Legislation approved by Republicans in the Iowa Senate on Tuesday would create a special state prosecutor to combat workers’ compensation fraud.
Sen. Jake Chapman, R-Adel, introduced SF 2305 after he said he received complaints from employers and constituents of workers defrauding Iowa’s workers’ compensation system.
“This is not a victimless crime. Every time someone commits fraud, we pay for it,” Chapman said during floor debate Tuesday evening. “We should be united against fraud.”
But the chamber was not united. Democrats labeled the bill as anti-worker and said it unfairly targeted injured workers while doing little to address employers and insurers that improperly deny or delay benefits.
In an impassioned speech on the floor, Sen. Bill Dotzler, a Democrat from Waterloo, said the bill paints workers as “a bunch of thieves and crooks.”
“I don’t understand why you hate workers so much. Because that’s what this bill to me says,” he said to Republicans across the aisle. “You don’t have any respect for the people who go to work every day to try to make a living and give profit to a company. Every day, year in and year out punching a clock.”
“I don’t know how you can look yourself in the mirror in the morning when you vote for stuff like this.”
The bill passed 28-22. It now moves to the House of Representatives for consideration.
Republicans called for a point of order when Dotzler tried to tie the bill to the American Legislative Exchange Council, a national group that advocates for conservative legislation. ALEC lists model policy for a Workers Compensation Fraud Warning Act on its website.
But Chapman swatted down that criticism: “This is not an ALEC bill. This is a Senator Chapman bill.”
The bill comes a year after the Republican-led legislature approved sweeping cuts to workers’ comp benefits. In 2017, business groups argued reform was needed to keep costs down, though data did not support arguments that costs in Iowa were out of control.
‘What’s the problem here?’
If signed into law, the bill will create a new workers’ compensation fraud unit within the Iowa Insurance Division’s fraud bureau. Chapman said the problem of fraud in workers’ compensation demands a dedicated prosecutor.
“The problem is that, as we dug into this, it seems no one is taking ownership of investigating and prosecuting workers’ compensation fraud,” he said in an interview with the Des Moines Register.
The new prosecutor could charge those accused of fraud with felonies and pursue fines, restitution and jail time.
In floor debate, Chapman pledged that the bill would have no effect on legitimate claims from injured workers. The bill has support from several insurance groups, while groups representing attorneys are opposing the change.
Ken Sagar, president of the Iowa Federation of Labor, AFL-CIO, speaks to a crowd gathered at the Iowa Capitol during a labor rally in the Rotunda on Tuesday, Feb. 7, 2017, in Des Moines, Iowa. Rodney White/The Register
Opponents said the legislation seemed to present a solution in search of a problem.
“What’s the problem here?” said James Carney, a lobbyist representing the Iowa State Bar Association. “We’re unaware of there being a fraud issue in Iowa. And to set up a whole separate unit — a prosecutorial unit — that is basically self-funded by fines that this fraud unit will collect, is very questionable.”
Lawyers can already face discipline, including loss of their license, from the Iowa Supreme Court, Carney said. The insurance commissioner is already empowered to investigate fraud. And the Rules of Civil Procedure already ban lawyers from bringing frivolous cases, he said.
Carney said the law would set a different standard for workers’ compensation attorneys than for those practicing in areas like medical malpractice or personal injury.
“They don’t have anything in here about insurance companies engaging in misconduct or acting in bad faith,” Carney said. “This is all one-sided, and it’s a huge step and unbelievably chilling, in terms of injured people pursuing their rights under the work comp law and the lawyers who represent them.”
Chapman said he was surprised by the fierce opposition among trial attorneys.
“The question is, well, what is in this bill you’re opposed to if you’re not defrauding the system — if you’re not part of a scheme to defraud the system?” he said in an interview. “It is troublesome to see that trial attorneys are somehow concerned about a bill that combats fraud.”
But Sen. Herman Quirmbach, D-Ames, argued that the fraudulent activities spelled out in the legislation are already covered under other parts of Iowa law.
“The purpose of this bill, quite simply, is to intimidate injured workers away from filing claims for workers’ compensation,” he said. “Fraud is already illegal. Fraud is already prosecutable.”
If approved, the bill will cost more than $1.2 million per year to implement by fiscal year 2020, according to a fiscal analysis
While the prosecutor will have the power to collect fines, the analysis did not estimate possible revenues.
The LSA analysis expects the insurance division to hire eight full-time workers, including one prosecutor, a criminal intelligence analyst and six special investigators. The fiscal note predicts the state’s workers’ compensation division will need to hire two additional workers.
‘It looks at fraud holistically’
The Iowa Insurance Division receives more than 700 complaints of insurance fraud each year, agency spokesman Chance McElhaney said. That includes complaints about fraudulent claims on property, life and workers’ compensation insurance.
The division is currently registered as undecided on the bill.
From the 700-plus complaints, the three investigators in the fraud bureau expect to handle about 60 to 75 cases. McElhaney said 8 to 10 percent of the annual caseload comes from workers’ compensation fraud complaints reported by insurance carriers.
But the fraud bureau only investigates workers’ comp complaints from insurance carriers. The agency currently lacks jurisdiction to investigate suspected fraud by workers at self-insured companies, McElhaney said.
The legislation will allow the new fraud prosecutor to tackle complaints from self-insured companies, which includes some of the larger employers in the state.
Nicole Crain, a lobbyist for the Iowa Association of Business and Industry, said her organization has heard complaints about fraud in workers’ compensation claims. She said the bill will weed out fraud among workers and employers alike.
“Someone shouldn’t be taking advantage of the system, whether they’re an employee or an insurer,” Crain said. “That’s one thing good about the bill: It looks at fraud holistically. If there is fraud taking place, there’s a mechanism to go after those who are committing the fraud.”
Iowa Association for Justice spokesman Andrew Mertens released a statement Tuesday saying that examples of fraud in workers’ compensation cases are “incredibly rare” in Iowa.
The association includes many attorneys who represent injured workers in workers’ compensation claims. Mertens said the insurance division is already empowered to investigate claims.
“This bill builds an expensive, duplicative, and unnecessary new bureaucratic scheme intended only to scare workers, the doctors who treat them, and the lawyers who fight for them, from accessing desperately needed workers’ compensation benefits,” the statement read.