Data sharing helps North Carolina detect workers’ comp fraud

The state’s Industrial Commission has collected $1 million in civil penalties and increased employer compliance.

North Carolina is now using shared state government data to crack down on businesses that falsify and illegally cancel workers’ compensation coverage. The state's Government Data Analytics Center (GDAC) makes it possible, and real revenues are being generated as a result.

GDAC is the statewide data analytics project that facilitates data sharing and integration among participating agencies by making data sources available and helping agencies to define and develop their analytic needs.  Established in 2007 as a business intelligence program in the state controller's office, GDAC moved into the Office of Information Technology Services in 2014 and has redoubled its efforts to share data and improve government operations.

Before the state and IT vendor SAS partnered to build the GDAC system, North Carolina did not have the tools to access and share information that would help detect coverage fraud before the fact. Bryan Strickland, the director of compliant and fraud investigations with the Industrial Commission (the agency that administers the state’s workman compensation laws), told GCN that “we’ve never really been proactive about going out and trying to make sure folks have coverage before an employee gets injured.”

More often, he explained, an employee would file a claim, realize they were not insured only after a commission background check, and then have to cover the cost themselves, leading to a snowball effect of problems for the business, city and employee.

The commission lacked the preliminary data, basic and analyzed, the motivation for agencies to share data, and overall citizen and business awareness of the penalties associated with coverage fraud to take proper action.

The solution was GDAC, which allowed the Industrial Commission tackle statewide problems like this one.

The Industrial Commission's refers to its GDAC-based solution as the Noncompliant Employer Tracking System, or NETS.  According to the GDAC team, the NETS system is a secure web-based application built using the SAS Fraud Framework. Authorized users can access data collected from multiple state sources to support the generation of leads for investigation.

Strickland said that some 600 employers who appeared to lack coverage before the system was implemented now have coverage, and the commission has collected nearly $1 million in civil penalties from 101 misdemeanor charges.

Because of the data made available on GDAC, the commission is able to leverage data from the Division of Employment Security (DES), for example, to determine how many employees an employer has. Data from the Rate Bureau also gets pushed directly into the commission’s network and then sent to SAS for analysis. SAS sends back that analyzed data to the commission to show whether or not those employees have coverage.

For example, if an employer claims to have three employees, but information from the Rate Bureau does not appear to show coverage, that is an alert for possible noncompliance.

GDAC also allows the commission to tap into the North Carolina Secretary of State’s data for information like specific business addresses. Corporations are required to submit annual reports to the Secretary of State, offering the most up-to-date and accurate information, according to Strickland.

A main security concern lay within Rate Bureau data. If insurance companies can see what competitors are offering, they can try to underbid them to steal a client. Given the sensitive information involved, Strickland said, the state chose to keep GDAC on a private network.  The system is accessible only by authorized government agency personnel and requires strict user IDs and passwords.

Cleaner data also plays a major role in fraud detection efficiency.

Though some companies may have the required insurance, their carriers could have poorly updated systems. This causes the commission waste valuable time and money sending letters of violations to companies that do, indeed, have coverage.  The Industrial Commission now takes that information to Rate Bureau personnel, who contact carriers enforcing and stressing the importance of updated information.

This type of real-time data verification has additional benefits. While the core NETS and GDAC databases are accessible only by authorized government personnel, some information is made public on the Industrial Commission’s website.  So homeowners, for example, can access data to confirm their roofing contractor is covered.

“Before we even started this system, who knows how reliable that data even was,” Strickland said. “The data that the Rate Bureau is putting out and that the public has access to is actually better data now.”

Sharing data similarly opened up doors for contributing agencies. The information retrieved from the Rate Bureau by the Industrial Commission is also made available to the DES.

This allows DES officials to detect when a company shows workers compensation coverage but is not reporting any unemployment benefits, implying it is not reporting any employees. The agency can then contact the employer and solve the issue.

Furthermore, it is a criminal charge to willfully fail to carry worker’s compensation coverage. Certain law enforcement officers who are able to access the GDAC system can sort data geographically by industry-heavy areas and proactively conduct quick sweeps to increase enforcement.  

Not only does this increase awareness (word spreads quick when an employer is charged), but according to Strickland, the number of criminal charges jumped from 18 last year to 101 for the year ending June 30.

Before the NETS system, the commission tried using an old database and generally closed about 400 cases a year. Since April 2014, the agency has closed more than 2,300 cases; 1,800 of those in the past year alone, according to Strickland.

The Industrial Commission is now looking at misclassification of employee data, to determine whether or not workers are actual employees or independent contractors. The agency is also working with the Department of Insurance to incorporate its data into NETS and hopes to bring in the Department of Revenue to the GDAC system soon.

“We’re hoping that by using this system not only have we been able to collect fines, but [also that the enforcement effort] makes a difference and increases critical awareness so that [employers] will actually go out and get coverage,” he said.

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