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J&L Risk Management Consultants

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Home » Premium audit

Workers Comp Premium Audit Dispute Delay Can Be Very Costly

November 11, 2020 By JL Risk Management Consultants

Premium Audit Dispute Delay Costs Company $500,000 – Ouch! 

Over the last 13 years that I have been writing articles for the J&L website, I have warned very heavily against any type of premium audit dispute delay.   Delaying a dispute of or ignoring a bill from your current or prior carrier often turns into money lost from your company’s budget. 

vector alarm clock ringing premium audit dispute delay

OK, you or your company may not agree with the workers comp premium audit.  Many times, your company must act quickly regardless of the circumstances. 

This website and I provided many articles on this very subject.  Why?  Because I see the leftover problems once a company contacts J&L too late in the premium audit dispute process.  

By the way, thanks to William Rabb and the folks over at WorkCompCentral for providing me with the location of the ruling on a major premium dispute delay.  I cannot point you directly to the article as it is behind a paywall.  

The lawsuit can be found here.  I will not name any of the parties involved in the lawsuit.  I recommend you take a few minutes to read over the decision.    In the proverbial nutshell, this is what happened: 

  1. A company separates from its parent company 
  2. The company then requests a policy from a carrier 
  3. The rating bureau (WCIRB) gives the new company a higher X-Mod than the parent company.
  4. The carrier provides the company with an endorsement on the higher X-Mod
  5. The company thought the X-Mod should have been from the parent company 
  6. At the premium audit, the company is charged with the higher Mod which sharply increases the premium. 
  7. The carrier sends out the premium audit bill. 
  8. The company does not think they should pay it due to verbal guarantees.
  9. The company does not file a response to the collection lawsuit timely.
  10. District Court and Appellate Court says Pay Up.

Experience Modification and not Premium Audit Dispute Delay?

I will not cover the Ownership Rules or what happened when the companies split.  I do not have that information and will not attempt to assess what happened in that part of the dispute. 

If your company disagrees with an Experience Modifier decision by the Workers Comp rating bureau including WCIRB, here are the time rules right out of the manual –  (Note there are some exceptions to the below rules – these are the GENERAL Rules from their ERP Manual:

In the event of the discovery of an error in the current experience modification or the two immediately preceding experience modifications, a revised experience modification shall be published and be effective as follows:

a. The revised experience modification shall be effective as of the effective date of the erroneous experience modification, provided:

(1) The revised experience modification is less than the erroneous experience modification; 

(2) The revised experience modification is published within three (3) months of the effective date or publication date of the erroneous experience modification;

(3) The WCIRB was notified, in writing, within three (3) months of the effective date or publication date of the erroneous experience modification of a possible error; or

(4) The WCIRB notified the carrier of record, in writing, within three (3) months of the effective date or publication date of the erroneous experience modification that the erroneous experience modification was under review.

b. Except as provided in paragraph a, the revised experience modification shall be effective as of the date it is published provided, however, that the revised experience modification shall not be applied if it is published three (3) months or less prior to its expiration.

The above timetable represents very distinct periods of time on the X-Mod changes after a policy goes into effect. 

Endorsements Can Completely Change Aspects of Any Policy 

Any changes to a policy once issued is accomplished by Endorsements.  I have written or spoke on Endorsement many times.  The endorsement letters from the insurance carrier may be more important than the policy itself.   Check out this article on Endorsements.  I have written at least seven articles on Endorsements. 

I have seen up to 75 endorsements on a large company’s workers comp policy.  

Insurance Carriers Now Using Collection Agencies – with different response timetables 

Once an insurance carrier turns over a premium audit bill to collections, a new timetable, besides any of the insurance timetables, kicks in and must be handled properly.  

Knowing your local collection rules/laws may be helpful.  The best tactic to use is responding ASAP to any collection notice in writing with Certified Return Receipt.

We often hear from policyholders with a premium audit bill after the collection agency contacts them.   Please refer to this article on collection agencies. 

No matter if a policy generates a premium audit dispute or an Experience Mod dispute, the clock is ticking.

 

 

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium Audit Dispute Tagged With: ERP, Ownership Rules, proverbial nutshell, up to 75 endorsements, verbal guarantees., Willam Rabb

Physical Premium Audits – COVID 19 Removed The Physical Part

September 24, 2020 By JL Risk Management Consultants

Will Today’s Hybrid Audits Ever Return to Physical Premium Audits?

First – let us define the three types of audits in this article – 

pic of coronavirus mask physical premium audits

Wikimedia – NetanelBacharSchwartz

Short Definitions

Hybrid -the records are usually reviewed offsite -technology has allowed much easier access to employer records without having a “physical presence” at the employers’ offices.   If the employer hires its own premium audit consultant, the audit is usually hybrid. 

Self-reporting audit– the employer submits their payroll and classification codes to their insurance carrier.   Spreadsheets are critical to the success of self-reporting audits.   This type of audit usually occurs with very small companies.  

Physical – the premium auditor physically visits the employer’s offices to review the records onsite.  Many states require physical premium audits if the premium or payroll amount reaches a minimum figure.    The auditor may request to take some of the records offsite – my opinion on records removal can be found here.

COVID-19 Lockdowns Changed Everything 

The first that I heard of employers not allowing any type of outside contact began in March and has not changed that much since then on who comes and goes at employers.  

Hybrid audits became very necessary in states such as California and New Jersey.  The Departments of Insurance required the carriers to process premium refunds due to furloughed employees and reclassified employees along with other requirements such as 90-day grace periods for premium payment.  

The Classification Code 8871 became very popular almost overnight.    The Telecommuter Class Code was extremely important for employees working from home on their computers. 

Three carriers and two agencies contacted J&L to obtain our opinion on how to process refunds to employers even though physical premium audits were placed on hold.   The answer was modified hybrid audits.

Hybrid premium audits came to the forefront over the last six months.  

My Predicted Change to Physical Premium Audits

In my opinion, physical premium audits will not be eliminated entirely and replaced with hybrid audits.  Premium audit disputes would spike over “the auditor does not know what we do here at our plant” or something similar. 

My predicted change is the Departments of Insurance and Rating Bureaus (NCCI, WCIRB, etc.) will increase the minimum requirements for physical premium audits to a higher level.  

How will this occur? The process has already started for insurance carriers and premium audit companies.  Check out this webinar today on premium audits. 

Child in medical mask physical premium audits during coronavirus pandemic

Wikimedia Commons – vperemen.com

Premium audit companies and insurance carrier premium audit departments have started using algorithms and analytics to choose the type of audit – from the webinar page – 

“The webinar will focus on how insurance carriers are integrating advanced analytics and machine learning to their premium audit process t

PRP results carriers are seeing the benefit of proactive risk mapping. 

Objective: Understand how analytics works and how carriers can integrate modeling into their premium audit process”. 

Physical premium audits will never be eliminated totally.  How premium audits are conducted post-COVID-19 will change in early 2021 and 2022.

©J&L Risk Management Inc Copyright Notice 

Filed Under: hybrid Tagged With: 90-day grace periods, agencies contacted, integrate modeling, New Jersey, proactive risk mapping

Premium Audit Report vs Bill vs Statement- Important Reader Question

June 27, 2019 By JL Risk Management Consultants

Newsletter Reader Asks What Is the Difference Between a Premium Audit Statement, Premium Audit Bill, and Premium Audit Report?

A premium audit report, statement, or bill all refer to the premium audit process.   Many employers think these mean the same report.   Each one is a different report on the same result. 

cat playing with work comppremium audit report lizard

Public Use License – Basile Monin – Wiki

Each insurance carrier possesses its own business language for each of the three terms.    Any confusion on the three terms results from how each carrier bills for their premium audit results.   No one standard exists for the premium audit billing process.

Premium Audit Report

The premium auditor generates a premium audit report once they finish auditing your payroll and other company records.    The premium auditor may meet with the employer contact to provide a verbal report of their findings before they leave the company premises.    The auditor usually covers how they arrived at their numbers.   

The auditor usually provides the auditor’s workpapers at this meeting.   If the auditor does not, the employer can ask for a copy.   The workpapers can usually clear up many of the questions an employer asks about the results.  

The auditor may take the audit material obtained from the employer offsite.   Much debate exists on whether an auditor can carry any of the company financials offsite.  

Unless there are extenuating circumstances, we recommend that an employer provide the auditor with a comfortable work environment to complete their task.   No policy provision allows for material to be taken off the employer premises during an audit.

The offsite decision remains totally up to the employer. 

If the next two – premium audit statement or premium audit bill – arrive without the audit workpapers and the premium audit report, a request should be made in writing to the insurance carrier. for both of these important documents.  

The premium audit report may contain the audit workpapers.  

Premium Audit Statement

Picture of fountain pen premium audit report made by Pelikan

Wikimedia – MAKY.OREL

The premium audit statement or PAS usually breaks down the premium auditor’s finding into a summary form that shows Classification Codes and payroll amounts.   Often, the premium audit statement will not show  the final billed numbers.   

The premium audit report may be enclosed with the premium audit statement.  

Often, the PAS will denote – This Statement Is Not Your Final Bill.   Some carriers do not send the premium audit statements to their insured employers.    The carriers often combine the premium audit statement and bill into one. 

If your company receives a premium audit statement without the workpapers, we recommend you request those by mail or email to the contacts on the PAS.   

The premium audit statement should not be confused with a statement if your company is overdue with a premium payment.  

Premium Audit Bill

Blurry picture of dollars premium audit report on hand

Wikimedia – At.morey.tota

The premium audit bill closes  out the audit process.   The premium audit bill may contain all the premium audit report, workpapers, and premium audit statement all in one package.   

As mentioned previously, each carrier has its own method of billing out your audited premiums.   No premium billing standard exists other than the rating bureau rules, and the policy provisions. 

Any undisputed parts of the premium bill should be paid timely.  One large error made by employers comes from not paying the undisputed premiums if one part of the bill is disputed. 

Conclusion or Confusion

If my attempt to explain these somewhat confusing terms has confused you further, please contact J&L through our Contact Us page with any questions.   We answer most inquiries within one business day.

The auditor workpapers represents the auditor’s detailed work.   Always make sure you ask for these and do review them even if they are contained in the premium audit report, statement, or final bill.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: extenuating circumstances, large error, PAS, standard exists, verbal report

Workers Comp Premium Savings Generated With Website Updates

January 17, 2019 By JL Risk Management Consultants

Workers Comp Premium Savings – Keep Your Website Updated 

How can workers comp premiums savings come from updating your website?   One of our clients from last year had let their website sit for a few years without updating it.   What happened caused me to write this article.  

workers comp premium savings picture stop sign

Wikipedia – Bidgee

During a workers comp premium audit, a premium auditor pulled up a page that said they were taking on jobs in a certain field.  The company had not performed this type of work for over seven years.    However, the website included a whole page dedicated to a higher risk service offering than the company was presently performing for clients. 

This situation popped up many times over the last few years.   I wrote an article concerning updating web pages a few years ago.  If one thinks of your company’s website as a calling card and brochure, then what services that you include in your website easily compares to the days gone past.   

You handed out brochures and business cards that concisely listed your services.  The web pages of your website , including the long-forgotten underneath pages that no one (except possibly a wily premium auditor) ever sees when looking over your products or services.  

Whenever a new client signs on with us, the first place we look to see what they do has always been their website.  A parallel comparison is when you look at someone’s LinkedIn after they give you their business card.   

Your company website can generate workers comp premium savings.  If you have an old outdated website, here is a list of people that may construe your company to be something it is not:

  • Underwriter
  • Broker/Agent
  • Premium Auditor 
  • Rating Bureau agent
  • Consultant (such as J&L) 
  • Any other party in the Workers Comp arena 

J&L’s website needs updating, too. The glass houses and stones euphemism applies to us.   I am sure you have seen websites that need updates.  Some can be very obvious. 

Check the pages on your website:

  • About Us
  • Services Offered
  • What we do 
  • Our other services – a real Workers Comp Savings edit is necessary if it is incorrect. 
  • Our employees 

Any web page that describes your operations needs to be exactly what you do  for your marketing purposes and for Workers Comp premium savings. 

©J&L Risk Management Inc Copyright Notice

 

Filed Under: premium recovery, premium refunds Tagged With: Broker, card and brochure, stones euphemism, underwriter

Premium Audit Statement + What Other Document Shows Final Numbers?

May 26, 2016 By JL Risk Management Consultants

Premium Audit Statement is One Piece of the Puzzle

The Premium Audit Statement (PAS) or bill is one of the documents that will show the final numbers for any policy year.  What is the other document to match to the Premium Audit Statement to make sure the final numbers are correct?

Dollar Sign Puzzle Premium Audit Statement Emblem From Website

123RF

This is a question that I posed in my recent Insurance Academy (R) presentation on Workers Comp Premium Audits.  The most popular answer is the Workers Comp policy.  However, the policy is more of an initial document that a document of finality.

Surprisingly, the document that is the most “final” other than the  PAS is the corresponding work comp rating worksheets.   When I first heard that answer many years ago, I refused to believe it.   How can the worksheet have the final numbers on it?   Then I realized, the worksheets are actually the last document produced in the process.

Surprisingly, an Experience Mod may be changed unlimited times before, during, and after a policy year.  

One would have to say those are the two documents of finality unless an employer disputes either one of those two documents.

The Workers Comp policy that just expired will not be on the rating sheets until the next year.  Patience is a virtue in this situation.

Matching the worksheets to the Premium Audit Statement should not be that difficult in most cases.  If there are discrepancies in the numbers, then a full review is warranted in most cases.

©J&L Risk Management Inc Copyright Notice

Filed Under: Experience Mod Worksheets, Premium audit Tagged With: finality, PAS, rating sheets, two documents

Work Comp Questions Top 10 Most Misunderstood Potpourri

February 3, 2016 By JL Risk Management Consultants

Top 10 Work Comp Questions From Our Readers

The top 10 work comp questions originate from the emails and calls we receive every month.   The answers to these are actually in this blog.    Answer them – then search for the bolded terms.   You never know, you may know the answers to all 10 or you may learn something about WC.

Picture Of Man Work Comp Questions Holding Question Mark

(c) StockUnlimited

These are 10 points each.   If you answer them in the comments, I will let you know if you answer all of them correctly.  You can email the answers.   You can also stay under the radar and just answer them on your own.

  1.  What is workers comp called in Australia?
  2. Where did WC originate – think a long time ago and not in the US
  3. The best Workers Comp risk management technique is ____?   Can be more than one answer.
  4. Who is always viewed as an impartial witness on WC claims?
  5. How many states allow carrier reimbursement for medical marijuana?   Which state(s)?
  6. What is a PEO and define the term.

    Call Center Woman Work Comp Questions Using Computer

    Wikimedia Commons – MÁV Zrt.

  7. What is the designation ChFC and the ARM-P?
  8. The normal waiting period for WC benefits is  _______?   Trick question?
  9. What disease/injury has fallen over 50% due to WC safety measures?  Amazing.
  10. The best thing to do to prepare for a Workers Comp audit is ________?
  11. Bonus – The first article on this blog is dated? ________
  12. Self-serving Super Bonus – What services do we provide as a company?

Feel free to answer these and post to the comments or just keep them to yourself and see if your answers are correct. Thanks.

The bonus question #11 adds on an extra 10 points.

The bonus question #12 adds 50 points- even more self-serving.

I wish you good luck in answering the Top 10 Work Comp questions and the two bonus questions.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: ARM-P, impartial, top 10

Work Comp Audit Bill – We Cannot Pay It Immediately

May 7, 2015 By JL Risk Management Consultants

We Are Unable to Pay Work Comp Audit Bill – Help

Companies that cannot afford their Work Comp audit bill is one of the main reasons that we are contacted overall.   The work comp audit bill is usually mailed to the employer within a few days after receiving the workers comp audit report

Picture of Hand Using Calculator Work Comp Audit Bill with Laptop

(c) 123rf

If your company receives a bill without a full breakdown of what is charged, we recommend that you immediately write, not call, the insurance carrier to inform them that you have received a bill with no explanation of charges.   The work comp audit bill will usually have an address on it.

One question to ask is – Was the premium audit accurate?  Sometimes, a sharp increase in payroll will result in a bill that is unexpectedly high.  Make sure your payroll figures match up with the premium auditor’s figures.

