nation. Since fraudulent claims drive up insurer payouts, rates are artificially inflated in order to compensate.
According to the latest study issued by the Oregon Department of Consumer and Business Services, the median comp rate in California is already twice as high as the median rate – $3.48 per $100 of payroll versus $1.85 per $100 of payroll.
Legislative efforts were passed in 2012 to fight low permanent disability benefits and high friction costs in the workers’ comp system, among other regulations, the majority of were put into place at the beginning of 2014.
“Premium costs are expected moderate due to those system changes, but they need time to work,” said State Division of Workers’ Compensation spokesman Peter Melton.
Jones also recommended a 10.2% rate decrease in May, which would bring the state’s rates down to $2.46 per $100 – about 5% lower than the current industry average of $2.59 per $100 in payroll. The new premium rates were directed to take effect July 1, and workers’ comp professionals in the state say that all of these efforts have already combined to show some improvement.
“In my opinion, workers’ comp is one of the most expensive policies out there and can really cause a business to close up or lay people off. When you’ve got people filing fraudulent claims or claiming for injuries that are not truly work-related, it only makes it more expensive,” said La’Troya McKinney, commercial lines account manager with Abram Interstate Insurance Services.
“The workers’ comp reform laws will tighten things like that down. In the long run, it will make coverage less expensive.”
