Fraud Hot and Sticky

Alaska weather.

We're having one of those searing Southern California heat waves that I remember from a child - just as school starts summer turns on and the misery of sitting in a class room, without air conditioning, just seemed at odds with starting school.

Particularly if summer was more overcast than sun at the beaches.

But the first week or two of September would always it seem be met with temperatures in the hundreds making learning difficult, particularly with the high humidity from sub-tropical air flow that contrasts with the normal rather arid Southern California environment.

What a contrast to the weather we experienced in Alaska. Temperatures were in the upper 50s during the day to mid-40s at night. We had one day of rain, and even then it was light - more of a rain forest mist than any deluges. It was humid, of course, but comfortable.

WorkCompCentral Marketing Director, Yvonne Guibert, just relocated from Florida to Southern California. She rented a condo on the beach near headquarters and of course beach living in Ventura County means no air conditioning, a detail for which she didn't have a contingency plan.

The stores were sold out of fans...

I met a lot of interesting characters in my trip to Alaska this past week. One lady, looking very independent and rather on the rough side, had grown up in Florida and lived there most of her 52 years.

She proudly told us how, one day, she just packed up and moved to Alaska 9 years ago.

That struck me as unique. Talk about environmental shock! She was nonplused. The heat and humidity of Southern Florida had worn on her, and culture was reflected in that environment: hot, humid, sticky.

She was more comfortable with the long summer days, and the long winter nights, of Alaska. The independence of Alaska culture appealed to her, and from my observation, she made a correct choice.

Besides, she quipped, the state of Alaska pays people to be there!

Texas has been under a heat wave of unprecedented duration it seems.

And Texans, like Alaskans, are a population that takes pride in their independence - doing things differently than everyone else according to their own sense of justice and code of responsibility. Remember, Texas was a republic long before it was a state.

So I'm not sure why the fact that Texas Mutual's direct access to law enforcement for workers' compensation fraud is such a big deal.

Texas Mutual was originated in 1991 as the Texas Workers' Compensation Insurance Fund.

The enabling legislation allowed the quasi-governmental carrier to contract directly with district attorneys throughout the state to prosecute fraud.

Since that time the company has funded the Travis County District Attorneys office with millions of dollars to pay for investigators, attorneys and prosecution costs in going after work comp fraud.

Texas Mutual Insurance Co. since 2001 has paid $4.7 million to the Travis County prosecutors' office to cover the monthly salary, benefits and expenses of two assistant district attorneys as well as support staff. (By comparison, California will direct $34.95 million to districts attorneys for the fiscal year ending in 2016 to investigate and prosecute work comp fraud.)

The contract, posted online by the Tribune and the American-Statesman, calls for the District Attorney's Office to investigate and prosecute alleged violations of the Texas Insurance Code "or other penal laws of the state relating to crimes committed against the company."

Some say this is a conflict of interests, because a) no other "private" carrier does so, and b) fraud prosecution gets lopsided against individuals making claims of injury or exaggerating their claims.

Others don't have a problem with the arrangement, since a) Texas Mutual is not really a private carrier (it's a hybrid like most state funds) and b) at least some fraud is being targeted and prosecuted.

Other states with work comp fraud prosecution funding systems pool money from policy assessments, and that money is divided up, usually based on some factor that puts heavy emphasis on the number of arrests and prosecutions.

Since the easiest fraud to investigate and prove is simple, injured worker fraud, usually for claiming a disability status in contrast to sworn testimony, the money invariably gets directed towards that type of fraud.

And the statistics bear that out: according to the Tribune and American-Statesman article, 80% of pending indictments reviewed this spring involved fraud allegedly committed by workers.

I'm not saying that's right or wrong - that's just the way it is.

But we all know there is fraud across the board in workers' compensation, from individuals claiming an injury that never happened, to white collar executives getting kick-backs for directing, and even promoting, business for various unnecessary services that inflate the cost of the system.

I'll never forget a meeting I had with an executive team from a system vendor several years ago where the CEO told me, "David, you and I know workers' compensation is a dirty business."

Needless to say, we didn't do any deals with that company.

The uproar in Texas over how fraud investigation and prosecution is paid for is misdirected. Like Alaska, if Texas wants to pay people "to be there" that's the state's discretion. It's in the law.

The focus should not be how it is paid for or by whom, but what is done with the money once in the district attorney's hands.

If workers' compensation is a "dirty business," then some funding needs to be directed to cleaning up that business as well.

That goes for all fraud funding in any state.

The topic of fraud is emotional. Fraud is also non-discriminatory.

It's a hot and sticky subject. The real issue is whether the store has enough fans to go around.