Workers Comp Overpayment

What You Need To Know About Workers Comp Overpayment

Worker’s compensation insurance provides wages and medical benefits to people who are injured or become ill at work. The coverage is mandated by each state and the wage and medical benefits vary by state. Worker’s compensation is considered social insurance because it relies on a social contract between management and labor, wherein exchange for purchasing worker’s compensation insurance, business owners are protected from civil suits from their workers who become injured on the job.

The owner of a small business must be mindful of all his expenses and make sure that he stays within the budget. With that in mind, a small business owner is expected to question the necessity of providing health insurance if he has only a handful of employees. The small business owner might be tempted to drop the idea of providing health insurance to his employees but it could be counterproductive as it will be difficult recruiting talented employees if he does not offer health insurance benefits. Providing health insurance to employees is one of those things that work for the small business owner and lets him retain his competitive advantage.

Worker’s compensation aims to protect both employers and employees if an illness or accident occurs while on the job. Employees filing claims for worker’s compensation insurance can only do so if their injury or illness is caused by performing their duties while on the job. Examples of injuries are those resulting from a fall or slip, a body strain from heavy lifting, or an accident during the operation of machinery.

It is not easy for an injured worker to file a valid claim and receive payment for the injury. Insurance companies are very thorough in checking if a worker’s claim is valid and deserving of compensation. Insurance companies want to hang onto every penny possible, which makes it highly unusual, if not funny, to hear stories about overpayments in worker’s compensation cases.

The basic premise of worker’s compensation

The basic premise of worker’s compensation insurance is that an injured worker should not be better or worse than the injury never occurred. The Office of Worker’s Compensation Programs pays for the lost wages and medical expenses to cushion the effects of an injury. The OWCP correctly determines wage-loss benefits on the accurate information on the employee’s wages and hours worked from the employer.

The injured worker needs to inform OWCP about his eligible dependents and other sources of income, such as benefits paid by the Social Security Administration and the Department of Veterans Affairs. Payment of wage-loss compensation may be delayed when the employer fails to provide timely and accurate pay rate information to OWCP. If the employer will provide OWCP incorrect pay-rate information, the individual could receive more or less of compensation that he should get.

OWCP periodically audits cases of wage-loss compensation to check for any errors. An overpayment occurs when an injured worker receives money that is more than what the law allows for. The cause of an overpayment – by incorrect information supplied by an injured worker, the employer, or by OWCP – makes no difference at all.

Causes of Overpayment

The policy of OWCP is that an injured worker must know when he is being overcompensated for lost wages. That would very obvious if a worker resumes his regular duty and OWCP continues paying wage-loss compensation.

Other cases are less obvious, such as when OWCP fails to deduct other benefits such as from Social Security or veterans benefits, or when the employer-provided inaccurate pay rate information.

In those cases, the injured worker may be found at fault because OWCP presumed that the injured workers know he was receiving more benefits that he was entitled to. Regardless of who is at fault, the injured worker is obligated to reimburse OWCP for the overpayment.

OWCP procedures on Overpayment

An OWCP claims examiner shall mail a Preliminary Overpayment Determination within 30 days after identifying the overpayment. The letter should include a memorandum that states the circumstances of the case and the occurence of an overpayment.

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The memorandum usually states the period and the amount of overpaid benefit. It should specifically detail how the overpayment was calculated to make it clear with the overpaid worker how the final overpayment amount was determined. Finally, the memorandum must state whether the overpaid individual is with or without fault in the creation of the overpayment and explain how the fault determination was made.

The Preliminary Overpayment Determination should explain how the injured worker can respond, including repayment of the overpayment, requesting a waiver or recovery, and a request for a pre-recoupment hearing with the Branch of Hearings and Review.

The Preliminary Overpayment Determination normally includes an OWCP-20 form, Overpayment Recovery Questionnaire for the injured worker to address fault or waiver, or to determine a reasonable method of collection, if applicable.

at your employees are happy and covered, if you fail to provide competitive health insurance plans for your workers, you can face severe financial repercussions and even lose employees to competitors. A study by the SHRM (Society for Human Resource Management) showed that the average cost to find a direct replacement could take up to 50 to 60 percent of a worker’s yearly wages.

Overpayments of $300 or less may be eligible for administrative termination if the anticipated costs of the collection would exceed the expected recovery. For overpayments between $300 and $1000, a Preliminary Overpayment Determination must be issued. In a follow-up to such determination of a debt greater than or equal to $300 but less than $1,000, the claims examiner should consider, on a case-by-case basis, whether the overpayment may be administratively terminated.

The overpaid worker is given 30 days to submit a response to the Preliminary Overpayment Determination. If the injured worker denies that an overpayment has occurred, or believes that the amount of the overpayment is not correct, he should request for a pre-recoupment hearing to fully develop the facts of the case.

Regardless of the reason for the overpayment, the injured worker cannot keep the overpaid benefits.