The worst thing to do is to just file the bill away.  If you renewed with the same carrier that has sent you the bill, you may be cancelled for non-payment.  In other words, the worst thing to do is to ignore the bill   Another complication is that employers which are written through a state risk pool are not allowed to renew with a delinquent balance to one of the carriers providing coverage in the risk pool.

 

If you, after verifying the bill, feel that you owe the total, you should contact the carrier by phone as soon as possible.  It is up to each carrier, but they may allow you to pay it off over time.   Do not expect this to happen automatically.

drawing of clock Work Comp Audit Bill Time To Audit

(c) 123rf

Alternative insuring arrangements such as Professional Employment Organizations (PEO‘s) will bill your company each payroll cycle.   The work comp audit bill is charged as your company turns in payroll.

Premium finance companies can be seen as an option.  However, unless I am mistaken, there are no premium finance companies that will allow you credit at the end of a policy.   Your company needs to have had this arrangement upfront when the policy is written.

Finally, the steps are:

  1. Make sure an explanation of the work comp audit bill was previously sent or included with the bill
  2. If not, immediately write the carrier, certified return receipt
  3. Verify the payroll, class code, and the covered subcontractors
  4. Contact carrier immediately if your company cannot pay, it may be possible to pay over a short period of time
  5. DO NOT ignore the bill
  6. Pay what you owe, but not an extra penny.
  7. Seek out a PEO or a Premium Finance Company before your next policy renews

©J&L Risk Management Inc Copyright Notice

Filed Under: premium audit bill Tagged With: delinquent balance, extra penny, Seek out, sharp increase

Workers Comp Audit – Five Great General Questions From Readers

February 19, 2015 By JL Risk Management Consultants

Workers Comp Audit Question Blog Readers Ask

Workers Comp audit questions are emailed or called in to us quite often.  I was unable to cover all the questions over the last few months.   A few of the questions are listed below with answers.   There are links to other articles that relate to the questions.  Follow the links for further information.

Emoji Of Workers Comp Audit With Question Marks

StockUnlimited

We have not heard from our insurance carrier this year on our workers comp audit. Should we contact the carrier?

Carriers are quite adept at scheduling audits.  Quite possibly, something happened on the carrier’s end such as they had to replace the auditor for some reason.  You will be hearing from them soon.

Our business grew so that we now are experiencing our first workers comp audit.  What preparations should we make?    

One of the best ways to prepare is to be highly organized.  Throwing a pile of papers at an auditor will never help your result.  Excel is a great tool for organizing the paperwork that you will need to produce.  Organization is the key.

We received our audits results and do not agree with them.  How do we proceed?  

You should have received an address, phone number, or  email address to contact if you do not agree with your audit.    I cannot recommend enough that you use Certified Return Receipt Mail and write to the address on the premium audit bill.   You may want to review exactly what the auditor included in their audit workpapers if you were left a copy.   If not, you can always ask for them by Certified Return Receipt Mail.

For whom does the Workers Comp auditor work for- the state, the carrier, the agent, as a consultant to our company?

Graphic of Workers Comp Audit Question Marks

(c) 123rf

The premium auditor works for the insurance company.  The auditor is often from an independent company that is contracted by the insurance carrier.    The auditor should leave a contact business card with you before they leave.

Do I have to allow the premium auditor to leave with our company files/information?

There is no rule concerning this situation.   However, if you do not want any of your info to leave your business, you can make that request and it should be followed by the auditor.  That is strictly up to your company.

**Please note that there are differing Workers Comp Audit rules in each state.  These are answers are “in general.”

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: independent company, pile of papers, scheduling

Hybrid Premium Audits Still Allowed For Larger Employers

February 5, 2015 By JL Risk Management Consultants

Mail-In and Hybrid Premium Audits Possible With Technology

Hybrid Premium audits are becoming more popular every year due to technological advancements.  Securely scanning and emailing documents lessened the need for in-person audits by the workers’ comp premium auditor. 

The two terms that seemed to raise the most questions were mail-in (voluntary) and hybrid premium audits.  I mentioned these terms in an article I wrote earlier this week.  I did receive a few emailed questions on these two types of audits.

Picture of Hand Hybrid Premium Audits Concept

StockUnlimited

Technology-based premium audits are usually the audits that we perform for clients.  I first heard the term hybrid a few years ago at an NSIPA national conference.  

Due to technological advancements, many audits can be performed without being there in person.  Teleconferencing and the ability to scan large numbers of documents into very small files has allowed auditors to change their methods somewhat.

Mail-In or voluntary audits usually involve smaller employers.  The employer “voluntarily” fills out a premium form that is provided by the carrier.  Once the employer calculates the premium, a check is mailed in with the premium form.  The premium is usually calculated and paid monthly.

As the article earlier this week pointed out, the states are sticklers on in-person physical audits being performed by the carriers annually.   The rating bureaus see the in-person audit as developing a more accurate premium.

Woman Hybrid Premium Audits Using Laptop

StockUnlimited

One has to wonder if the states will allow more hybrid premium audits in the future for larger employers.   Mobile technology should allow auditors to be able to tour business without ever actually being there.  States may be slow to adopt hybrid audits.

The one main steadfast rule by almost all states requires an in-person physical premium audit.   This requirement means states will allow this type of audit with smaller companies.  

One requirement used in the future will likely be a required physical premium audit for the first audit.  The carrier may then use hybrid premium audits for subsequent years.  

©J&L Risk Management Inc Copyright Notice

Filed Under: hybrid, Premium audit Tagged With: mobile, NSIPA, technological, teleconference

January 1st Renewals, Your Premium Audit Is Approaching

January 29, 2015 By JL Risk Management Consultants

Upcoming Premium Audit For January 1st Renewals

The January 1st renewals for Work Comp policies have a premium audit approaching soon.

We receive many inquiries this time of year on preparing for a premium audit.  There are numerous articles in this blog on premium audits, including preparation.

Picture Of January 1st Renewals Calendar

(c) stockunlimited

Please note that we do not and you should not accept help from any company that may look to alter your policy, payroll numbers, classification codes, or anything else from your policy as preparation for your audit.

One can refer to this South Carolina article on what can happen if you try to manipulate your numbers upfront.  Your company should pay everything you owe each year for Workers Comp, but not one penny extra.

Auditors, by their nature, be they tax, insurance, or from other disciplines notice the insureds that are very unorganized.   Excel(r) can be a great aid in organizing your materials.

If you have been through a premium audit previously, look over the old audit.  You will likely be reminded of what the auditor was searching for in the data.  If you organize the audit using Excel and then attaching backing data to the Excel spreadsheet, the auditor will much appreciate the effort.

Papers January 1st Renewals Documents

Wikimedia Commons – Niklas Bildhauer

Anything you can produce to aid the auditor in the work will usually result in a smoother insurance audit process.

A few other areas to consider are:

  • Make sure you present all Certificates of Insurance for any subcontractors that you used during the last policy period
  • There is no rule that allows any premium auditor to leave your premises with any of your company records.
  • If , after receiving your premium audit bill,  you disagree with your premium audit results, there are specific rules on disputing your audit.
  • Make sure that you have someone available at all times for the premium auditor to consult with on obtaining further records or if there are questions about your operations.

Search for premium audit, dispute, or certificates of insurance in the search box for many more articles on this subject.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit, Premium Audit Schedule Tagged With: manipulate, premises, preparation, upfront

Premium Audit Workpapers Can Save Future Headaches

October 21, 2014 By JL Risk Management Consultants

Premium Audit Workpapers Are Golden

The premium audit workpapers can be one of the easiest methods to document your yearly WC  premium audit.  The workpapers are prepared by the premium auditor. 

Picture of Premium Audit Workpapers Three Business Colleagues in Conference Meeting

123RF

They can be either hand-written or computerized, showing how the auditor arrived at the payroll numbers that are used to determine the audited premium.  

We always recommend that any employer asks for a copy of the workpapers before the premium auditor leaves your premises   Even if you agree with the audit, these documents can become very elusive as time passes.   


A large amount of confusion can be eliminated with the premium audit workpapers even if they are computerized or multiple Excel (R) worksheets.   The best workpapers are spreadsheets that are emailed by the auditor.  This allows you to analyze the premium audit without having to input all of the data. 

Picture Of Premium Audit Workpapers Document

Wikimedia Commons – Tom Ventura from Denver, CO, USA

Workpapers are the most often set of missing documents when our clients provide us with the requested information.   Asking for them at every premium audit conclusion may save you time, money, and headaches in the future. 

Audit checklists may also be beneficial.  The auditor will sometimes have a standard checklist they go through for every premium audit.  The checklist can be thought of as a map of your premium audit.   Many sets of audit workpapers are electronic.  In that case, you can ask for a copy of the electronic file such as the aforementioned spreadsheets.


You do have the right as the employer to be provided with a copy.  We have rarely seen where an auditor will not comply with the request for workpapers.  If an auditor refuses the request,  this should raise a red flag with you.  

An email to the premium auditor or the email address on the premium audit bill will work well to obtain your premium audit workpapers.  

©J&L Risk Management Inc Copyright Notice

Filed Under: Audit Workpapers, Premium audit Tagged With: beneficial, checklist

Disputed Premium Audit Bill – Does Our Company Have To Pay Any Of It?

September 10, 2014 By JL Risk Management Consultants

Disputed Premium Audit Bill – How Much To Pay?

One question that we receive the most often is the sufficient amount to pay when there is a disputed premium audit bill.  Premium audits and the associated bills always generate a large number of questions.

Graphic Of Disputed Premium Audit Bill Concept

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The answer in the simplest terms is that an employer must pay any undisputed premiums as soon as practical.  The key words are undisputed and practical.

The amount of the dispute needs to be as accurate as possible.  Determining the correct undisputed amount can be a critical point.  If your company pays too much, you lose your leverage in the dispute with the insurance carrier.

If you pay too little, your company is violating one of the basic rules of WC rating bureau (NCCI, WCIRB).  The old saying about paying what you owe in full, but not one penny more would apply to this situation.

The practical time to make the payment is not necessarily when you see a bill due date.  We have often seen clients receive the bill in the mail with the due date of the premium audit bill payment within just a few days.

If you receive a bill with a due date in just a few days, calling the billing department may keep your  current policy from being cancelled if you are with the same insurance carrier on the renewal policy.

The best way to proceed is by making arrangements with the carrier as soon as you receive the bill if you feel that you owe it in full and cannot make the bill payment immediately.

Graphic of Gavel and Dollars Disputed Premium Audit Bill Emblem from Web

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Most insurance carriers have a very specified premium audit dispute process.   The easiest place to locate the rules for disputing the premium is actually in the Workers Comp policy.

Some carriers ask for a form to be filled out while others request a premium dispute letter written on company letterhead by one of the company officers.

We usually recommend not using the forms provided by the carriers.  Some of them seem to be very limiting on what can be disputed from the audit.   Phone calls just will not work with disputes very well.  The disputes need to be in writing and timely.   Certified return receipt is the best method for sending audit disputes in to the carrier.

Another important factor to remember is there are very specific time limits on the disputes.  Letting a premium audit bill sit for weeks can sometimes end up with an employer paying more than they should have even though there was a valid dispute.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium Audit Dispute Tagged With: arrangement, letterhead, receipt, undisputed

Canceling Your Policy Right After Renewal Or Premium Audit Costly

June 5, 2014 By JL Risk Management Consultants

Canceling Your Policy Right After Renewal Bad Choice

Will canceling your policy post-renewal due to a premium audit cost your company $$$?

Clipart of canceling your policy blue dollar sign and red arrow

123RF

We receive this question at least once per week.   This is an almost verbatim question from two weeks ago with editing for length.

Question – “We just renewed our Workers Compensation policy. We do not agree with our (premium audit or policy terms).   Our company wants to cancel our renewal policy and move on to another carrier.  Can we do this? Is there any penalty for moving our business to another carrier?”

Answer – Without looking over the information, canceling a just renewed Workers Compensation policy may not be the best choice.  Employers sometimes want to end the relationship with their carrier regardless of cost.  This may lead you to the “penny-wise and pound foolish” adage.

The main economic burden that will be placed on your company is the Godzilla-like short rate penalty.  The short rate penalty is a rating bureau approved penalty that will be assessed on an employer that switches coverage before renewal.  The penalty can be significant early in the policy.  There are a few strategies to avoid having to switch before the next renewal or your company may not switch even at the next renewal.

Graphics of Canceling Your Policy Like Godzilla Pictures

© Toho Co. Ltd.en.wikipedia.org

Obtain the policy from your agent at least a few weeks before renewal.  Read through the policy very carefully.  Read through your expiring policy.  Discuss any concerns with your agent at least two weeks before renewal.  If your company does not like the policy quoted, ask for another quote.

Prepare for your premium audit by providing a knowledgeable person to talk with the premium auditor. This person should have organized records with all data that the premium auditor will ask for in their letter to you.

You have the right to dispute the current audit or a limited number of past premium audits.  Exercise this right cautiously.  Saying that “we are just paying too much premium $$ without backup information will likely alienate your carrier and agent.

There are many previous articles in this blog that cover the premium dispute process.  Feel free to print them out for your use.  Use the search box on the right side to find information on premium audit disputes.

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Filed Under: Premium audit, Premium Audit Dispute, Short Rate Penalty Tagged With: adage, Godzilla, Q&A, verbatim

Workers Compensation and Hospitality Industries Are Very Similar

May 29, 2014 By JL Risk Management Consultants

WC And Hospitality Industries Are Similar – Service and Employees

The WC and Hospitality Industries are very similar in quite a few respects. 

The idea for this article resulted from seeing the best in the hospitality industry and the worst.  We, as consultants, usually are contacted when there is a breakdown in communication somewhere in the insurance process.A large percentage of the time the breakdown in communication causes a “surprise” or unexpected outcome such as a premium audit result that resulted in a much higher premium audit bill than was expected at policy inception.

picture of Keke's Breakfast Cafe Hospitality Industries Are Very Similar

(c) todaysorlando.com

Customer service is very important in both industries as the product being sold is only  used when needed such as a policy or a hotel room.  An employer may only find out how great their coverage is when they have a claim.  The same can be said when one arrives to find out how great their hotel will or will not be for the length of the stay.I recently traveled to Florida on business trip.   There were great service providers and very poor ones.  

Enterprise Rent A Car in Winter Park FL; KeKes Restaurant in Winter Park; and Ayothaya Thai in Orlando provided a no surprise service.  Both of the restaurants are award winners.Enterprise had me out the door in two minutes.  KeKes Restaurant and Ayothaya Thai had outstanding service and the product was also great.   Their workers made the difference. 

The one bad experience I had was at the Orlando resort hotel.  I will not mention the name as I do not want this blog to be the subject of a lawsuit.   When I checked in, I must have been checked into a room with a person’s name that was very similar.

Orlando Resort Hospitality Industries Hotel

Wikipedia – Bernard Gagnon

When I arrived at the room and opened the door, there were two suitcases on the bed and someone was taking a shower.  The front desk was very apologetic and upgraded me to a different room.  That was OK customer service.   It was not over yet. 

At 10 PM that night,  I was frantically called by the front desk saying that I had been identified as a possible credit fraud as I had checked into the room using a Visa.  That was interesting as I had checked in using an American Express card.  I explained this to the hotel clerk over the phone as to what had earlier occurred as it was late and I did not want to return to the front desk.

The front desk clerk then said they would send security to the room if I did not come to the front desk immediately.   I asked to talk to the manager or shift manager who was not at the hotel at the time.

 Thai Emblem Hospitality Industries Are Very Similar Ayothaya

(c) ayothayathai.com

The breakdown in communication had occurred and the “surprise” was in play.  As with any type of service industry, the mistake by the provider had tainted the relationship.   The resort was massive.  The return to the front desk was a long trip.    Who would want to have to return to the front desk for a second time to straighten out the hotel’s multiple mistakes?

The same can be said for the WC industry.  As with this article, the outstanding services providers are noted, but the deficient service providers are remembered much longer and in greater detail.

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Filed Under: Florida, Premium audit, premium audit bill Tagged With: customer service, keke's, Winter Park

Premium Audit Disputes and Collection Agencies Warning

January 16, 2014 By JL Risk Management Consultants

Premium Audit Disputes Warning

Since the first of the year, a large number of inquiries on premium audit disputes from employers with premium  audit disputes.

