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Premium Audit Errors and Overcharges Are Not Just For Private Employers

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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.

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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?

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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.

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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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