Premium Audits May Go Back Into The Past
Workers Comp premium audits can be a harrowing situation. This can be worse when you current or prior carrier decides to re-audit your policy after they already had one shot at it. The very short question in the post title came in last week from California.
California handles their premium audits a little differently on time limits. My rule of thumb is the current policy year and:
- Three years into the past for most states
- One year for California
- Two years for Ohio
As an example if your Workers Comp policy period looked something like this:
- August 1, 2007 – August 1, 2008
- August 1, 2008 – August 1, 2009
- August 1, 2009 – August 1, 2010 – not in OH or CA
- August 1, 2010 – August 1, 2011 – not in CA
- August 1, 2011 – August 1, 2012
- August 1, 2012 – August 1, 2013 – current policy
The ones that could possibly be audited in most states are in bold and italicized. Most audits are only for the last year’s policy that just expired. While it is legal to go back more than just the last year, I have always found that to be a questionable subject unless the carrier has some reasonable explanation.
The same time span is comparable to IRS audits. This may have possibly been where the origination of the rules for auditing workers comp policies. The basis could also have originated with Unemployment Insurance.
We had one caller from October that says there is a California carrier wanting to go back 10 years to re-audit their policies. From what I can tell, this employer had completely opened up their business books to the carrier’s premium auditor every year.
We are currently looking at that business’s payroll and business books and have found nothing beyond what the original auditor had found in their premium audit. In fact, we found a few inconsequential overcharges in the initial stages of the review.
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