Graphic Of Warning Sign Premium Audit Disputes Icon

(c) stockunlimited

 I am not sure if insurance carriers by contract can do this – but a large number of disputed bills are being forwarded to collection agencies for final collection.  This seems to be an ever increasing trend.There are a few ways to avoid this situation:

  • Pay any undisputed part of the bill.  One of the conundrums in disputing a WC audit bill is establishing how much your company owes the carrier that is not in dispute.   Every Workers Comp policy has a clause in it that requires payment of the undisputed premium.
  • Just to be safe, it is recommended that you respond to the credit bureau by certified return receipt mail as soon as possible and cc: the carrier’s audit department.
  • If the carrier’s collection department also sends your company a request for payment, respond to them ASAP in writing with certified return receipt mail regardless of any collection agencies.
  • Do not use the audit premium dispute process as a way to delay paying a bill that your company actually may owe.  This will ruin your relationship with your agent and the carrier.
Picture Human Palm Held Up Premium Audit Disputes Warning

(c) stockunlimited

One of the big mistakes concerning premium audit disputes is to let a collection letter from a collection company sit or destroy the letter.  If you look at usually the back of the letter – it will say that your company must respond to them – and not the carrier within so many days.   If you do not, then you may have admitted that the debt is valid.

I am not a credit and collections expert.  I am only warning you to respond to any collection letters timely or you may end up owing a premium dispute debt.  Calling the collection agency is basically worthless as you have no documentation to back up anything you have told the collection agency.

We have had two companies call us where they did not respond to the collection agency’s letter.  The collection agencies are now saying they are in default of a debt and must pay it.  The main reason that this happened in both cases was the employers threw away the collection letters.

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Filed Under: Premium audit, Premium Audit Dispute Tagged With: collection agency, collection expert, credit bureau, undisputed

Best Premium Audit Software For Employers – You Have It

November 20, 2013 By JL Risk Management Consultants

Best Premium Audit Software

Recommended Premium Audit Software updates

Wikimedia Commons – Victorgrigas

The best premium audit software may already be right in front of you and costs nothing to use.  We receive many calls every week where an employer is very anxious about their workers comp premium audit.  One of the main questions is how to properly prepare for this yearly necessity.   

The best way to begin to prepare is with the right premium audit software.   

By the way, the premium audit software the auditors use is very limited in availability.  I have often been asked what the best software is by independent premium auditors.  

The secret to any type of audit – be it tax, workers compensation, etc. is to be highly organized.  One of the worst ways to prepare is by just piling a large amount of paper in front of any type of auditor and then say – go through it.  

First impressions count in audits just as they do when meeting someone for the first time.  The best method is to have everything organized as much as possible.  Auditors – including premium auditors- by their nature are very organized workers.  

The software that you likely have on your computer right now can easily organize what you need to show the premium auditor.  Excel(R) or any other type of spreadsheet software is great for such a task.  One of the main determinants will be the auditor’s letter to you.  

The letter will point out what the auditor needs to complete the audit.  One important point is that you are not required to let the auditor leave with any of your business information.   If your company does not have Excel(R), you may want to try Apache’s Open Office.  

Graphic Of Apache Open Office Premium Audit Software Logo

Wikimedia Commons – Chris Rottensteiner

Calc is their version of a good spreadsheet program.  It is open source and free, but you should donate to the program if you use it for commercial purposes.  Programmers have donated thousands of hours of their time to make it work.   

I have seen some employers organize the payroll by classification codes based on their prior year’s audit.  Spreadsheet programs are perfect for this task.  This can be helpful if you know exactly what you are doing.  In some cases, this may cost you.  The main goal is to be concise and complete.  

If you use a payroll service, they can always run a yearly report.  Some even have a Workers Comp report template that you can use.  I just searched in my Excel 2010 for “yearly payroll” and was provided with a free template that with a few alterations may suffice.  

The main goal is to summarize all your payroll data as much as possible using a spreadsheet.  Premium auditors are under a tremendous time pressure.  Anything you can do to present your payroll information in summary form with backing data will always pay off in the long run.  

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Filed Under: Premium audit Tagged With: Open Office, organized, programmer, software, spreadsheet, suffice

Estimated Premium Audits For Non Compliance Costly Proposition

October 23, 2013 By JL Risk Management Consultants

Estimated Premium Audits Not Sound Judgement By Employer

Estimated Premium Audits for non compliance costs many employers dearly.  Premium audit bills and notices generate most of the calls and emails we receive on a consistent basis.  The first question that is asked usually concerns allowing the premium auditor to examine their books.   The issue of privacy comes up often with the numerous reports on the NSA.

Picture of Estimated Premium Audits Concept

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The best way to pay what your company rightfully owes (and not a dollar more) is great preparation and organization using a basic spreadsheet app.  

The best way to do this is to have everything in the initial premium audit letter available to the auditor.  Spreadsheets that summarize the payroll records can be helpful.  Being organized is the key.

The rules for audits are usually in your policy.   Most states allow the auditor to TRIPLE your estimated audit.   The key here is “estimated.”   What constitutes estimated an estimated premium audit amount?   The rules allow much of your final estimated premium audit bill to be up to the premium auditor.   This is the person you have ignored for a number of week or months.

If your company is in the situation, you should contact the auditor and schedule a date.   Make sure you document when you called the audit and the subject of your conversation.  

Picture Businessman Holding Two Documents Estimated Premium Audits By Employer

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We have seen estimated audit bills where the premiums were five to eight times the normal amount.  As I mentioned in the last paragraph, your company is leaving much to the premium auditor by not agreeing to let him/her do their job.  The rating bureau rules allow them to examine any of your company’s financial records.  

All workers’ compensation policies have a section on this process.   Take out your original policy.  You will find that section towards the end of the policy documents.

The only way to actually reduce an estimated premium audit bill is to allow the audit that was going to occur in the first place, except now your company has a big, tall red flag on the information you will be providing to the auditor.

If, after the premium audit, you feel there is something wrong, you may dispute the audit figures.   We have never assisted any employer in how to present the figures to a premium auditor. 

There is a very large group of articles on this blog in reference to premium audits that you can read for free.  You may print them out as needed.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit, Premium Audit Dispute Tagged With: compliance, estimated, NSA, record, spreadsheet

Workers Comp Audit Dispute Question From Twitter Tweeter

August 1, 2013 By JL Risk Management Consultants

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

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(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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Filed Under: classification code, Insurance Policy, payroll, Premium audit, WCIRB Tagged With: contract, data, lawsuit, skepticism, subtleties

Payroll Audit vs. Workers Comp Policy Renewal Timing Conundrum

July 11, 2013 By JL Risk Management Consultants

Payroll Audit vs. Workers Comp Policy

Payroll audit vs Workers Comp policy renewal timing has been a controversial subject for many years.  We received this question last week from an employer with quite a conundrum that happens to almost all Workers Comp policyholders.  The question was:

Leave and Earnings Payroll Audit vs. Workers Comp Policy statement

Wikipedia commons – Kajmal

Why does the payroll audit occur after the policy renewal?  We disagree with our Workers Comp audit and want to switch carriers.  Our agent told us that we will receive a hefty penalty if we try to switch after policy renewal.  Is this true?   We are into our third month of the next year’s policy.   This seems to be unfair and almost binds us to another policy without knowing the true cost of the first policy.  

Your question is one we see the most often from our blog readers.  The timing of a WC policy does cause a problem for a large number of policyholders.  The short rate penalty is the reason your agent recommended not switching policies mid-term.   That was smart advice.

Woman Carrying Folder Payroll Audit vs. Workers Comp Policy Documents

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The conundrum is that an audit cannot occur on the day of policy expiry.  That would be very burdensome on your company to provide records for payroll that just occurred the previous day.  The usual schedule for a premium or payroll auditor is to audit the business books 30 45 days after the policy has expired – in most cases.   That gives the employer time to organize their records.

Most insurance carriers will send out the premium audit bill within 15 – 21 days after the premium audit.  The schedule results in the receipt of the premium audit bill along with the audit results at 60 days into the policy.   Your company would then have to pay the audit bill within 10 days or dispute it.

I have never agreed with the 10 days to pay a large audit bill upon receipt of the bill.  Most states and polices allow up to 30 days.   Regardless, if you follow the 10 days to pay rule or not, you are at least three months into a policy with a carrier that you wish to not have for Workers Comp.

Woman Tensed Payroll Audit vs. Workers Comp Policy On Computer At Office Table

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Some of the questions I would ask you at this point are:

  • Is the audit incorrect or do you just disagree with it?  Changes in business practices, new ownership, state law changes, etc. may have changed the “playing field”.
  • Did you dispute the policy and audit?  If so, what were the results?
  • Are you willing to pay a large penalty to switch Insurance companies?
  • Have you had a premium expert look at your audit that you do not agree with overall?
  • Did you read your policy before disputing?
  • Did you have a very large increase in payroll?

Disputing an audit can create your own minefield, so to speak.  You may actually cost your company more than the original audit.

The only solution I could ever come up with is to have a 90 day policy probationary period where no short rate penalty would apply if a company decided to switch carriers.  However, the carriers would respond with very sharp rate increases as they would be on the hook for a claim that you for which no premiums were paid.   In other words, I have not come up with a good idea, either. 

The best way I have seen to resolve the matter is to do a well-informed audit dispute with information and numbers to back your dispute assertions.  As distasteful as it may seem, you could switch carriers at renewal on your current policy in 2014.

If your company is in an assigned risk pool, switching carriers can be very close to impossible as there may be only one carrier covering your type of business in your state.  This has happened more frequently in the last few years as many carriers do not wish to be assigned carriers. 

Please remember when it comes down to the payroll audit vs workers comp policy, read over your policy before disputing the audit.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit, Workers Comp Payroll Audits Tagged With: assertions, conundrum, mid-term, probationary

Audit Dispute No Explanation Great Way To Alienate Carrier + Agent

May 22, 2013 By JL Risk Management Consultants

Audit Dispute With No Explanation Can Create Bad Vibes

A premium audit dispute with no explanation of why it was disputed can wreck your Workers Comp system.

Picture Of Working Couple Audit Dispute With Accountant

StockUnlimited

We are quite often brought into a dispute that an employer has with their insurance carrier’s audit.   One caveat to disputing a premium audit is doing so without any documentation other than “the bill increased greatly” or “we are just paying too much for Workers Compensation insurance.”

No carrier, Insurance Commissioner, or Rating Bureau (NCCI, WCIRB, etc.) has ever said to dispute a premium audit without reason was akin to fraud.  However, we have noticed the insurance carriers are much more assertive when an audit dispute is undertaken with no reason or premium dispute calculation.

Delaying a premium audit bill payment by using a dispute is slowly becoming a thing of the past with many carriers.  I had advised against this numerous times in this blog.  A business owner’s or risk manager’s gut feeling that something is wrong with their policy or audit is very often a legitimate concern.  No person or business knows your business better than you do overall.

We have not seen any carriers that will just cancel an insured because they have raised a dispute, even if there is no documentation as to the reason.  That environment is changing somewhat as carriers have been very patient as they do not want to lose a customer – plain and simple.

However,  an unfounded dispute puts the insurance agent in a predicament and can tarnish the relationship between a carrier and their insured employer.

Man Doing Audit Dispute Calculation

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The old “ducks in a row” adage is very accurate in these cases.  Also, any undisputed premiums have to be paid regardless of the dispute.  The calculation of the amount of the dispute is critical as the employer is supposed to pay the undisputed premium timely.  That rule is in every Workers Comp policy written today.

Timely audit disputes with the reasons for the disagreement along with the proper calculations will go a very long way in proving your case to the insurance carrier.

©J&L Risk Management Inc Copyright Notice

Filed Under: fraud, Premium audit, Premium Audit Dispute Tagged With: adage, assertive, tarnish

California Physical Premium Audits Increasing For Certain Classifications

April 22, 2013 By JL Risk Management Consultants

California Physical Premium Audits

The rules for California physical premium audits have changed recently.  The WCIRB (California’s Rating Bureau) recently released a reminder memo on the upcoming changes for 2014 Workers policies that have payroll developed under what is called a High Wage/Dual Wage Classification.  

Flag California Physical Premium Audits Republic

Wikimedia Commons – Makaristos

 Physical audits will be required for all new policies regardless of the amount unless it is a renewal policy that has been physically audited in the past two years.   

According to the WCIRB – 

Currently, the USRP at Part 3, Standard Classification System, Section VI, Administration of Classification System, Rule 4(a)(2) states: “Each policy producing a final premium of less than $10,000 shall be physically audited at sufficient intervals to ensure determination of proper payrolls.” The Insurance Commissioner’s Decision adds a new audit requirement for policies effective on or after January 1, 2014. 

The new audit requirement provides that each policy producing a final premium of less than $10,000 and developing exposure in a high wage, dual wage construction classification must be physically audited unless the policy is a renewal and the insurer physically audited one of the two immediately preceding policy periods. This new audit requirement also applies to policies issued to Owner Controlled Insurance Programs (also known as “wrap up” policies).

Picture Woman Pressing Colleague's Head Against Table California Physical Premium Audits Classifications

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This means that new small policies will be physically audited even if they are under $10,000.  The recordkeeping requirements for physical audits are:

“An audit of payroll, whether conducted at the policyholder’s location or at a remote site, that is based upon an auditor’s examination of the policyholder’s books of accounts and original payroll records (in either electronic or hard copy form) as necessary to determine and verify the exposure amounts by classification.”

The bottom line is that if you have a small construction company with premiums less than $10,000 it is wise to make sure you have all payroll figures correctly recorded.  The old rule was that if your policy was under $10,000 your company may have not been required to go through physical audits.   This will cause a large number of physical premium audits for policies that have less than $10,000 in premiums. 

The list of high wage/dual wage classifications  is available here. 

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit, WCIRB Tagged With: dual wage, high wage, physical, sufficient intervals, USRP

Workers Comp Policy Bill Finalized With Premium Audit

April 11, 2013 By JL Risk Management Consultants

Final Workers Comp Policy Bill Comes From The Premium Audit

The final Workers Comp Policy bill  results directly from premium audit.  I received a question late last night on the last article I wrote on Deposit Premium.   The question – (paraphrased) was:

Picture of Man Calculating Workers Comp Policy Bill Concept

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We paid a very large deposit premium upfront January 2012.  We have not heard from the insurance carrier except to renew our current policy for 2013.  Should we be expecting a call or letter from our carrier’s premium auditor?  Was the deposit premium for 2012 adequate?   Should we be doing something on our end? 

If your company has paid all premiums requested by your carrier, then you have not really done anything that would violate your 2012 or 2013 policy.  April is a little late for a policy that expired in December 2012.  Your final policy premium should never be considered as the deposit premium with your new policy.

Most states do have some type of rules on when policies can be audited by the carrier.   If you look in your policy, in usually the last few pages, you will find your carrier’s premium audit rules.  Most of the time it will have a passage or two on your responsibilities for your final premium audit.

You may want to check your incoming letters.  We have seen a very large carrier in the mid-Atlantic states send out a large amount of marketing materials – sometimes two or three times a month.   A letter with a follow up letter was sent out by the carrier from the audit department.  The client employer actually thought it was marketing material and threw them out each time.

Their first notice was a 10 day notice to cancel their current policy for not abiding by the premium audit rules for the prior policy.  With our assistance, the situation was straightened out in the nick of time and coverage cancellation was avoided.

Graphic Of Educational Set Workers Comp Policy Bill Icon

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A good suggestion is to have someone responsible for any (not just Workers Comp) insurance mail.   Do not assume that your agent is receiving carbon copies of all of the mail from your carrier.  The designated person should bring any of these items to the attention of management:

  • Endorsements
  • Changes to premiums
  • Bills
  • Policies
  • Notices
  • Audit results
  • Audit bills

If you feel your company may be owed a refund, then you may want to reach out to the carrier.  As post-audit policy refunds are becoming more rare, that is a decision you may want to weigh heavily.  All Workers Comp policies require responses, not initial contact.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: mid-Atlantic, violate, weigh heavily

Workers Comp Audit Materials Needed For Full Review

March 21, 2013 By JL Risk Management Consultants

Workers Comp Audit Materials Needed

The materials needed for Workers Comp Audit are communications, data, information and contracts. We receive this question quite often when customers or potential clients inquire about our services.  

