Can I Opt Out of Workers’ Compensation Insurance?

Employers know that they need to take precautions to make sure their business is adequately protected.  Employers need to carry a variety of types of insurance, ranging from fire insurance to insurance on any vehicles.  Workers’ compensation insurance is another important component to protect your business.  Workers’ compensation provides insurance coverage in the event that your employee sustains a work related injury.  Despite its protections, some employers find the cost of workers’ compensation insurance too heavy a price to pay for that protection.  This leads many employers to wonder whether they can opt out of carrying workers’ compensation insurance.

California labor code section 3700 provides that if a business employs one or more employees, that business is required to carry workers’ compensation insurance.  It is important to note that this requirement includes some workers that you would not ordinarily believe would fall under this requirement, such as nannies or handymen.    It also should be noted that due to recent changes in the law, executive officers and directors of corporations must also be included in workers’ compensation coverage unless the corporation is completely owned by the directors and officers.  In that circumstance, they can opt to be excluded from coverage.  Except for those circumstances, all employers are required to carry workers’ compensation insurance and can face hefty penalties for failure to comply.

In some cases, an employer may decide to self-insure.  Self-insurance requires that you receive state approval.  The business must have a net worth of at least five million dollars with a net annual income of at least five hundred thousand dollars.  The employer must also post a security deposit.  Although this generally means that only larger businesses are able to meet the requirements, some small employers in the same homogeneous industry pool their workers’ compensation liabilities.  If the employer is self-insured, workers’ compensation claims may be administered directly by the employer or the employer may contact with a third party administrator to handle the administration of the case.

If you have questions about whether your business is required to carry workers’ compensation insurance, contact us today.  We can talk to you about your rights and responsibilities.

Medical Fraud and Workers’ Compensation

Workers’ compensation exists to make sure that employees receive the appropriate compensation and medical care in the event they sustain a work related injury.  In the vast majority of cases, workers’ compensation claims are valid and the injured employee really does require medical care.  In some unfortunate cases, however, there may be medical fraud in workers’ compensation cases.

Medical fraud in workers’ compensation cases comes in many different forms.  One common form is when a worker either exaggerates or completely fabricates an injury.  An employee may state that he or she still needs medical care and accommodations at work even though he or she is actually no longer injured.  This is commonly known as “malingering.”  If an employee fabricates or exaggerates an injury to continue to receive benefits, the employee can be charged with insurance fraud, ordered to pay back the fraudulently received funds and even serve time in jail.  Common injuries that are seen with this type of fraud are soft tissue injuries, as there are no medical tests to determine whether the injury has sufficiently healed and the employee is the only one who can say whether there is still pain or limitations because of the injury.

There are also much more complicated types of medical fraud.  These are typically white collar crimes that may involve multiple layers of fraud and multiple offenders.  These types of schemes may include doctors and attorneys who encourage others to exaggerate their injuries.  Doctors may over treat the patient to continue receiving payment for services and may over prescribe drugs, including harmful and addictive substances like powerful opioids.  Doctors receive payments for unnecessary treatment and the cost of insurance companies, and that cost is ultimately passed on to tax payers and others who must purchase workers’ compensation insurance.

In recent years, the state of California has made significant efforts to identify and prosecute workers’ compensation fraud, including medical fraud.  During the 2015-16 fiscal year alone, 167 cases were referred to prosecutors by the fraud division, totaling a potential loss of almost two hundred million dollars.  In addition, during that same time period, district attorneys reported 731 arrests.  Restitution of over fifteen million dollars was ordered in connection with the successful convictions.

If you have questions about workers’ compensation fraud, contact us today.  We can talk with you about fraud concerns and how you can comply with the law.

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