Workers' comp fraud costs Americans more than $5 billion annually, threatens the jobs of Americans, and hurts employers so much that in some cases, companies go out of business or are forced to move. It adds 10 cents to every dollar of premiums. It's pervasive, growing, and often very hard to detect.

In the past several years, rising premium rates for workers' compensation insurance have increasingly pressured both insurers and employers. Despite workers' comp reform legislation that has been enacted recently in states such as California, across the nation medical costs continue to grow significantly despite a decline in the number of claims filed. In a 2004 study by the National Council on Compensation Insurance (NCCI), the medical share of total benefit costs in workers' compensation rose to approximately 55 percent on a countrywide basis, with some individual state shares approaching 70 percent.

Because a significant percentage of claims start off as legitimate, workers' comp fraud and abuse is hard to spot. Much of this is abuse, such as a case in which a claimant is malingering, delaying their return to work. Outright fraud is less frequent, but often costs payers dearly. The longer it takes to discover a fraudulent claim, the more money is paid out. That's why early detection of fraudulent and abusive claims is critical to containing the cost of workers' compensation. And the more insurers can decrease their losses, the more likely it is that their insurance rates will be lower as well.