California's Experience: Addressing Workers' Compensation Fraud and Abuse

Abstract

Workers' compensation fraud and abuse in California rose to unprecedented levels in the 1980s. Three areas were particularly troublesome and costly: medical-legal evaluations associated with the "claim mills" in the Los Angeles Basin, psychiatric injury or "stress" claims, and excessive and questionable use of vocational rehabilitation. Between 1989 and 1993, the California legislature enacted a 4(OMPNSATION & B[N[FITS REVI[W number of reform laws that greatly changed the state's workers' compensation system. As measured by the large number of case referrals, arrests, and convictions for fraud, as well as by declining claim frequency rates and greatly reduced insurance premium costs, these changes have been highly successful and saved California employers millions of dollars.