Workers' Compensation: State of New Jersey Failed to Address Deficiencies in $96 Million Workers’ Compensation Program

A report released today by the Office of the State Comptroller (OSC) finds that the agency that manages workers’ compensation claims filed by state employees failed to remedy deficiencies identified three years ago. As a result, the State faces a greater risk of preventable workplace injuries, spurious claims, and wasted tax dollars.

2020 AUDIT DEFICIENCIES
OSC’s original 2020 audit found that the Treasury Department’s Division of Risk Management had inadequate processes and made incorrect payments in two out of three payments sampled. The Division also did not identify and investigate suspected fraud, waste, and abuse, including by repeated claimants. OSC’s 2020 audit found that six claimants collectively filed 266 claims between 1978 and 2016. In 23 percent of those claims surveyed, no follow-up action, such as safety officer interviews, was taken.

2023 REVIEW

OSC’s 2023 review found that while the Division made some changes, including modifying its claims management software and adopting performance metrics for its vendor, the Division implemented them ineffectively and therefore did not fix the systemic problems uncovered in 2020.

Of the seven recommendations made in 2020, none was fully implemented. “The Division didn’t follow through on most of what it said it would do,” said Kevin Walsh, Acting State Comptroller. “The State’s failure to prevent abuse is putting the taxpayers’ money and employee safety at risk. As of now, the risk of fraud, waste, and abuse in New Jersey’s workers’ compensation system remains unacceptably high.”

In fiscal year 2022, the Division processed about 8,000 claims, amounting to $96 million in total costs.

Some of OSC’s findings include:

The Division does not conduct regular reviews of employees on long-term leave. In 2020, OSC found that Division investigators failed to conduct and document timely reviews, which resulted in improper benefit payments. In response, the Division committed to quarterly reviews of claimants who have received more than 270 days (9 months) of payments. In its 2023 audit, OSC examined a group of claimants that received, on average, more than 600 days (20 months) of consecutive workers’ compensation payments. There was no evidence that Division staff conducted quarterly reviews for these claimants.
The Division still lacks a formal policy for tracking and managing multiple claimants or locations with multiple claims. OSC examined the files of ten claimants who collectively filed 300 claims during the course of their state employment. OSC found no evidence of surveillance, site visits, or safety training related to these claims from fiscal year 2021 through fiscal year 2023. For a brief period, the Division identified employees with multiple claims and recommended their employer conduct fit-for-duty assessments, but it was an ad hoc effort that was eventually abandoned. The Division disregarded OSC’s recommendation that it should establish criteria and protocols for investigating suspected fraud, waste, and abuse.
The risk of incorrect payments to workers remains. The Division relies on wage data from human resources units at other agencies, which is frequently inaccurate. The Division’s written policies also provide contradictory instructions to its employees on how to calculate wage benefits, thus increasing the likelihood of errors.
The vendor that manages medical services for injured workers still isn’t adequately monitored. The 2020 audit found medical providers were chronically tardy in submitting medical reports and often did not include an estimated return-to-work date. While the Division adopted some performance metrics for the vendor, OSC found the Division continues to accept the vendor’s self-reporting that it meets these metrics. The vendor billed the Division about $6.5 million from July 2020 to October 2022.

Finally, the Division claimed that it did not have the ability to prevent injuries to state employees and that only other agencies can do so. OSC found that the Division misunderstood its role within state government.

Since 2007, the Division has been required by law to lead a whole-of-government approach to managing risk within state government. Specifically, the Division is supposed to send out monthly accident reports to the Governor, legislators, and state agencies. It also has been required to convene state agency representatives quarterly to meet as a Risk Management Committee to review those reports and address issues related to worker safety and capital repairs that may prevent injuries. The Division never issued the required reports, and the Risk Management Committee has never met.

“Given the amount of public funds at stake, and the importance of having a safe workplace, it is time for the Division to take our recommendations much more seriously,” said Walsh.

Read the report.

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Jon L. Gelman of Wayne, NJ, is the author of NJ Workers’ Compensation Law (West-Thomson-Reuters) and co-author of the national treatise Modern Workers’ Compensation Law (West-Thomson-Reuters). For over five decades, the Law Offices of Jon L Gelman 1.973.696.7900 jon@gelmans.com has represented injured workers and their families who have suffered occupational accidents and illnesses.