Cheap tricks.

• Author: Young, Rebekah
• Position: Employers without workers comp insurance

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...