Picture Of Group Of Workers Comp Audit On Table

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We usually do not disclose this information until a contract is signed as we use a copyrighted info grid that I constructed from working with clients over the years.

I decided to shed some light on the subject as this is where we often have a breakdown in communications as the amount of data required can sometimes be very large.   The amount of data needed also depends on the states of operation for a certain business.

California insureds usually only require three years at a maximum due to the premium audit laws in CA. However, this is for states that operate only in California.   We actually request the two prior years and the current years’ information.

In California, we can only examine the current year and the prior years’ WC data.  This is due to the rules established by the Insurance Commissioner and the rating bureau – the WCIRB.

Materials For Workers Comp Audit Vector

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Almost all other states have a three year look-back period which means that the Insurance Commissioner  State Rating Bureau, and/or NCCI allow the current policy and three years’ prior policies to be examined overall.   There are some very rare exceptions to this rule.  I will not cover those examples.

If your company operates in multiple states, the NCCI will usually have jurisdiction over your rating better known as a multi-state rating.  This can cause some confusion as some of the independent bureaus such as California or Ohio wish to have the part of the ratings as a separate policy for just their state.

I would just list all the workers comp audit items that we usually request.  However, there are many documents that are requested due to a specific company such as drivers’ expense records for a trucking company.  The main thing to start now is a Workers Comp file, whether scanned or paper, that has EVERY piece of info you have received or sent including emails over the last five years – three for California employers.

We actually found a mistake made on a policy resulting from a sticky note that saved an employer over $25,000 over a three year period.  I also recommend not letting your agent or broker have the only copy of your WC info including policies, amendments, payroll audits, etc.  You should have a local copy of everything at your disposal.

NCCI, or your State Rating Bureau will usually provide a free copy of your E-Mod rating if your  company requests it on your company letterhead.

©J&L Risk Management Inc Copyright Notice

Filed Under: California, Premium audit Tagged With: amendment, copyrighted info, endorsements, multistate rating

Payroll Audit Increased Policy Cost By 150% – Five Scenarios

February 21, 2013 By JL Risk Management Consultants

Payroll Audit Increased Policy Cost Significantly 

Below are five scenarios why your payroll audit may have increased policy cost.

I received this question earlier this week from a California .  A related question on policy premium is here.

Graphic of 150% color red Payroll Audit Increased Policy Cost

(c) 123rf.com


We had switched agents and carriers as our company was offered a very low policy premium as compared to our previous agent and carrier.  We just had our audit and our premiums increased from approximately $125,000 to over $300,000.  How did this happen?

The money that your company paid the agent at the inception time of the policy is referred to as a deposit premium.  The deposit premium that you pay upfront has little to do with what your company will finally end up paying in premiums.

The basic definition of deposit premium is the amount your company must pay at the start of the policy to the carrier for your company to be accepted as an insured.

Picture Of Calculator And Payroll Audit Paper

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Properly budgeting for a Workers Comp paid policy (deposit premium and audit premium)  is sometimes not an easy task.  The easiest way to start is by:

  1. Reviewing what you paid last year in premiums.  If your company did not change that much from the previous year, did your company actually expect a $175,000 discount?  Premiums among carriers vary some, but not that much. 
  2. Accounting for any payroll changes – this is a popular scenario – if your company was very successful and your payroll increased by a large amount, you should expect some type of increase at premium audit.
  3. Company changes such as layoffs, purchasing new companies, or change of ownership.  Major changes to your company will usually have an effect on  your Workers Comp premiums
  4. Workers Comp law changes –  This is not as common, but can have a very large effect on premiums.   An example is when West Virginia changed from a monopolistic state to an open market system.

    Hand Gesture Payroll Audit With Increase Graph

    StockUnlimied

  5. Analyze loss runs – if you had at least one or more bad claims years, your E-Mod can increase significantly in the next year.
  6. Bonus – Analyze NCCI or State Rating Bureau Ex-Mod sheets –   your E-Mod/X-Mod is basically a multiplier of risk.  If you have a high E-Mod, then any premium increases at audit can be significant.  For example, having a .8 versus a 1.2 E-Mod is a 40% swing in premiums. This is one area “that sneaks up” on employers.   You can actually know what your E-Mod is 6 months before policy renewal and/or 3 months before the rating agency publishes your E-Mod.

The deposit premium that you paid is just to get your company insured under an applicable Workers Comp policy.  There are no rules on how much the deposit premium should be from year to year.  It is whatever the carrier will accept upfront to write you a policy.   I have seen policies where the deposit premium was $850 and the total amount owed at premium audit (payroll audit) was in excess of $300,000.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit, Workers Comp Payroll Audits Tagged With: inception time, popular scenario, sneaks up

Premium Auditor Asked Employer To Sign Audit Agreement

January 30, 2013 By JL Risk Management Consultants

Audit Agreement – Premium Auditor Asked Employer To Sign Off ???

The Audit agreement form has been a rather controversial topic.  This question was emailed in earlier this week.  We had our yearly Workers Comp premium audit last week.  The insurance company’s auditor actually worked for a premium audit company and was not a direct employee of the insurance carrier.  

Two businessman Audit Agreement shaking hand

Wikimedia Commons – Duisenberg

After the auditor completed the audit, I, as CFO was asked to sign off on an audit agreement form where I agreed to pay the premium owed after the audit and that I agreed to the audit.   The form is sitting on my desk.  Should I sign it?  What are the repercussions if I do not sign it? 

This is a disturbing trend that I have heard on the Workers Comp airwaves over the last few years.  There seems to be not even an audit company, but certain auditors in certain companies that have used this tactic.

I am not sure that it is even legal to ask you to sign anything after an audit admitting that you owe the $.  In all Workers Comp policies, there are rules about Workers Comp premium disputes.  I have never personally seen in any policy the requirement to sign an agreement to the audit results.   There are also many state laws, rules, and regulations that would seem to prohibit that request.   Of course, if you sign it, then the policy and rules/regulations will not matter.

Woman Audit Agreement Talking To Man Signing Papers

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Your Workers Comp policy may be unique.   I thought I would reach out to a few premium auditors and ask their opinion on if they have ever requested this sign off. I also asked if they knew of any auditors, auditing companies, or insurance carriers that requested a signed agreement.

The answers were unanimously – no.  According to the insurance premium auditors if the premium bill was in collections for a long period of time, there are some agreements that could be signed such as a partial payment arrangement or if the file was in litigation to stop the collection process.

I am not saying NEVER on this one.  There may be some specialized policies where this may occur, but it would still be in the policy.  I suggest immediately reading the policy front to back.

By signing the agreement, you will also be giving up certain rights as a policyholder.  

 

Picture of Two Man Hand Shaking Premium Auditor Asked Agreement

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As I mentioned previously, I have never seen in any policy the requirement to sign off on a premium audit whatsoever.  There are a few exceptions that I noted in the last post.

An employer would give up most of their rights by signing such an agreement.  These rights would include:

  • The right to later question the audit is eliminated.  If you agreed to the audit, it is too late to even consider a premium audit dispute.  Get the out the checkbook and pay up.
  • Some of the agreements may require that your company also give up all rights to the present audit and all of the past ones.  If you find a mistake in your next policy or the current one, you cannot ask for premium refunds on past policies.

    Agreement Premium Auditor Asked Paper

    StockUnlimited

  • Your company may be required to pay the premium audit bill very quickly according to the auditor’s side agreement.
  • The insurance carrier may possibly still be able to audit your past and present policies and charge your company more premium.  This would all depend on the agreement you signed with the auditor.
  • Your company may have to pay all or a portion of the audit findings on the spot.   This is rare, but it does happen.

Please note that most premium auditors are good people just doing their jobs.  I cannot imagine why these good people would want you to sign such an agreement.

There are certain instances where an agreement might be appropriate, but not on a just-completed workers compensation premium audit.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit, Premium Auditor Tagged With: airwaves, audit result, checkbook, controversial topic, repercussions

Seven Premium Audit Resolutions For Smooth Premium Audit

January 16, 2013 By JL Risk Management Consultants

Seven Premium Audit Resolutions

The seven premium audit resolutions to reduce stress are below.

As the premium audit season rolls around every year, I usually post quite a few articles on the subject.   The reason that this time of the year is called premium audit season is that most policies renew and expire on January 1st.

Picture Of Notes And Pen Seven Premium Audit Resolutions

Wikimedia – Photos public domain.com

Your company does not want to stand out from the pile of audits that the premium auditors face every week.  For the most part, Workers Comp premium auditors are overloaded as are most insurance company personnel.   They are usually on a very tight schedule.

Premium audits are usually scheduled not long after policy expiry.  Even if your current policy did not expire on January 1, the list can be useful whenever you are audited in the upcoming year.

The seven best premium audit resolutions for your company are:

  1. Organization is the key.   An unorganized group of records will immediately indicate to the auditor that the audit should at least be yellow-flagged if not red-flagged.  How can your company have accurate payroll and company records if they cannot at least be pulled together for a premium audit?
  2. Read the audit records request letter very carefully.
    Reading Seven Premium Audit notes

    Wikimedia Commons – Ragesoss

     An easy way to start the records organization process is the letter the insurance carrier’s audit department will send usually 21 – 30 days before the audit appointment.   Almost all policies require your carrier to allow enough time for your company to amass the records.   You can ask for the audit to be delayed if the records request letter does not arrive or runs very late.

  3. Spreadsheet programs are crucial.   The best method to undertake #1 above is to use a spreadsheet (usually Excel) program.  You can use the audit letter #2 as a basis for records organization.
  4. Spreadsheet/audit info must be accurate.  One of the pet peeves of a premium auditor is the spreadsheet and the supporting documentation does not match.  Checking to make sure the info matches will save the auditor and your company a large amount of time and effort retracing the requested info.
  5. An office contact will save many headaches. Make sure you have one and only one person  to answer any of the premium auditor’s questions and to provide any additional information. The contact must understand the records that were provided to the premium auditor; the company’s operations in full;  and the company financial records.
  6. Graphic Seven Premium Audit Number

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    Review your premium audit bill very closely.  The bill should arrive within 21 days after a premium auditor has finished your audit.  If there is anything in the bill that concerns you, then you should contact the carrier (by letter).   The time clock is running once the premium bill is issued.  The explanation for any additional charges should be attached to the bill.  Only contacting your agent may forfeit some of your rights.  The policy spells out what you need to do if you thing your company has been overcharged on premiums.  The policy is a contract you must follow.

  7. If you feel that you are in over your head or are running out of time on a premium audit bill grace period, you may want to consult a non-agent expert.  There is nothing wrong with not understanding the policy, audit, or premium audit bill.  They can be highly complicated in certain circumstances.

©J&L Risk Management Inc Copyright Notice

Filed Under: Insurance Policy, Premium audit, Premium Auditor Tagged With: audit record, resolution, spreadsheet, yellow-flagged

Premium Audit Bill and Policy Renewal Conondrum

January 9, 2013 By JL Risk Management Consultants

Changing Carriers Due To Premium Audit Bill Can Be Costly

Our Workers Comp premium audit bill surprisingly increased our premium by 26%.  We do not necessarily agree with the audit and want to change insurance carriers.    Due to the timing of the audit, we are already two months into our next policy.  Can we dispute the audit and cancel our renewal policy?

Graphic of puzzle with dollar sign printed Premium Audit Bill Concept

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We receive this question often. There seems to be two issues here – one of the premium audit dispute, and secondly canceling a policy midterm.   Both could turn out to be a very expensive proposition if not done properly.

This blog contains numerous posts on premium audit disputes.   There are time limits on disputing your premium audit bill.   Your company has to be very careful in just disputing a premium audit bill because it looks large.   Reviewing the bill and audit may point out a reasonable explanation for the increase.

If you review the bill and associated premium audit and still feel there are overcharges, you can dispute the bill.  It is a very wise move to have a basis for your dispute.   Your company may even owe a larger bill if the dispute is not done properly.

The second concern is one that has to be handled delicately.  Your agent may have already explained to you there are short rate penalties that can be substantial.   An assessment of the short rate penalty revolves around a complicated formula for computing the carrier’s fee.

If your company is already six months into your new policy, the penalty can be very substantial.  If your company is only two months into a policy, the cost may not be that high to switch.

Searching for a new policy takes time.  The new carrier will know that you had canceled out before policy expiration.  The search for a new WC policy may take a few weeks if not months.

Arrow Increase diagram and dollar sign Premium Audit Bill Graphic

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There is an inherent delay in receiving the premium audit bill for the prior policy while the next year’s policy is being renewed.  The premium audit process cannot finish before your next renewal as the carrier needs to have a complete year of payroll and documents.   The normal WC insurance cycle does not provide for an audit 11 months into a policy.

If you are not a fan of the premium audit and policy renewal process, there are many alternatives such as pay-go or PEO‘s.  These two options have basically no audits and/or you pay for the WC coverage every payroll period.  Both of those options have been growing in popularity over the last few years.   There is a caveat that these two types of WC coverage must be placed properly.  If not, your company may end up paying much more than for a regular WC policy.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium Audit Dispute, Short Rate Penalty Tagged With: inherent delay, reasonable explanation, revolves around

Six Workers Comp Premium Saving Resolutions

January 2, 2013 By JL Risk Management Consultants

 Workers Comp Premium Saving Resolutions

Workers Comp Premium saving resolutions are always a great way to start the New Year.  There are six easy workers comp premium saving resolutions below.  These will work for companies of all sizes.  Six Workers Comp Resolutions for Self Insureds will be covered next time.   The premium-saving employers always:

Picture Of Piggy Bank Workers Comp Premium Saving With Coins

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  1. Have a current copy of their Workers Comp loss run.  Having online access is the best and up-to-date way to track your reserves.  Paper loss runs are satisfactory.  Monitoring any changes in your company’s reserves can avoid a premium disaster in the future.
  2. Have the most current copy of their company’s NCCI or Rating Bureau sheets.  Rating bureaus may issue many different revised rating sheets during your company’s policy year.   Your company needs to know the current status of your E-Mod (X-Mod) at all times. The Mod may not stay the same as the one your company was originally issued before policy renewal.   The worst time to find out a Mod has changed is at premium audit.
  3. Know their policy status.  Is your company in or headed into an assigned risk pool?  Are there better deals than the policy you are about to renew for another year?  Are you changing to a different carrier?  Are you expanding into other states?
  4. Have a copy of the Six Keys to Workers Comp Savings handy.  The keys are the same as they were 20 years ago.   The keys are still current today.  Follow the link for the list.   These are proactive tried-and-true ways to reduce your Workers Comp costs on the front-end of an accident.
  5. Understand the premium audit process.  There are many employers receiving very large premium audit bills.    The premium audit process has very defined rules in every state that must be followed by the carrier, premium auditor, employer, and rating bureau.   Disputing an audit without justification is just as detrimental as writing a premium check without full justification of the amount.  There are time limits placed on the carrier and employer on completing the audit process.
  6. Picture of Man holding alarm clock Workers Comp Premium Saving

    StockUnlimited

    Know safety is the crucial element.  The least costly accident is the one that never happened in your workplace.   Workers Comp claims are called a “loss” for a reason.  Post-accident savings are tough at best.  The important Schedule Debit/Credits also directly result from your safety regimen.

  7. Bonus – if you have any questions, make sure your company knows which entity or department to contact.   This will save your company a large amount of time and money.  Even contacting your agent does not necessarily preserve some of your rights as an insured.

These workers comp premium saving resolutions are a good start to reducing WC costs.

©J&L Risk Management Inc Copyright Notice

Filed Under: NCCI, Premium audit, rate bureau, Safety, Workers Comp Resolutions Tagged With: Bonus, policy status, safety regimen, tried-and-true

Workers Comp Premium Audit Season Prep Work Required

December 11, 2012 By JL Risk Management Consultants

Workers Comp Premium Audit Season Over The Next 3 Months

Workers Comp premium audit season is upon us again.  Why do I designate this time of year as premium audit season?

The largest number of premium audits for WC are performed January – February of each year.  Why would it be January/February?

Picture of Flying Dollars Premium Audit Prep Work

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January 1 is the most popular renewal date for insurance policies including Workers Compensation.

As a side note, there are some disadvantages to a January 1 renewal date as you can see in the linked article. 

The premium auditor will usually contact your company within 30 days and will perform and finish the audit within 60 days after policy expiration.  I was going to write the usual – preparing for a WC audit article.

