Overcharges And Premium Audit Errors
Overcharges and premium audit errors are not only for private employers. Premium audit and policy errors can affect any employer, no matter the size of the business. One of the largest premium errors I have seen was pointed out in a few articles last week.
For some odd reason, the Armed Forces through the Defense Base Act (DBA) decided to pay Workers Compensation premiums instead of self-insuring. I find that astounding with the large amounts of money that were involved in the program.
From what I gather, the main contractors were supposed to supply their subcontractors with insurance. The DBA was supposed to reimburse the contractors for the Workers Comp coverage they provided for their subcontractors.
CNA (Continental Insurance) was the company hired by the government to oversee the program with a price tag of $225 million since 2005.
The audit recommends requiring Continental Insurance to provide additional reporting and undergo periodic independent reviews. It also recommends the Defense Department agencies get back the money owed the government. Does this not sound like the premium audit services that we provide for employers?
The audit shows the Army Corps of Engineers agreed to pay Continental Insurance higher premium rates than warranted, leading to being overcharged $9.9 million. One area of the audit by the Inspector General’s office that showed inaccuracies was that Continental mixed the billing and reimbursement funds together and did not keep the funds in at least two separate accounts.
The government had basically no way to track the refunds that were owed by Continental. The internal audit set the amount possibly owed at $60 million. Continental’s response was that they had done nothing wrong and had followed the contract they had with the DBA.
The takeaway from the figures is that without a premium audit of sorts being performed, the overcharging situation would have continued without anyone ever noticing that premium refunds were due overall.
©J&L Risk Management Inc Copyright Notice