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Audit Bill Handling and Response – Question From Blog Reader

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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 it. What do we do? We do not want to lose our Workers Comp coverage.

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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 really 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 the 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.

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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 a phrase 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.

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I have blogged 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.

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 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 been seen by the company, only the premium audit statement or bill.

4. Make sure the payroll figures for the 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.

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We have often seen the 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 years’ policy increase sharply, as your Experience Mod (E-Mod) will increase exponentially.

Next Up – Classification Codes Revisited

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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