Audit Dispute Question From A Twitter Follower
Our Workers Comp Twitter handle received an audit dispute question from a Twitter Tweeter.
Can an insurance carrier perform a mid-term audit and then come back in for another audit after the policy expires? That seems to take up a large amount of our time to have to assemble all of the data twice per year. Will the carrier (name removed) be able to do this every year? What are the rules on Workers Comp audits?
The email had a few expletives and the carrier’s name that I removed to avoid receiving another threat of a lawsuit due to this blog. Unless our customer base has changed, we seem to be receiving questions concerning multiple premium audits per year more than in the past.
It is noted that employment agencies seem to have more audits per year than most other lines of business. Those audits can be very complicated as they may cover multiple states and long lists of classification codes.
The best place to start on payroll or premium audit rules is the policy for that year itself. In every policy, there is going to be a small section on premium audits. I have often advised every company, risk manager, human resources manager, business owner that I have met with policy questions to review their policies in depth. There are many interesting subtleties in every policy.
The premium audit section will usually say something similar to:
StockUnlimited Carrier has right to audit multiple times per year during policy term and up to three years after policy expiration.
- Employer must turn over any/all records that have been requested – not just payroll records
- Audit must be convenient to employer and not interrupt business practices
- Refusing audit appointment will result in a heavy penalty – not in all policies
- Employer will receive audit notice letter well in advance of audit date
The bottom line is the WC policy is a contract between the employer and insurance carrier including any policy amendments during the year. Do I agree with these? I would say not necessarily, but it is the insurance contract that conforms to the rules of every state of WC coverage that dictates the rules.
The most upset employers we hear from are the ones where the carrier decided to audit them more than two times per year. I would have to agree with these employers. It is understandable possibly for the first year. After that time, what is to be accomplished by three audits per policy year?
The rule from one of the state rating bureaus (CA’s WCIRB) on premium audits is:
(1) Each policy producing a final premium of $10,000 or more shall be subject to a physical audit at least once a year. On policies subject to monthly, quarterly, or semiannual interim audits, …
The last audit of the policy shall be a physical audit of the complete policy period.
I used the WCIRB’s rule as they seem to be more concise. The keyword is the policy. One of the areas of the most concern is changing premium by a non-audit based endorsement. Any type of interim changes to your WC policies should be met with a certain level of skepticism and close review.
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