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Workers Comp Audit Dispute Question From Twitter Tweeter

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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?

Twitter Audit Dispute Question logo
Wikimedia – David Ferreira

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:

  • Picture Of Computing Audit Dispute Question Concept
    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:

Piggy Bank Audit Dispute Question With Dollars
StockUnlimited

(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.

Also Read: What Is A Guaranteed Cost Program In Workers Compensation?

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management 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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