Audit Bill Handling and Response – Question From Blog Reader

Workers Comp Audit Bill  – Readers Question

The Blog readers question about handling a WC \audit bill. We received a huge bill from our Workers’ Compensation Yearly Payroll Audit. We cannot afford to pay for it. What do we do? We do not want to lose our Workers Comp coverage.

I would advise you to do four things:

1. Do not panic, as you need to make sure you are taking care of the rest of the business.
2. Check to make sure that you do owe that amount; if not, then dispute the amount you think that you do not owe. Do not dispute the bill as a way of delaying your payment.
3. If you owe the whole bill, then immediately call the contact person on the bill and tell them of your situation. Almost all carriers will let you pay the audit bill over time.
4. Make sure the payroll figures for next year’s policy are adjusted to the audited payroll amounts, or you will end up owing a huge bill again at the end of the year. Have your reserves examined by an expert before your next UNIT STAT date.

I will cover each of the four points below.

1. As you are very busy running your company or the financial end of the corporation that you work for, worrying about the bill will not help. We have never seen an employer lose their coverage when they are making attempts to pay the bill.

Often you will see phrases such as, “Please pay immediately”, or “You have 10 days to pay.” Most state insurance rules will let you have a longer period, even if your Workers’ Compensation insurance policy says 10 days. However, if you do owe the bill, then at least make contact with the insurance carrier. DO NOT IGNORE THE BILL as this will only cause more problems later on with your insurance carrier.

2. If you are not sure that you owe the bill, then you do have a right to dispute the audit. You must have some basis besides – The bill looks high, or There is no way we can owe this much. If you know something is wrong and you need help, call in an expert to look over the bill. We do not mean your insurance agent. We do provide this service. It takes time to get the records together, so getting help with your audit quickly is crucial. As mentioned before, do not use the dispute process as a way to delay paying the bill.

I have blogged about How to Dispute a Bill very often. Please check my prior blogs on how to dispute a premium billing, or contact us.

Quite a few states now require the insurance carrier to inform the employer of how to dispute the bill. California is one of the states that is very specific on this point.

3. If you are sure that you owe the whole bill, but cannot pay it, do not just ignore it and hope that it will go away. On the bill, there will usually be a phone number, address, and sometimes email address of the billing department. Many times, we hear from insureds that have a premium bill that is over 90 days old.

Call or email them ASAP and let them know that you will pay part of the bill. Making a good faith payment is a great way to keep your current insurance coverages. Send a check as soon as you can with the bill. It may be a good idea to call the billing department when the check is mailed.

Unfortunately, some carriers now are not accepting a partial payment, or at least they say they do not. I have never seen an insurance carrier to date send a partial payment check back to the employer. NOT EVER.   Pay what you can when you can pay it.  Communicate with your insurance carrier’s billing department.

One of our mottoes is to STOP JUST WRITING checks. Make sure that you owe the Workers’ Compensation premium bill and be sure to question how the bill was calculated.  Ask for the audit workpapers to see the complete documentation from the premium auditor on your audit.  Your company has a right to see that information.  Many times the auditor will send you a copy of their workpapers.  However, the audit results may not ever be seen by the company, only the premium audit statement or bill.

4. Make sure the payroll figures for next year’s policy are adjusted to the audited payroll amounts, or you will end up owing a huge bill again at the end of the year. Unless your company has had a decrease in payroll, you will likely owe another big bill. It is best to pay it through the year on a payment plan versus having to pay a huge surprise bill at the end of the policy year.

We have often seen this situation lately where an insurance carrier will write a policy in complete contradiction to the audits. Check to make sure what was on the original policy resembles what is on the Workers Comp payroll audit.  Agents will sometimes just copy what was on the policy from the previous year regardless of the audit results.   The time to ask questions concerning your Workers’ Compensation policy happens before you sign off on the new policy.

Have your reserves examined by an expert before your next UNIT STAT date. A huge increase in Workers Comp reserves will make your next year’s policy increase sharply, as your Experience Mod (E-Mod) will increase exponentially.

2025 Update – Most Workers Comp premium audits are handled by submitting your documentation through a portal on the carrier’s website.  Known as hybrid audits, organization and accuracy of the documents are critical.

Next Up – Classification Codes Revisited