I then realized there are many audit prep articles already on the Internet.   I really do not like to refer to them as they recommend such strategies as putting the auditor in an uncomfortably cold or warm room, etc. and how to tell your employees to dress the day of the audit.

Picture of Woman auditor Premium Audit Season Workers Comp

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There are even many WC carriers that have published articles on the process of a Workers Comp audit. That makes sense as anything a carrier can do to make the auditor’s job easier would be highly recommended.

I am not saying that making the premium auditor’s job easier will help your company when it comes to the audit.   There are two main points I wanted to bring up concerning WC audits.

The two most important prep work tasks are (in my humble opinion):

Organization of the audit materials

Dumping folders of data and receipts on an auditor may have been an old school way to have the auditor just give up on the audit.  That is not the case any longer.

One of the easiest tasks is to always summarize any of the data on a spreadsheet.  That may seem simple.  Many companies are not doing this task.  Two of my good friends are tax auditors – one for employers and one for the IRS.  They both have stressed the fact that organized data gives the best first impression possible in any type of audit situation.

Designating one and only one very knowledgeable employee to assist the auditor and answer any questions falls under the organization category.   Most premium auditors are going to be there for 1/2 to one day at the most.  The employee will not be inconvenienced except for a short period of time.

Having multiple employees answer the premium auditor’s questions may end up confusing the auditor and not providing the proper substations for the premium audit.  

Separating out any subcontractors/temporary employees along with the proper certificates of insurance is a very good  idea.  A spreadsheet of these two types of non-employees is also a good idea.  Having the premium auditor correct any non-employees that are deemed employees during the audit can be an arduous task at best.

Your company’s organizational skills are extremely important.   A yellow flag pops up in the auditor’s mind if your recordsare very disorganized. 

An employer that provides: 

  • Organized payroll data 
  • A knowledgeable employee to answer questions and provide additional data if requested
  • Full subcontractor information 

will always have a better workers comp premium audit season experience. 

Read Your Workers’ Comp Policy Before The Premium Audit 

The second area of preparation I wanted to cover is reading your Workers Comp policy front to back.  The basis for all Workers Comp premium audits is, of course, the policy.  There are several parts to your policy.   The Dec page or Declarations Page is the most important.  

Unless your company has many different types of employees, your Dec page should not be that long.  Review it very carefully.  Does the Dec page describe the business practices of your company?  If not, you should be asking questions long before the premium audit.   

Woman Agent Premium Audit WalkingWith Clipboard

StockUnlimited

The premium audit is the worst time to receive an unexpected bill that is not in your company’s budget.  I do realize that in this very bad economy your company may not have the time to review everything as you are in the survival mode.  Presently, we are seeing companies headed to bankruptcy by owing very large unexpected Workers Comp bills.   In other words,  reviewing your WC policy is part of your survival mode. 

The Dec page is a good start if you are in a time crunch.  Reading the whole policy is worth it.  I have heard from employers, agents, and other insurance personnel that after the Dec page, the WC policies are all fluff and really do not change.  That may be true for possibly one year.  That is not true for the long term.   A client’s policy changed over 70 times in a year when J&L performed a premium audit review.   

The policy will usually contain:

  • Rules for the premium audit
  • Audit dispute procedures
  • What is excluded from coverage
  • States that you are covered for Workers Comp – usually on Dec Page

Many times the insurance endorses (changes) the policy before policy expiration, often at the very beginning of the policy year.   These changes are called Endorsements.  These Endorsements can change the policy dramatically.   

Reading the policy and Endorsements will usually generate questions.  I always recommend asking your agent/broker and then obtaining another objective opinion.  

For every policy, the workers comp premium audit season in 30 – 60 days after your policy expires each year.  Being prepared will cut your comp costs. 

©J&L Risk Management Inc Copyright Notice

 

Filed Under: Premium audit Tagged With: audit material, renewal date, spreadsheets

Make Sure Your Policy Payroll Matches Your Budget Forecast

December 4, 2012 By JL Risk Management Consultants

Does Your Policy Payroll Match Your Budget Forecast?

Your policy payroll should match up with your budget forecast.   Payroll and certain benefits – known as remuneration among the Workers Comp premium auditors – should match your budget for your next policy year.  Just copying the payroll figures from your last years’ audit may result in giving your Workers Comp carrier having free use of your $$.

Picture Of Money Policy Payroll And Calculator

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This is a very prevalent situation as employers are shrinking their payrolls and laying off workers in a very down economy.  If your company has shrunk or your payrolls have declined, do not just allow the carrier to copy last years’ audit as a baseline.   For instance if your company has reduced its payroll by 18%, why would you have to pay the extra 18%?

This is a hotly debated item as often your agent may tell your company that it will be all refunded or credited back to your company at audit.   Why would you wait 13 – 14 months to recover what you knew was going to occur at policy inception?    The 13 – 14 month figure includes 12 months for the policy to expire and then 60 days for the audit and the results of the premium audit to concluded and reported by the carrier.

Woman Policy Payroll Counting Money

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This makes your projected budgets even more important when talking with your agent about your upfront policy premiums.  If you do not have an exact budget prepared approximately 45 days before your fiscal end of year, your company will not have very much leverage or substantiating documentation.

You may wish to even throw in a graph of how your company is projecting your next fiscal years’ payroll numbers.  As they say, a picture paints a thousand words – so do graphs.

Your agent and the carrier’s underwriter will require more than a verbal estimation.  This is when Excel(R)  can be very helpful along with your accounting package such as QuickBooks(R).    

The same applies if your company decides to use temporary workers or subcontractors instead of regular employees.  Using subcontractors invokes a new set of rules on whether or not they are actually employees.

©J&L Risk Management Inc Copyright Notice

Filed Under: payroll, Premium audit, Premium Auditor, Remuneration, subcontractor, temporary employee Tagged With: companies, credited, documentation, QuickBooks

Premium Audits – How Far Back Can They Go Into Your Policy Years

November 20, 2012 By JL Risk Management Consultants

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.

Old Clock Premium Audits At The Wall Old Picture

Wikimedia Commons – Paragbhagat8

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
Hand Presenting Premium Audits Concept

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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.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: bold and italicized, harrowing situation

Premium Audit Workpapers – Employers Can Obtain Copy

November 8, 2012 By JL Risk Management Consultants

Premium Audit Workpapers – No Harm To Ask For Them

Premium audit workpapers are one of the audit items that are seldom provided to employers.  I have also seen them provided to employers with the audit results or at the time of the premium audit bill.   Along those lines, I received this question last week.

Picture Of Audit Workpapers Stack

Wikimedia Commons – Niklas Bildhauer

 Is it a requirement that the premium auditor provide our company with a copy of the audit workpapers?

I think we should first start off with the definition of the premium audit workpapers.  They are handwritten or computerized step-by-step background notes of how the auditor calculated the premium during an audit.  I have also seen a computerized or handwritten checklist, especially in California.

The auditor will usually record each step of their audit as justification of why they changed any of the payroll amounts.  The audit workpapers are usually very organized and easy to read.  It is a good place to review if there are questions on any part of the premium audit.

The premium auditor is actually required in most states to provide the employer with a copy of the workpapers.  Paying for an audit without the workpapers would be similar to paying an electric bill without knowing how much energy was used by your company.

Woman Audit Workpapers On Conference Room Table

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It is always a good idea to ask for them if the auditor did not leave the workpapers behind on a recent audit.  An email to the auditor or your agent asking for the workpapers will usually result in your company being provided with a copy very quickly.

Once you have received the workpapers, it may be a good idea to scan over them to see how the auditor calculated your final premium bill.   The workpapers should not really be that lengthy unless your company is very large, has many locations in multiple states, or is a temporary employment agency.

If, after reviewing the workpapers, you feel that your company was overcharged, you may want to contact a premium audit expert company such as J&L.  The main thing is to not just write out premium checks if you do not understand the justification for the charges.

©J&L Risk Management Inc Copyright Notice

Filed Under: Audit Workpapers, Premium audit Tagged With: computerized, handwritten, justification

Premium Audit Dispute – DIY- Goes Horribly Wrong

September 13, 2012 By JL Risk Management Consultants

Premium Audit Dispute – DIY

A Premium Audit Dispute can go awry if a company is not careful. Last week, I received an email with an audit dispute letter and an additional premium bill from a company in West Virginia. We usually receive one or two of these a month.

Picture of Gavel and Dollars Premium Audit Dispute of DIY

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A manufacturer in WV decided to work with their agent and do a premium audit dispute. The result was a nightmare. In my opinion, the classification codes and jurisdictions should have been left as they were in the beginning.

 This is a timeline of the results:

  1. The manufacturer thinks there is something wrong with their policies and wants to challenge their present policy and the last three years premium audits.
  2. The company wants their classification codes changed and wanted the workers in Kentucky only counted as WV employees
  3. They find a website with class codes for WV – totally different from premium rates
  4. They write a dispute letter outlining the changes.
  5. They do not check the statistics that go with each class code
  6. The insurance carrier accepts the class codes and jurisdiction
  7. The manufacturer’s E-Mod jumps sharply on all of the policies that were disputed from .89 to 1.23. That is a 38% increase.

    Checking Premium Audit Dispute balance

    Wikimedia Commons – Sharan1610564

  8. The Kentucky employees should have been left as is due to the rate for Workers Comp in WV was actually more expensive.
  9. The manufacturer receives a bill for an extra $113,000 in premiums.
  10. They can no longer bid on certain projects that require a 1.0 or less EMod (ouch).

The caveat is what looks cheaper might be much more expensive. The E-Mod/X-Mod calculation is very complicated when trying to adjust the variables. J&L goes through the laborious task of making sure the Mods are not going to increase enough to offset a refund when assisting an employer.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium Audit Dispute Tagged With: jurisdiction, work comp class code

Our Premium Audit Bill Just Arrived And I Have Questions About It

August 27, 2012 By JL Risk Management Consultants

Our Premium Audit Bill Caused Questions 

Our premium audit bill just arrived. I have questions on how our final bill was calculated and how our Workers Comp policy was written. How do I know if my gut feeling is correct?

I received the above question on Saturday. If you have a gut feeling something is amiss, that is usually the best indication of an error in your policy. You may want to go through a List Of Red Flags concerning your Workers Compensation coverage.

picture of Auditor Calculating Premium Audit Bill Just Arrived

(c) 12rf.com

The one from the list that seems to cause the most concern is – was the audit brief and superficial? In this downward spiral economy, insurance carriers are cutting overhead in many ways including personnel. Premium auditors and other insurance personnel are being asked to take on much more of a load than usual. There may not be enough time allotted to properly audit your Workers Comp.

The most important thing to do is to not let the bill and audit report sit on your desk with no response. There are many deadlines with your premium bill. Your bill may say that you have five days to pay. However, most times you have 30 days to pay or dispute the premium audit bill. The number of days varies from state to state.

I have seen many companies have to pay bills because they let the deadlines pass without any action. Phone calls and emails are great, but letters always provide the best documentation.

If you feel that your concerns are not being met or that you are unsure of how to exactly proceed, it may best to consult with a workers compensation premium expert.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: 30 days, allotted, brief, superficial

Workers Comp Audits Change As Your Company Grows

August 1, 2012 By JL Risk Management Consultants

Company Growth = Workers Comp Audits Change

As your company grows the Work Comp  audits will change.Workers compensation audits for very small companies are usually self-audit situations. Each state has a minimum level of premium that requires the insurance carrier to do an on-site audit. 

Hands Symbolize Workers Comp Audits Change With Plant on top

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One of the most common bases for mistakes on payroll (premium) audits is that a very small company and/or their agent will describe to the carrier what operations they perform in going about their daily tasks. As the company is so small, the agent or company owner is charged with making the initial determination. The classification codes can sometimes be wrong from the start.

The more common mistake is made when the company grows and the classification codes are just copied from policy to policy each year. I have seen where there should have been an additional seven classifications added to better describe some of the employees’ job functions.

The workers compensation payroll auditor will usually discover some of the errors and possibly reclassify some of the employees. However, the auditor is under pressure to perform as many audits weekly as possible. They may not have the time to review what each employee does on their job. I am not picking on premium auditors – it is just the nature of the business.

Picture Company Grows National Cement

Wikimedia – DFID – UK Department for International Development

Knowing what classifications a company should be under is sometimes a very arduous and complicated task. I have seen employers try to use their SIC codes when describing what they do on their Workers Comp insurance applications. The SIC and Workers Comp classification codes can have (and are usually) night and day differences.

This mistake and others are mentioned in a previous post on red flags with your Workers Comp policy. I will cover classification by analogy next time.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: Analogy, on site audit, self audit, SIC Codes

Workers Compensation Audits For Public Employers Hits High Point

July 23, 2012 By JL Risk Management Consultants

Audits For Public Employers Upcoming

Premium audits for public employers are about to increase dramatically.

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Most public employers have a renewal date of July 1. Your auditor should be contacting you, if they have not already done so recently. The highest number of policies for private employers renew on January 1.

The time cycle for audits is usually 30 – 45 days after your policy expiration date. I always recommend, especially with larger employers, that any mail from the carrier be handled by one person. I have seen large public and private employers receive a non-compliance audit because the letters from the carrier had either been destroyed as junk mail or routed to the wrong department.

If there is no premium audit appointment set after a few letters and time passes, the auditor can actually increase the estimated premium audit up to 300% of the estimate. The premium auditor would have called by then, but if the letters advising of an upcoming audit go unanswered, then the auditor’s phone calls are likely not being routed to the right person either. I have seen this happen more than a few times.

There are a few dubious companies that have written books or have a website that will guarantee they can prepare you for a premium audit weeks before the auditor arrives at your workplace. As with the case a few years ago in South Carolina, that is not a good choice. There is nothing wrong with having someone assist your organization at the time of the audit. There are a few reputable companies that may help your company before the audit. It pays to be very careful.

Vector Graphic of Public Employers Of Premium Audit

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As always, the best advice is to have everything organized. Getting together a ton of paper for the auditor to review is not always the best tact. If you review the premium auditor’s letter, they will usually ask to have certain documents prepared for their visit.

Organizing those documents with a spreadsheet cover will help the premium auditor and your company finish the audit quickly and accurately.

One of the questions I receive – sometimes right in the middle of a premium audit – concerns allowing the auditor to take records offsite. There is nothing in the rules that say you must comply with this request. I do not recommend it.

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Filed Under: Premium audit Tagged With: cycle, Non-Compliance, public entities, reputable

No XMod On Premium Audit Bill – Reader Question

June 27, 2012 By JL Risk Management Consultants

Reader Question – No XMod On Premium Audit Bill

A reader question came in this week concerning the lack of an XMod on the premium audit bill.

Xmods or X-Mods are WCIRB’s equivalent of an E-Mod (EMod). The WCIRB is California’s equivalent of the NCCI. The full names of the acronyms are listed at the end of this post. This same question could also apply to E-Mods or Mods in states other than CA.

Emoticons with big question mark at the back No XMod On Premium Audit Bill

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You will not necessarily see an Xmod on your carrier’s premium audit bill. However, the X-Mod is critical in calculating your Workers Compensation bill. The premium audit report is often enclosed with the bill or very likely came under separate cover.

Most standard premium audit reports will have the X-Mod on the last page. If the XMod is different than the XMod on your original policy, you may want to question what caused the change. A caveat is to make sure that if you question the change of the XMod your company may receive an even higher bill.

You may want to call in a workers comp premium expert at that point in time. Any X-Mod changes in the same policy period is one of the Red Flags for possible overcharges on your premium. You may want to follow the link. It is one of the most read articles on this blog.

If you cannot locate your premium audit report, there should be a phone number or address on the bill. I always recommend writing the carrier (no calls or emails) to request a copy of your audit report. The fax is also a great way to request anything from your carrier.

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Your company should receive the audit report in 7 – 10 days at most after your request. I recommend looking over your complete policy and audit before paying any premium audit bill. There are usually time limits on paying your insurance bill. Waiting until the date the premium bill is due to make the request is usually not a good idea.

