In May of 1992, Christi Norton was 17 years old and excited to be working at her first job ever. Although it was hot, dirty, and sometimes dangerous work on the dairy farm she was employed at in rural Modesto, Calif., she cheerfully helped out the rest of the farm hands with anything that needed to be done. It was in May of 1992 that the accident happened. It was a freak accident that didn't seem too serious at first. Norton was knocked in the chest by a steer which bruised her lungs and was airlifted to the local hospital. But two weeks later, one of her bruised lungs collapsed, cutting off oxygen to her brain. Those precious few minutes in which her brain was starved of oxygen left her in a vegetative state ma state she will remain in for the rest of her life. "The medical term is anoxic. Severe anoxic and encepholopathy with spasdic quadriplegia and severe cognitive deficit," says her mother, Sherri Atkins. "In real life, it means that ... she has no awareness, no movement on her own. She's totally incapacitated."
After the accident, Sherri Atkins and her husband, Allen, were consumed with taking care of their daughter, which quickly became a 24-hour job. But in addition to taking a crash course in health care, they also got a harsh lesson in workers compensation insurance. Because although Christi's employer, contractor Michael Bennett, was required by state law to carry workers comp insurance policies for his employees, he had neglected to purchase any insurance policies.
Officially, what Bennett did is called premium fraud. It can involve employers who buy no workers comp insurance policies and, therefore, pay no workers comp insurance premiums at all, or it can involve employers who buy policies but lower the cost of their premiums in fraudulent ways. Prosecutors and insurance fraud specialists say that this is the next big thing in workers comp fraud.
When you think of workers comp scams, you probably think of what we've all seen thanks to the hidden cameras of insurance company investigators and newsmagazines--malingering employees who continue to collect checks for sprained backs that healed months or even years ago. We've all seen the footage of men and women, supposedly out on medical leave, as they play golf or work at another job, usually one that requires heavy lifting. This is called claimant fraud. Or you may think of the doctors who, for a cut of the workers comp claim settlement, will conduct only cursory medical exams of the malingering employees. These doctors will then say that the employees need to receive medical care (and benefit checks) for far longer than is necessary. This is called provider fraud. Both claimant fraud and provider fraud helped inflate the cost of workers comp insurance premiums in the late 1980s and early 1990s, says insurance fraud expert Dennis Jay.
These expanded costs helped trigger the new wave of premium fraud. "The damage one employer can do is much bigger than what one claimant can do," says Don Elisburg of the National Council on Compensation Insurance. "The stuff that has sex appeal, the visuals, is the fraud done by claimants. But the big dollars come from the fraud done on the employer's end"
Few states have quantified how much they lose every year to premium fraud, but the Los Angeles County district attorney's office, which has recently made prosecuting these kinds of fraud cases a priority, estimates that California residents lose about $240 million every year to premium fraud. Los Angeles Deputy District Attorney Barry Gale, now assigned to prosecute premium fraud cases full-time, says he had one overriding thought when he took the assignment and saw his cases pile up: "My God, look at all this money!" And California isn't the only state paying a high price for premium fraud. "There's no state that's immune to it," says Dennis Jay of the Coalition Against Insurance Fraud. "And there's at least half a dozen states with problems as bad as California's"
Sherri and Allen Atkins found out just how bad California's problems are. After Christi's accident, expenses were running $10,000 a day, says Allen, and his own insurance policy capped the amount of money available for Christi's care. Christi soon exceeded that cap and the family spent everything else they had on her mounting medical bills while wondering how they were going to continue to care for Christi at home. They envisioned having to put Christi into a state facility, which, they feared, would just monitor her body functions until she died.
Before Christi's accident, the Atkins had no idea their daughter was not covered by a workers comp insurance policy. But even if families don't know that employers can neglect to take out workers comp policies for their employees, states--which often sell workers comp insurance themselves--know and prepare for it. California, for example, has set up a special fund for people in the Atkins' situation. This $23 million taxpayer-financed reserve fund, called appropriately enough the Uninsured Employers Fund and administered by the state's Department of Industrial Relations, pays the medical bills of employees whose employers did not take out workers comp policies on their behalf. That's the theory. In reality, once Sherri and Allen Atkins found out that the fund even existed, they then had to go to court to prove that Michael Bennett was Christi's so-called employer of record and that it had been his responsibility to provide Christi with workers comp insurance. Their litigation would have been unnecessary if Christi had been covered in the first place because workers comp is a "no-fault" system, meaning that employees do not have to sue their employers in order to get their medical and disability benefits.
The courts eventually found that Bennett was indeed Christi's employer of record, that he should have purchased a workers comp policy for her, and that because he neglected to do so he was therefore liable for her medical expenses. But Bennett then turned around and declared bankruptcy, once again putting the financial burden of Christi's care on the taxpayers of California. The irony should be apparent: Because employers like Christi's refuse to spend just hundreds of dollars a year on a workers comp insurance policy, taxpayers end up spending millions of dollars a year on their employees' medical bills.
Risky Businesses
The Atkins are saddened that taxpayers have had to pay Christi's medical bills. "We find out that [Bennett] didn't have workman's comp and then what do you do? I mean we're not talking about a few hundred dollars a month. We're talking about thousands of dollars a month," says Sherri Atkins. "No family that I know of could assume that responsibility. We wish it wasn't like that but when they don't have workman's comp, what other ways do you have?" It's a raw deal for everyone. It's a raw deal for employees, who often have to litigate for benefits that should have come to them automatically. They are then faced with delaying treatment or skipping it altogether if they can't come up with the money needed to pay their medical bills while their case winds its way through the courts. It's also a raw deal for taxpayers, who may be forced to pay the medical bills that should have been covered by a workers comp insurance pool if an employer can't pay up even after the courts say he must. And it's a raw deal for honest businesses that are forced to pay more for their own workers comp insurance policies because dishonest businesses pay less. But there are many more consequences to this kind of fraud, many more ways for employers to cheat the system, and many things that could be done to crack down on these crooked companies--but aren't.
