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June 9, 2004

New anti-fraud laws take effect June 10

TUMWATER — Anti-fraud legislation passed in March takes effect Thursday, June 10, giving the Department of Labor & Industries (L&I) broad new authority to combat fraud and abuse of the workers' compensation insurance system.

A change in the law governing successorship means that employers no longer will be able to avoid insurance premiums by closing a business and reopening a new one with a clean slate in regards to business taxes. Other changes will make it easier for L&I to prove fraud cases against workers, employers and health-care providers who knowingly cheat the industrial insurance system.

When the state Legislature passed the anti-fraud measures in March, it also gave L&I additional resources to expand its fraud staff. Ten new investigators and auditors are being hired, and some existing L&I positions are being transferred to the anti-fraud effort. The agency recently reorganized its investigations, auditing and collections efforts and named Carl Hammersburg to head that program.

L&I's focus on combating fraud and abuse is in response to concerns expressed by employers and some workers. At rate hearings over the past two years, they told L&I that invalid injury claims, and employers who don't pay the premiums, put an unfair financial burden on companies that support the insurance system. L&I set out to overhaul the way it manages claims and how it uncovers, investigates and pursues fraud and abuse of the system by workers, employers and health-care providers.

The agency reassigned additional people to combat fraud and abuse, and it adopted new procedures for investigations and audits. In addition, it requested legislation that would make it easier to prove fraud and harder to avoid business taxes. Backed by Gov. Gary Locke and supported by organized labor and the business community, the legislation passed in March.

"Our goal is to be the best workers' compensation system anywhere," said Robert Malooly, assistant director for L&I's Insurance Services Division." One way we can do that is to work with employers to help them manage their claims and keep their rates low. Another way is to go after employers who don't play by the rules and knowingly and repeatedly cheat the system. With
this new fraud effort, those employers will either get into compliance or move on to another state. We will not let dishonest employers shift their costs of workers' compensation claims to the honest employers and their employees."

With the additional staff, L&I will conduct more validity checks to make sure new workplace-injury claims are legitimate. The agency's auditors will perform more random audits of businesses to make sure they are accurately reporting hours worked and paying premiums. L&I investigators will crosscheck with other government agencies to find workers who are collecting L&I benefits while secretly working at other jobs. And new software programs will soon improve L&I's ability to detect duplicative and improper billings by health-care providers.

The new legal authority and additional staff will allow L&I to expand an anti-fraud effort that has been under way for some time. Working with local prosecutors, the agency has more aggressively pursued criminal fraud cases against workers and beneficiaries who knowingly collect benefits to which they aren't entitled. And, for the first time ever, L&I recently began
suspension proceedings against six construction contractors who refused to enter into payment agreements for the premiums they owed. Four of those contractors have since set up repayment schedules.

L&I's anti-fraud effort is one of five high-priority projects designed to reduce workplace injuries and hold down the cost of industrial insurance. In addition to its anti-fraud effort, these projects are designed to:

  • Improve the speed, fairness and quality of workers' compensation processes.
  • Get people back to work as soon as they are medically able.
  • Involve employers earlier and more often in the claims process.
  • Prevent workplace injuries and illnesses.

L&I provides workers' compensation insurance for about 155,000 employers who employ about 70 percent of the state's workforce. The system provides medical treatment and, where appropriate, wage-replacement benefits to workers who are injured or become ill as a result of their job. The system also shields employers from claim costs that can last a lifetime, and from personal-injury and negligence lawsuits filed by workers who are injured on the job.


For more information, or to set up an interview or talk show appearance, please contact Robert T. Nelson in L&I Public Affairs at 360-902-6043 or nelq235@LNI.wa.gov.

Broadcast version

The Department of Labor & Industries, which runs the state workers' compensation program, has been given new authority to crack down on employers, workers and health-care providers who defraud or abuse the industrial insurance system.

Robert Malooly, who heads L&I's Insurance Services Division, says the new laws, which take effect Thursday, June 10, will make it easier to bring criminal fraud cases against those who knowingly cheat the system. Malooly said the new law also is designed to end the practice, by some employers, of closing a business that owes workers' comp premiums and reopening a new business with a clean slate.


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