WCIRB -Workers Compensation Insurance Rating Bureau

E-Mod/Emod/Mod/X-Mod/XMod – Experience Modification Factor

NCCI – National Council on Compensation Insurance

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Filed Under: Premium audit Tagged With: 7 - 10 days, Caveat, under separate cover

Premium Recovery For Fully Paid Policy Resolved By Premium Audit

June 18, 2012 By JL Risk Management Consultants

Fully Paid Policy – Premium Recovery May Not Be Fruitful

Workers Compensation premium recovery can be very complicated on a prepaid policy. Over the weekend, I received this question –

Picture of Policies Files and Calculator Premium Recovery Workers Compensation

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Our company canceled our policy in February. We had six months left before the policy ended. We have not heard from our prior carrier on refunding any of the prepaid premium. We were not on any type of payment plan. How do we go about recovering our premiums from the carrier?

My answer that I emailed back was –

  • Short-Rate Penalty – As you canceled mid-term, did your company experience a short rate penalty? Short rate penalties can be substantial.  The penalty may have been more than your leftover policy premiums. 
  • Final Premium Audit – as you mentioned you did not hear from the carrier, you should have a premium audit pending to close out the short policy year.
  • Call the customer service phone number listed on your policy.  If you call, fully document who you had spoken to and the conversation

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  • You may get more than you asked for overall. If you have a final premium audit pending with a short rate penalty – your company may owe more than the premium recovery you are anticipating. The premium penalty can be 50% or more in certain cases. All of the rating bureaus have the formula on file. Please be extremely careful on the numbers that are input into the formula.
  • Calculate the short rate penalty on your own – these calculations can be cumbersome and complicated. Your company may want to calculate this number before you contact the carrier.
  • Be patient, your carrier will get around to the audit.
  • As always, if you feel that you are in over your head or that you may end up costing your company more $ by pursuing the premium recovery, you may want to call on a non-agent expert for an unbiased opinion.

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Filed Under: premium recovery Tagged With: cumbersome and complicated, Prepaid premium

Five Days Notice May Be Yellow Flag For Premium Audits

June 11, 2012 By JL Risk Management Consultants

Five Days Notice Until Proposed Premium Audit Date

Less than five days notice cannot be enough time for a employer to prepare for a premium audit. This is a concern that we are hearing from quite a few clients, blog readers, and fellow conference attendees. Recently, premium audit notices are being emailed and faxed to businesses giving the business owners or CFO’s less than week to prepare their records for a premium audit.

Picture of Workers Holding Magnifying Glass Five Days Notice Premium Audit

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I am looking at two notices from clients as I write this post. I could understand the short notice if the business was small and/or assembling the records would not be very complicated. However, in both of the ones I am examining involve subcontractors, expense logs, and other documents that cannot be organized in time.

Five days (three business days) is a little much to ask an employer to prepare for an audit. There are premium audit guidelines usually built into every policy. If not; your state’s rating bureau is the organization (NCCI, WCIRB, etc.) that sets the premium audit rules.

The one clause that is usually in all of the rules states the audit will be conducted at a convenient time for all parties, or something along those lines.

If you feel that your company needs more time to organize your records, then fax or email a letter to the auditor that is setting his/her schedule that the premium audit date and time is not convenient. I do not recommend calling as this has led to confusion on “who said what” on rescheduling the appointment.

Graphic Five Days Notice Calendar

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It is recommended to not completely disallow the premium auditor looking over your payroll and company records. The insurance carrier will then perform an estimated audit and bill. An estimated premium bill will usually be 200 – 300% more than what is actually owed due to the very liberal rules for estimated audits.

Please note I am not blaming the Workers Comp premium auditors on their schedules. They are given very heavy schedules in today’s insurance environment. He/she is trying to fit in as many audits as can be done in a week due to internal time pressures. That is the nature of the beast on anything with Workers Comp presently.

There is no exact time frame on extending the audit date. I would think that more than four business weeks or 30 calendar days would be the maximum number of days to extend the audit date.

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Filed Under: Premium Audit Schedule Tagged With: attendees, expense logs, fellow conference, internal time pressures

Payroll and Premium Audit Urgent Question – $85,000 Audit Bill

April 26, 2012 By JL Risk Management Consultants

Urgent Question – Payroll and Premium Audit

I received this urgent question on payroll and premium audit at 2 AM. The sender must have been losing sleep over it.

Picture of Sand Time Urgent Question Inside

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We are now with a new carrier. Our Workers Comp Payroll Auditor came into our business four months ago. She went through our books and said everything looked good except for a few things.

We just received a bill for $85,000 with an overdue notice. We received no other warning and had no idea the bill would be so much. Our original Workers Comp policy was $105,000.

Should we just pay the bill as we are so late? How do we find out the results of the audit? Can we dispute the $85,000 bill? Should we contact the Insurance Commissioner? Please answer ASAP.

The insurance carrier will usually send the audit bill to the contact information they receive during the premium audit or the address on the policy. I looked up your company address and it is a PO Box. If you have a PO Box and the carrier sent it to your physical address, the bill and the backup info from the audit was likely returned to the carrier.

Your letter may have gone into a pile of returned envelopes at the carrier or will sometimes get lost in the mail. The carrier sent you the final notice by FedEx so it was delivered directly to your physical address.

The best way to find out the results of your audit is to immediately write the billing office noted on the bill. Send the letter certified return receipt. Explain to the carrier what happened and ask for a copy of the audit results and the auditor’s workpapers. Make sure you note that you receive mail at a PO Box.

Picture of Business man Calculating Urgent Question Payroll and Premium Audit

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This previous article on your choices when you receive an audit bill may help you. Judging from the name of your company, it is likely you have hired subcontractors. That could be the source of the additional premiums.

Quite often, a new carrier will view your workplace differently than the last carrier. Your business may have added in additional employees which will cause a spike in your payrolls resulting in an increase in premiums.

A cardinal sin is to dispute a bill without a basis. Another cardinal sin is to contact the Insurance Commissioner’s office until all other means have been exhausted. This will harm the relationship with your new carrier and your agent even before your first payroll and premium audit. 

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Filed Under: Premium audit, Workers Comp Payroll Audits Tagged With: cardinal sin, envelopes, FedEx, workpapers

Premium Audits And Short Rate Penalty – continued

March 29, 2012 By JL Risk Management Consultants

Premium Audits And The Short Rate Penalty

In my last post, I covered the predicament some employers can be in when they want to switch insurance companies due to their premium audit sticker shock. The main consideration is the short rate penalty. The premium audit has just been completed so your company is very early into your next policy.

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Your company is going to receive a very heavy financial penalty even though you may have no claims. That is due to the sometimes nasty Incurred But Not Reported (IBNR). The insurance carrier is basically saying there is a risk that even though claims were not reported during the short rate policy, your employees may have unreported injuries. It is a common term.

What is your plan of action if your company is in this “back against the wall” situation? You have seven choices. You can :

  • Dispute the audit, if there is a good reason. You may have to call in an audit expert – yes, that was a shameless plug for J&L
  • Take the new policy on the chin and wait until the end of the new policy period to switch. The caveat here is you are going to be hit with another audit.
  • Calculate the short rate penalty to see how much it will cost your company to switch and pony up the funds. It is not a simple calculation. We do them occasionally. The short penalty tapers off later into the policy.

    Picture Of Businessman Calculating short rate penalty Premium Audit

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  • Calculate the short rate penalty further into the policy to see if there is a better time to switch. However, you have to the extra premium while you wait and then pay the penalty. This may not make good financial sense. Attempting to game the system will always end up costing more unless you know what you are doing.
  • Just consider Workers Comp as overhead and write the check. If you were going to do that, you would not be reading this blog or post.
  • Ask for a policy extension. I have rarely seen this agreed to by the carrier.
  • Call or email us – even more of a shameless plug

The short rate penalty is calculated with factors from a group of tables. The interesting note is all insurance carriers say that the short rate penalty explanations are in the policy. The Workers Comp policy usually will only refer to applicable tables and calculations which are not located in the policy.

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The best way to avoid this whole situation is with proper policy pre-planning. This involves:

  • Calculating your E-mod six months early, yes, it can be done.
  • Performing a pre-audit on your current Workers Comp policy to avoid audit sticker shock, especially if you have increasing payroll figures.
  • Making sure you have rock-solid job descriptions for all employees.
  • As always, making sure you have a good safety program. The less accidents your company has to include in the E-mod system, the better.

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Filed Under: Premium audit, Short Rate Penalty Tagged With: rock-solid job, shameless plug, tapers

Premium Audit Offer Warning To Employers – Not Before Carrier Audit

March 22, 2012 By JL Risk Management Consultants

Offer Warning –  Premium Audit Before Carrier Audits Policy

 A certain type of premium audit offer warning for our blog readers was required after two phone calls received on this illegal type of offer this week. 

As I have discussed many types; and as you will see in the heading of this article, we, of course, perform audits for employers and governmental agencies. Our audits are basically a review of the last three years for policy overcharges. This is one of a group of our services.

Graphic of premium audit Offer Warning Sign

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I have received two phone calls this week that were disturbing, to say the least. One employer from CA and another from WV both called to ask about a service where the auditor would come in and basically set up the business book BEFORE the premium audit by the insurance carrier. This is highly illegal.

There is nothing wrong with going over the premium audit with or without a consultant after the premium auditor finishes their audit and produces a premium audit report.  

From what I could gather, the so-called premium auditing company’s goal was to lower the premium BEFORE THE AUDIT. That is a good way to spend time in jail. I had written about this type of unscrupulous audit here and here. The company owner and the premium auditing consultant are now both doing hard time in a South Carolina prison.

Honesty is always the best policy when dealing with insurance company premium auditors. Your company should pay every cent in premiums you owe, but nary a cent more.

These types of bad-actor companies give the premium auditing and risk management consulting professions a bad name to say the least. Do not end up being accused of the “F” word in insurance. California has added some very strong laws dealing with this subject. I will cover that next time.

 

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Filed Under: Premium audit Tagged With: bad-actor, illegal type, jail

Premium Audit Bill Mistake Made By Employers

February 15, 2012 By JL Risk Management Consultants

The Most Common Premium Audit Bill Mistake

A devastating premium audit bill mistake occurs when no payment is made by the insured.  The Workers Compensation premium audit bill is one of the most posted subjects in this blog. There are two reasons for the numerous postings.

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They are:

  • We receive the highest number of questions on the subject. We received two last night.
  • There is a deadline in which to do something – pay or dispute it

One of the clauses in your insurance contract/policy that appears in the back pages (usually in smaller print) is the subject of the premium disputes. This language is usually mandated by each state’s laws on Workers Comp policies. Each state has its own set of rules on how to properly dispute the bill.

The mistake that some employers and governmental agencies make is to not pay any of the premium audit bills even if part of it is acceptable. All Workers Comp policies have a clause that reads similar to – You (the company) must pay any undisputed premiums before raising any disputes with (your insurance carrier).

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You would owe the expense constant charge regardless of any dispute. 

I realize that may not be the exact contract language in your policy. The example is very generic. The concern is to know what part of the premium audit bill should not be disputed. As I have posted very often, once you pay your audit bill in full, you obviously lose some leverage.

I have written on handling the premium audit bill very often Check out this post on premium audit bills and this one. You can also use the search box halfway down the page on the right to search.

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Filed Under: Premium audit Tagged With: contract language, deadline, dispute it, highest number

Premium Audits and Bathroom Breaks – Revisited Once Again

February 7, 2012 By JL Risk Management Consultants

Revisited – Premium Audits and Bathroom Breaks

The question on bathroom breaks and premium audit required a revisit.  I have received a large number of responses to the questions that I posed on this post. One of the independent auditors that I have known for quite some time added a comment to that post. I agree with it for the most part.

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I think the main concern here is that at what point does one draw the line between “incidental duties” and a part of the job function. There may be other considerations that a premium auditor would take into account. That is why the audit work papers or auditor’s comments are so important. Always request a copy regardless of your premium audit looks to be OK or not.

You can usually ask for them when the premium auditor is at your place of business or by writing the audit department that is listed on your audit report or premium bill. Even if you decide to have a consultant look at the audits for your company, this is a very important piece of information. It can be very difficult to obtain them from a few months or years in the past.

Asking for the work papers within two months after the audit should be good timing. 

The one thing to make sure is that the premium auditor understands what every person does in your company – no more, no less. That is why I always recommend fully documented job descriptions for all employees.

Job descriptions can also come in handy when you are trying to return an injured employee to work. They are very tedious to pull together but will save your company $ in the long run.   

The injured employee’s treating physician will appreciate having a full job duty listing for a successful return to work. 

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Filed Under: Audit Workpapers Tagged With: bathroom breaks, incidental duties

Premium Audit And Bathroom Breaks For Computer Programmer

February 2, 2012 By JL Risk Management Consultants

Workers Comp Premium Audit Question

I received a question this week from one of our blog readers that had this WC Premium Audit question. “I have an employee that walks across a corner of our manufacturing plant to go to the bathroom. On our recent premium audit, the auditor changed the Classification Code from 8810 Clerical to 1438 Smelt Manufacturing. Is this correct?”

kids Premium Audit asking a question

Wikimedia commons – Jim Larrison

I will usually answer the question posed directly. However, in this case, I wanted to actually give more examples that came from our readers and clients. Are these judgment calls by the Workers Comp premium auditor or are there actually rules in place? This is a very hotly debated topic in the premium audit world of Workers Compensation.

An owner of a tow truck company does not ever drive the tow trucks to pick up autos. He is never in the maintenance area for the tow trucks. He does walk across the parking lot where the tow trucks are parked to go to his car twice daily. The premium auditor changed the Class Codes to a higher code. Is it correct to have the tow truck owner classification code moved from 8810 Clerical to 8002 Truck Rental and Drivers?

Two computer programmers walk into the manufacturing area to pick up his/her printouts multiple times each day. The premium auditor moved the Class Code from 8810 to 3004 Iron/Steel Manufacturing. Was this a proper procedure?

People Question Raising Hands Premium Audit I Conference Room

Wikimedia commons – Glenn Fawcett

I know that each state has its own peculiarities and specific class codes – especially California. I am more referring to how the workers are performing their jobs and looking at it on a national basis. If anyone would like to comment or send me an email at [email protected], that would be great.

I will answer these questions in the next few posts. Classification Codes were provided by NCRB and the WCIRB.

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Filed Under: Premium audit Tagged With: Manufacturing, printouts, programmer, tow truck

Premium Audit Nightmare For January Policies

December 21, 2011 By JL Risk Management Consultants

Premium Audit Nightmare – Change Policy Renewal Date 

A premium audit nightmare that can happen with January polices can easily be avoided with some planning.

Graphic Of Dollar Tight With Tape Measure Premium Audit Nightmare Policy Budget

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Almost 50% of the Workers Comp policies renew at the first of the year. One thing we see very often is our client or potential will call and say that they have found a great low-priced policy they have found and will be switching to the new insurance carrier.

We then will usually receive a frantic call or email after the policy expiration. The insurance carrier payroll (premium) audit bill is huge and the company did not have the money budgeted to cover the bill.

One of the easiest ways to avoid this type of disaster is to compare your Workers Compensation policies and audits from the past. If your prior premium audit and polices indicate that your company has for example $2.5 million in payroll, then why would the new policy have a payroll of $300,000? This is from a real-world example.

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The main occurrence that may lower your premium from the former year would of course happen due to a period of major layoffs.

I am not saying that any company has to pay every penny owed on the policy upfront. However, if you have a previous payroll of $2.5 million, you are going to have to “pony up” a large amount of $ at audit. Your company should have a budget for Workers Comp premiums for the upcoming bill after the premium audit.

This type of budgeting advice will also apply to any policy. I wanted to pass this info along due to the large % of polices that renew on January 1st. I wrote a previous article on payroll audit budgeting here.

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Filed Under: Insurance Policy, Premium audit Tagged With: insurance carrier, Workers Comp premium

Paying Premium Audit Bill – I May Have Been Misunderstood

December 9, 2011 By JL Risk Management Consultants

Paying The Premium Audit Bill  Misunderstanding

Last week, I wrote a post concerning paying the premium audit bill.  I have heard from a few of our weekly newsletter readers that the title of the newsletter article and the article itself sounded like an employer should just pay the bill. I apologize as nothing could be further from what I had intended to say on workers compensation premium audit bills.

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One of the best comments I have ever heard or possibly read referred to any bill. Your company should pay what you owe, but not a cent more. Premium audit bills are no exception. A piece of advice that I post on often is to pay the undisputed amount and not just refuse to pay any of the bills whatsoever if there is a pending dispute. If you feel that you do not owe a partial amount on a bill, then pay the undisputed amount when the bill is due. Your company does not have to pay the disputed amount – if it is based on a valid dispute.

Recently, and I think it is due to the economy, I have received numerous calls and emails where a dispute process was entered into with the carrier to delay paying the bill. That is one of the quickest ways to ruin a company’s reputation with their agent and carrier. A word of caution – expect a cancellation notice from your carrier if this has happened. Insurance carriers are becoming much less patient with invalid disputes.

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I do not mean to sound like a Workers Compensation insurance company advocate. I am just reporting what we have seen over the last two years in the insurance environment. There are no new companies being created and most companies have reduced their staff. Workers Comp carriers have seen premiums fall quickly. Their margins have become thinner.

What is an invalid dispute? Any dispute where your non-payment is based on the insurance policy and premium audit bill was just too expensive. Your company needs to have re-calculated the premium audit with real and true numbers. The insurance carrier’s audit department will need something in writing within 30 days maximum on the basis for your dispute.

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Filed Under: Premium Audit Dispute Tagged With: advocate, re-calculated

Premium Audits – Paying Undisputed Premiums

December 2, 2011 By JL Risk Management Consultants

Paying The Undisputed Premiums Requirement 

The undisputed premiums after the audit should be paid to the carrier.  We have received a number of questions on how to proceed if there is a Workers Comp premium dispute on how much premiums are owed. For example, I received this question last week.

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 We are disputing a premium that was added in at audit time by the Workers Compensation auditor. As we are unsure of exactly the total amount owed, do we have to make a provisional payment or can our company wait to pay until all disputes are resolved?

 All states have on their books that any undisputed premium should be paid on receipt of the premium bill. Your company is not required to pay the disputed amount until you have resolved the issue with the insurance carrier that has billed your company. Using the dispute process to hold off paying a bill can ruin what would have been a good working relationship between your agent, insurance company, and your company.

Finding out what your company owes in a premium dispute should be initiated as soon as possible. Paying an estimated amount is not sufficient. Your company should not underpay or overpay in this situation.

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As I have said many times in this blog, over 90% of the employers that have overcharges or their Workers Comp premiums have a gut feeling something is wrong. We have a list here that may turn on that gut feeling.

I have had clients and peers say that sometimes I sound like I am a very pro-insurance company. Actually, I am pro-the rules in place. As Charles Givens once said, “If you want to win, you have to play by their rules.” You can still make sure you are paying the right premium for Workers Compensation and follow the rules in place – better known as your Workers Comp policy.

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Filed Under: Premium Audit Dispute Tagged With: audit time, undisputed

Premium Audits During Policy Period

November 3, 2011 By JL Risk Management Consultants

Should Premium Audits Be Allowed During Policy Period?

I received this question last week on premium audits. I know that an insurance carrier comes in after a Workers Comp policy expires. We just signed on with a new carrier two months ago. They now want to come in and audit the payroll during the policy period. Do they think we are up to something or do not trust us? Can they audit us while the policy is in force? Can the carrier come in and audit us again when the policy expires?

Blurry Picture Of Man Calculating Policy Period Concept

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I would not worry that a premium audit during a policy indicates that an insurance carrier does not trust your business. If they did not, you would have likely not made it past their underwriting department. For example, a carrier may audit during a policy if your company is/has:

  • Newly formed
  • Operating under new ownership
  • The first year of coverage with a new carrier (likely the reason in this case)
  • Your company has changed some of its operations
  • A temporary employment agency

The carrier may come in again after the same policy expires to perform an additional audit. One area that I am in disagreement with the insurance carriers is multiple audits during a policy period or after a policy expires. If you feel that the carrier is being abusive with multiple audits, you should contact your state’s rating bureau or department of insurance.

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One of the most concise and best examples is from the NJ Compensation Insurance Rating Bureau. New Jersey has it own rating bureau and has written its own rating manual. They do not use the NCCI manual or rules. The rule for audits reads as follows:

You will let us examine and audit all your records that relate to this policy. These records include ledgers, journals, registers, vouchers, contracts, tax reports, payroll and disbursement records, and programs for storing and retrieving data. We may conduct the audits during regular business hours during the policy period and within three years after the policy period ends. Information developed by audit will be used to determine final premium. Insurance rate service organizations have the same rights we have under this provision.

 

The premium audit rules are very similar for NCCI-rated states and other state rating bureaus. One of the unwritten rules is the premium audits should be at the convenience of the employer. Most carrier premium auditors will have not have a problem with rescheduling an audit.

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Filed Under: Premium Audit Schedule Tagged With: abusive, retrieving, vouchers

Tax Audits Due To Findings In Premium Audits – Connection?

October 18, 2011 By JL Risk Management Consultants

Tax Audits from Premium Audits?

Most Tax Audits make every business concerned due to the time required and possible costs.  As I had expected, the federal and state taxing authorities and Workers Compensation insurance carriers have decided to share data on premium audits.   I am not sure of the effect of a memorandum of understanding. This is the article verbatim from the DOL website. I highlighted the states that signed onto the memo.

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Please note this article was written four + years ago. Many states are now sharing data among all departments for tax and other types of compliance.  The term “misclassified worker”  does not necessarily mean an employee that has the incorrect classification code.

Labor secretary, IRS commissioner sign memorandum of understanding to improve agencies’ coordination on employee misclassification compliance and education

11 state agency leaders also sign, agree to memorandums of understanding

WASHINGTON — Secretary of Labor Hilda L. Solis today hosted a ceremony at U.S. Department of Labor headquarters in Washington to sign a memorandum of understanding with the Internal Revenue Service that will improve departmental efforts to end the business practice of misclassifying employees in order to avoid providing employment protections. In addition, labor commissioners and other agency leaders representing seven states signed memorandums of understanding with the department’s Wage and Hour Division and, in some cases, its Employee Benefits Security Administration, Occupational Safety and Health Administration, Office of Federal Contract Compliance Programs and Office of the Solicitor.

The signatory states are Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Utah and Washington. Secretary Solis also announced agreements for the Wage and Hour Division to enter into memorandums of understanding with the state labor agencies of Hawaii, Illinois and Montana, as well as with New York’s attorney general.

Department Of Labor USA Tax Audits Logo

Wikimedia Commons – U.S. Department of Labor

The memorandums of understanding will enable the U.S. Department of Labor to share information and coordinate law enforcement with the IRS and participating states in order to level the playing field for law-abiding employers and ensure that employees receive the protections to which they are entitled under federal and state law.

“We’re here today to sign a series of agreements that together send a coordinated message: We’re standing united to end the practice of misclassifying employees,” said Secretary Solis. “We are taking important steps toward making sure that the American dream is still available for all employees and responsible employers alike.”

“This agreement takes the partnership between the IRS and Department of Labor to a new level,” said IRS Commissioner Doug Shulman. “In this new phase of our relationship, we will work together more efficiently to address worker misclassification issues, and better serve the needs of small businesses and employees.”

Business models that attempt to change, obscure or eliminate the employment relationship are not inherently illegal, unless they are used to evade compliance with federal labor laws — for example, if an employee is misclassified as an independent contractor and subsequently denied rights and benefits to which he or she is entitled under the law. In addition, misclassification can create economic pressure for law-abiding business owners.

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These memorandums of understanding arose as part of the department’s Misclassification Initiative, which was launched under the auspices of Vice President Biden’s Middle Class Task Force with the goal of preventing, detecting and remedying employee misclassification.

The mission of the U.S. Department of Labor is to foster, promote and develop the welfare of the wage earners, job seekers and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.

See more at the DOL website article

Premium audits presently have not generated any type of  tax audits.

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Filed Under: Premium audit Tagged With: denied rights, memorandums

Premium Audit Disputes and Collection Agencies Confusion

October 7, 2011 By JL Risk Management Consultants

Premium Audit Disputes vs. Collection Agencies

Most premium audit disputes may not be documented by a collection agency.  I received a great question on Premium Audits this week. We are disputing our premium audit for 2009 – 2010. We are receiving letters from a collection agency and the carrier. Do we need to respond to all the letters (seven in total) from both companies while we are in a dispute?

Graphic Of White Envelope premium audit disputes in Black Background

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 My answer to this is an emphatic yes. I do not agree that you should have to answer to all seven letters. However, if you do not respond timely to either company, you would lose your ability to dispute the audit. I am not an expert in the creditor laws. I am not sure if the carriers in question can actually turn your file over to a collection agency during a valid premium dispute.

Most collection letters and carrier letters will give you a time frame in which to respond.. We received an email two weeks ago where a potential client had not responded to two collection letters from a collection agency. This can put an insured into a real conundrum as the carrier and collection agency will both considered your company to be in default on the dispute.

Pile Of Letters Premium Audit Disputes On Doormat

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My recommendation is to respond within the time frames given in the collection letters from both the carrier and collection agency. Any letters written during a dispute and especially collection letters should be sent Certified Mail with a Return Receipt. The return receipt is legal proof you have responded timely. If I am correct, the Certified Return Receipt fee for a one ounce letter is $5.59. That is $ well spent.

Phone calls are great, but they do not preserve your credit or premium audit dispute rights. Responding by letter keeps everything upfront and documented. I do not even recommend emails in this instance.

One recommendation that is very important is to read all pages and both sides of a collection letter from the carrier or collection agency. I have seen one where the letter looked innocuous only to find the 30 days to respond or default clause on the bottom of the very last page.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium Audit Dispute Tagged With: agencies, collection letter, creditor laws

Premium Audit For Large Deductible Programs

September 1, 2011 By JL Risk Management Consultants

Large Deductible Programs

I had been asked this question three times over the last two weeks. “We have a large deductible programs for our Workers Comp.” Can those policies be audited for overcharges?”

Hand Presenting Deductible Programs Coins and Increase Arrow

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The three main questions that I asked were:

  1. Did your company pay some type of premium to your carrier for handling the claims?
  2. Did your company receive or should your company have received an E-Mod sheet from NCCI or your state’s rating agency?
  3. Was an audit performed by your insurance carrier on your large deductible policy?

If you answered Yes to all three, then your company should be able to have your current and last three years policies audited for overcharges. Even though you may have insuring agreements with your carrier, if you pay premiums and the carrier audits your polices, your company should be able to have your large deductible program examined by your own independent auditor.

The mechanics of the policies whether a regular first dollar insurance company or a large deductible are basically the same. The one main area that changes is there is an agreed amount to handle the claims that may be different from the carrier’s usual way of charging premiums.

One very large misunderstanding that we have heard from a few of our large deductible clients is that the insurance carrier will not report the claims to NCCI or state rating bureau. Almost all large deductible policies I have ever seen are reported to the rating agencies.

Up next is the answer to the question “Did the CMS’s enforcement of the Workers Comp Medicare Set Asides cause claims to stay open much longer than in the past?”

Diagram Of Large Deductible Programs NCCI States

(c) slideplayer.com

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Filed Under: CMS, Large Deductible, Premium audit Tagged With: examined, independent auditor, overcharges

Hybrid Workers Comp Premium Audits – New Trend?

August 25, 2011 By JL Risk Management Consultants

Hybrid Workers Comp Premium Audits Now More Popular

Hybrid workers comp premium audits seem to be rising in popularity very quickly. I noticed this term popping up on websites and premium auditing company booths at conferences. Two years ago, an auditing company at a conference started explaining this new (?) method of performing audits. I had written this definition on hybrid premium audits some time ago.

Icon Auditor magnifying glass Hybrid Workers Comp Premium Audits blocks

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Almost all employers now have scanning and email abilities. The need for in-person on-site audits by insurance carriers will very likely incur a reduction over the next few years. Some employers will require an in-person audit regardless.

The main driver behind hybrid workers comp premium audits is the cost of obtaining an audit of an employer’s operations. Costs such as travel are easily reduced using this type of audit. As carriers’ profit and investment incomes have fallen, any method that will reduce overhead has to be heavily considered overall.

Hybrid workers comp premium audits are actually nothing new. The carriers and audit companies are basically mimicking the practice that has been in place for years with companies that perform Workers Comp premium audits for employers. As I mentioned before, certain employers and organizations will require an in-person audit. I see the need for in-person on-site audits shrinking rapidly.

Hand Presenting Hybrid Workers Comp Premium Audits Icon

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Even the small employers have now become very sophisticated in their record keeping. Many employers can provide spreadsheets of almost any type on demand. I think insurance carriers and the auditing companies they hire will very likely move to hybrid audits for employers that had the same premium auditor on a past audit, unless of course the employer has changed some of their job functions.

I have never been too keen on telephone audits as an alternative to on-site premium audits. We have seen too many mistakes made on this type of audit. Self-reporting audits made by the employers have also caused many problems.

I will write another post on this area within a year. I will look back over the year to see if hybrid audits are more popular.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: mimicking, popping up, telephone audits

Premium Audit Bill Payment Question From Employer

August 3, 2011 By JL Risk Management Consultants

The Premium Audit Bill Arrives Without Explanation

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We receive this premium audit bill question quite often. I wanted to reiterate what how an employer should handle the situation.

The question is – Our company received a workers compensation premium audit billing from our insurance carrier. We did not receive any audit results, just a bill. How do we handle this situation?

 The premium auditor will sometimes leave his/her results with you at the time of the audit. This is rarer now than in the past. Usually, you will receive the results of the audit approximately 14 – 30 days after the premium auditor visits your business.

The premium audit billing will usually arrive 30 – 60 days after the auditor has performed the audit. The bill will usually ask for payment within 10 days. The audit billing may have a copy of the audit attached to the bill as your first notice of the premium audit results.

If you only receive a bill without having seen any of the results, I recommend writing the insurance carrier (certified return receipt) and ask for a copy of the audit results. The carrier will usually provide an address for questions. You should receive the audit results back from your request letter within two weeks. Written documentation is very important.

I do not recommend calling your insurance carrier. You are legally entitled to the audit results – including any auditor workpapers. You are not actually disputing the audit by asking for the supporting documents. If you decide to dispute the audit, that is another matter.

Each workers comp insurance carrier has their own audit process schedule. The audit process is somewhat dictated by state law and the NCCI or State Rating Bureau. One of the easiest places to find the audit rules is actually in your policy. There are very specific time lines the carrier must follow in the premium audit process.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: reiterate, request letter, supporting documents

Premium Audit Errors and Overcharges Are Not Just For Private Employers

August 1, 2011 By JL Risk Management Consultants

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.

People Icon with Big X Audit Errors Concept

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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?

Hand Holding Magnifying Glass Audit Errors Icon

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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.

©J&L Risk Management Inc Copyright Notice

Filed Under: Defense Base Act, Premium audit Tagged With: CNA, inaccuracies, private employers

Premium Audits For Public Employers Now Due

July 21, 2011 By JL Risk Management Consultants

Public Employers Workers Comp Audits Now Due

The public employers are due for a  premium audit very soon.

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A large number of our clients are public entities. Most of them are self insured or at least partially self insured. There are still a large number of smaller public employers that buy regular insurance from the marketplace.

Most public employers’ budgets cover from July 1 until June 30 of the next year. There is a schedule that most insurance carriers follow. Usually, within 60 days after a policy has expired, the insurance company auditor will make a visit and audit the books to set a final premium.

One area that seems to cause a large amount of confusion about public employer premium audits is the area of subcontractors. As there are usually many departments in, for instance, a school district, there can be many independent contractors working simultaneously. If the premium auditor is left to guess if the worker is an employee or subcontractor, they are almost always going to designate the worker as an employee.

Certificates of insurance should be obtained from all subcontractors and be attached to their contracts. We have recently seen where even though the contractor’s employees were working under a certificate of insurance and a contract, they were still ruled as employees by the auditor. Providing these to the premium auditor may save headaches and $$.

Picture Of Public Employers With Couple Having Discussion

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Certificate of insurance tracking is also important. If the subcontractor’s certificate of insurance and policy expire during their contract, a current one must be obtained immediately. A premium auditor may designate the subcontractor as an employee if their certificate of insurance expires during the subcontract.

A suggestion is that a person be designated to keep track of the subcontracts and the certificates of insurance. A diary system such as Outlook(R) can be used to track certificates of insurance expiry.

 Why I am particularly sensitive to certificates of insurance is that one of the local school systems had a subcontractor working for them for several years. Their task was to remove trees and shrubs. The certificate of insurance had expired two weeks before the subcontractor fell off a ladder, landed on his head, and passed away after three weeks in ICU.

 The school system had to pay a death claim and extremely large hospital bills out of their own budget as their carrier denied the claim. I think their workers comp carrier did finally pay some of the bills but then canceled them mid-policy.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: public entities, simultaneously

Workers Compensation Premium Audit Bill – Your Four Choices

June 23, 2011 By JL Risk Management Consultants

Four Choices For A WC Premium Audit Bill

Over the years, we have received the most communications from employers when a premium audit bill has hit their desk and the payment is now due. Often, the bill has been sitting for a few weeks and the insurance carrier is now sending a second notice for payment.

Graphic of Calculator And Form Four Choices Premium Audit Bill

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There are four choices on what to do with the bill:

  1. Ignore it
  2. Review it and ask questions
  3. Dispute it
  4. Pay it without even a review

There are very detrimental effects on three of the four actions. I will cover each one in more detail.

Ignore It

 

Ignoring a premium audit bill just delays the inevitable. A bill (sometimes large) is due. One of the warnings here is that in most states, you will lose certain rights if you ignore the bill too long. The longer a bill sits, the more unlikely a carrier will be amicable to any questions on the bill or a very late dispute.

 

Most bills will instruct you to please pay it in 1o or 14 days. Your policy will usually note that you have 30 days to pay the bill. If you wait until the 29th day, this will not help your company if you have questions on the audit bill.

If you have the same carrier for your new policy as the one that is billing you for the premium audit, your company or organization will likely receive a cancellation notice. With the economy as it is, insurance carriers are becoming very stringent on cancelling your new policy and not extending any deadlines.

Review It And Ask Questions

 

We recommend reviewing the bill immediately and asking questions if there is something that seems amiss. Phone calls are great, but everything should be put in writing to your insurance carrier with a cc: to your agent.

Picture of Auditor Four Choices Premium Audit

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Writing your agent only may not necessarily protect your rights and remedies if you later wish to dispute the premium bill. Emails are OK, but I recommend sending certified return receipt letters. This may later save you great headaches.

If you feel something is wrong on your premium audit bill, that is usually a big red flag. I always say that a gut feeling is the best indicator that your concerns may be valid. There is a list of Red Flags you may wish to review on this blog.

Dispute It

 

If you still feel after asking questions to your carrier about the premium audit bill that there is something wrong, you always have the right to dispute the bill – within certain deadlines. The three things that will irritate your carrier:

  1. After paying the bill, then waiting months and months before deciding to dispute a bill – it is possible to do this, but your dispute will not be received well
  2. Disputing a bill with no reasons or data to back up your dispute – this is when you may wish to call in a premium consultant – yes, that was shameless promotion
  3. Disputing a bill just to delay payment – this often results in an even higher premium audit bill and may ruin the working relationship with your agent and carrier.

Paying It Without Even A Review

 

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Paying a premium audit without even looking back over your associated policy and the auditor’s work papers to me is the worst of the four. You are not giving your company a fair shake if you just rubber-stamp pay it as a part of doing business.

I would say at least cover the Red Flags post that I referenced earlier in this post. A link to the post is provided there. Looking over your policy, audit, and premium bill does not really take that much time for at least a cursory review. You may be surprised by what you find there.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: amicable, inevitable, stringent

Premium Audits And Lesser Known Standard Exception Codes

May 25, 2011 By JL Risk Management Consultants

The Lesser Known Standard Exception Codes

Last week, I posted on the Standard Exception classification codes namely 8742 and 8810. The concern of a few of the blog readers and our clients is there were new classification codes on their premium audits such as Telecommuters.

Picture Of Employees Standard Exception Telecommuter

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There are some very specialized rules for Clerical Staff to be considered Telecommuters. The same rules that apply to most employees being reclassified will not fly in this case. I will not go into the rules now. If you see this classification appearing on your audits, this could be a red flag situation.

The reason for my concern is in certain states, the difference between a classification of a clerical employee and a telecommuter can cause up to a 76% increase in your Workers Compensation for those employees. There are reasons that Telecommuters are more expensive classification such as not being supervised in person and the home workspace may not be as safe as in the office.

Man On His Room Standard Exception On Computer

Wikipedia

I do realize that each state has their own rules on Standard Exception Codes and Telecommuters. I did not write this post to discourage having employees that are Telecommuters. I often, as in this case, like to comment to the blog readers what I am hearing from our clients.

There is nothing wrong with questioning your yearly premium audits or your Workers Comp policies. I would not recommend disputing the Telecommuter classification code for the only reason being that it appeared on your Workers Comp audit. If you feel that you need any help, please do consult a non-agent expert to assist your company. An audit dispute can sometimes end up costing more than the original audit or policy.

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Filed Under: Premium audit, Standard Exception Codes Tagged With: 8742, Clerical, supervised, telecommuters

Great Premium Audit Follow Up Question From Yesterday

May 17, 2011 By JL Risk Management Consultants

 A Great Premium Audit Classification Codes Changes Question – Be Careful Here 

Earlier this morning,  I received a great follow up question about great premium audit class codes.  Yesterday I posted on how changing classification codes can backfire in certain instances. I received two questions since that asked – Why then should our company even try to review our premium audits or use your services if we are going to end up paying more $$$?

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That is a very fair question. The point I was trying to make about yesterday’s article was that without non-agent professional help, what looks great on paper at the beginning can be a nightmare if all facets of a request for a change in Classification Codes or another factor such as reserves are not fully explored from step one.

When we do premium audits, we run many tests to make sure that at the end of the day, you are not paying more than you were originally billed for your Workers Comp. A full review of your Workers Comp situation results in us writing a report making recommendations on how to proceed with your insurance policy and audits.

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The example that I gave yesterday was actually from a live audit situation that was overnighted to us to see if we could fix the situation. I was attempting to send out a warning to our blog readers to make sure all the numbers have been calculated on every part of their Worker Compensation insurance policies.

As I have posted very often, if you have a gut feeling that your Workers Compensation situation is not quite right, then do pursue that feeling.   Business owners, risk managers, safety officers, and other key company personnel usually know when something seems off in their workers compensation policies and program.  However, please make sure that all angles have been explored before you contact your insurance carrier.

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Filed Under: classification code, Premium audit Tagged With: explored, non-agent, safety officers

Premium Audit Question From One Of Our Readers

May 16, 2011 By JL Risk Management Consultants

Premium Audit Question On Class Code Changes

We received a Premium Audit question on classification codes last week.  

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We had worked on our own with our agent and got our classification codes changed which we thought would save us Workers comp premiums. That was not the case. Our Ex-Mod actually increased and what we thought would be savings disappeared. Now, with a higher Mod, we cannot bid on certain projects. Where did we go wrong?

Without seeing your premium info, I would think that your E-Mod increased as you changed your classification codes to much safer ones. This can cause problems as your claims data must be recalculated with the safer class codes. Your old X-Mod was based on the higher risk classification so your expected losses would be higher.

For instance, if you are a construction firm and your classification codes were changed to a painting company, the insurance industry would expect you to be a safer company as painting companies are less risky by nature. There is a type of inverse relationship between class codes and E-Mods.

For instance, if you had $125,000 of clams as a construction company, that would be more in line than with the same amount of claims as a painting company. The very basic E-Mod Formula is Actual Losses/Expected Losses. When you switched to a safer classification code, your Expected Losses decreased

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If your losses were $125,000 and your expected losses were $150,000, then your E-Mod would have been .83, which is a good E-Mod. When you changed your classification code to one with lower Expected Losses (for example $115,000) then your E-Mod would have jumped to 1.08.

Most contractors want their subs to have an X-Mod of 1.0 or below. Overall, that is why all premium audit consultants recommend having a non-agent consultant go through the numbers before applying to change your classification codes.  

I am not saying your efforts were in vain. Most of the time, there can be reductions in your overall premiums by reviewing your insurance policies and premium audits. However, reviewing your whole Workers Compensation situation may cut out a few surprises.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: less risky, painting, switched

Premium Audit Bill – D-Day Is Date You Receive It

March 17, 2011 By JL Risk Management Consultants

D-Day – Premium Audit Bill Deadlines 

Why would I post that this is premium audit D-Day? A majority of our clients renewed on 1/1/11. January 1 is still the date that a majority of companies renew their Workers Comp policies. 

Showing D-Day calendar

Wikimedia Commons – Photos Public Domain

The premium audit cycle is that an insurance company premium auditor will have visited the companies renewing on 1/1 to audit the payroll for 2010. As with most of our clients, the auditor visited the employer in January or February.

An audit bill was then published along with the reasons for the increase in premiums. The bill, if not paid, has likely sat for about 3o days and the insurance carrier is now starting to turn up the heat to get the bill paid. This is when we receive urgent calls for assistance.

What do you do? The three WORST things to do are:

  • File the bill away and ignore it
  • Pay the bill without even reviewing how the auditor arrived at the numbers
  • Start a “shell” dispute just to buy more time
Several D-Day files

Wikimedia Commons – Tony Webster

As a minimum, the auditor’s numbers should be reviewed heavily to make sure your company is in agreement with them. If there are any questions on the numbers, all questions should be made in writing to the auditor. Sometimes, the policy or audit bill will give you a different person to contact if you have questions.

I do not recommend calling as email provides you with a paper trail of documentation if your questions are turned into a valid dispute.

If you ever feel you are in over your head with all these numbers and rules, it may save your company time and money to contact a non-agent professional for assistance. That is a shameless plug for our company.

If the questions you have sent are not answered timely, then you could raise a dispute on paying the premium audit bill until your questions are answered.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit, premium audit bill Tagged With: 3o days, assistance, non-agent, renew

Premium Audit Bills For Workers Comp – Calls and Emails Daily

August 17, 2010 By JL Risk Management Consultants

WC Premium Audit Bills Always Generate Calls and Emails

The workers comp premium audit bills cause us to receive calls and emails on a daily basis.  

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We are always glad to hear from former and potential clients for our Workers Comp services.

The most popular post and the #1 subject on the calls and emails is when an employer receives a sizable Workers Compensation premium bill they were not expecting.

I have posted on this often. I will still post on the subject as long as we receive inquiries on this controversial subject. Here is your game plan on how to deal with the bills.

  • Do not panic as bringing emotions into a business situation will end up costing your company in the long run.
  • Do not just send a check if you do not feel you owe it. Once you pay a Workers Comp premium bill, you are going to lose 90% of your leverage.
  • Do not ignore the premium bill. That may cause your current Workers Comp policy to be cancelled.
  • There will usually be an explanation of the premium audit bill sent with the bill or just before it arrives. Look this information over carefully.
  • You can call the auditor to discuss the bill. Make sure you have your “ducks in a row” before making the call. Winging it may cost your company even more $.
  • Cluttered Premium Audit Bills on table

    Wikimedia Commons – Jericho

    Always make sure that you put everything in writing. Insurance carriers usually have huge offices and you need a paper trail to show that you complied with the rules

  • Do not call or write a dispute just to delay the bill. That never works and can ruin the business relationship that your company, agent, and carrier have in place.
  • Make sure you have valid points to dispute. The premium audit bill being too much is not a valid point.
  • If your business grew quickly, then your company may owe more Workers Comp premium due to an increase in payroll. Never assume this is the reason for the increased premium.
  • Never threaten to take all of this to the Insurance Commissioner as a complaint unless you have exhausted all other means.
  • If you are in over your head, then consult with an expert company on Worker Comp premiums and reserves -yes, that would be “J&L”

The bottom line is your gut reaction to the bill. We have found that the best indicator of possible premium overcharges is that if you feel that something is amiss.

©J&L Risk Management Inc Copyright Notice

Filed Under: premium audit bill Tagged With: ducks, leverage

Hybrid Premium Audits Good Bad Points With Technology Assistance

June 22, 2010 By JL Risk Management Consultants

Hybrid Premium Audits May Become Future of Audits (Almost)

Most Hybrid Premium Audits on a Workers Comp policy are when the insurance company auditor asks for the material required to perform the audit without visiting the client’s business. As the Internet has made the flow of information much easier, hybrid audits can take many forms.

Graphic Of Hands Hybrid Premium Audits With Gold Coins

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They are becoming more popular as a cost cutting measure for the insurance carriers to save on travel and personnel costs. Hybrid Premium Audits may become more popular over the next few years.  The advancements in technology such as PDF’s reduce the size of an emailed document.  

A Premium Auditor performing a hybrid premium audit may request a scan of all the required material be emailed to them for review. There is basically no cost to the insurance carrier or employer if all documents are scanned.

One of the concerns over this type of audit is the insured employers have to send data outside the company versus a physical audit.  Many states require an in-person physical audit.  The hybrid audit may not suffice due to that rule.   Some employers have favored this type of audit to reduce the stress of a physical audit. 

One area to make sure that remains constant throughout a hybrid premium audit is your company has to appear accurately on paper.  The documentation has to show that for instance, a certain work performs certain job duties the same as if the premium auditor had performed an in-person physical audit.  

Lately, one area of concern consists of subcontractors and staffing agency supplied temporary employees.  The premium auditor has to know without a doubt that these subcontractors and temp employees are not your company’s responsibility for workers compensation coverage. 

As time passes,  we shall see the success/failure of using hybrid premium audits.    

©J&L Risk Management Inc Copyright Notice

Filed Under: hybrid, Premium audit Tagged With: PDF, physical audit

Expense Constant Charge On All Workers Comp Policies?

May 31, 2010 By JL Risk Management Consultants

Term of the Day- Expense Constant Charge

The Expense Constant charge is a fee charged on every Workers Compensation policy, regardless of the policy size. It is a fixed, flat expense charge that is applied in addition to the premium developed for that policy, usually ranging between $100-$300.

Graphic Of Hands Giving Money Expense Constant Charges

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This arbitrary amount is ultimately the cost for administering the policy and is based on the fact that the expense factor on such risks is inadequate to cover the cost of issuing and handling the policy.

This is similar to shop fees at when you take your  car into the shop.  It is a fixed amount that states have allowed insurance carriers to charge their policyholders.  

J&L receives a question on the expense constant charge at least a few times a year.   Employers question how this charge is calculated as there seems to be no rhyme or reason to the premium charge.   

Examine your policy in the Dec pages or the final premium audit bill.  You will see the expense constant charge in that billing.  There is not much one can do to protest it.  

All states allow this cost.  The charge is very small.  If the amount is over the usual $300 max, you may want to question it by calling your agent or carrier.   A mistake on the expense constant charge is rare. 

©J&L Risk Management Inc Copyright Notice

Filed Under: Expense Constant Charge Tagged With: expense factor, fixed amount, rhyme

Do We Have To Pay Premium Audit Bill Now – Not Exactly

May 15, 2010 By JL Risk Management Consultants

Do We Need To Pay The Premium Audit Bill Immediately?

All employers have concerns on whey they should need to pay premium audit bills as soon as they receive them from their insurance carrier.

 As I have mentioned often, employers call or email us with this question more than any other by far.

Picture Of Audit Bill Calculation

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The insurer is usually preparing to cancel the employer as they have not paid their premium audit bill timely. I received an email with this exact concern just before I wrote this post.

We usually respond – If you owe it, then you owe it, and if you do not owe it, then you do not – if there is a good reason to dispute the premium audit.

The rule in any state is that the employer must pay the undisputed part of the premium audit bill. We usually see on the premium audit bills some type of statement that says – Please pay or dispute in 10 days.

Your company actually has more than 10 days in most states as the time limit to dispute an audit is usually at least 30 days. In the Workers Comp policy, hidden in the back pages is the same statement limiting your company’s time to dispute or pay to 10 days. The state insurance laws have the final say.

In most cases, your company will not be bothered by the insurance carrier for 30 days.  Most states agree with the 30 days.  In our opinion, an employer needs some time to:

  1. Request the audit workpapers and review them.
  2. Decide whether a dispute is warranted
  3. Consult their agent
  4. If necessary, have the workpapers and premium audit bill reviewed by an expert consultant. 

This blog is full of advice on how to handle this situation. The main thing to not do is to file the bill away in a drawer and ignore it.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: email, undisputed

Audit Workpapers – Are They Important To Employers?

May 13, 2010 By JL Risk Management Consultants

Audit Workpapers Are Important To Employers In All Cases

The Audit Workpapers are important to your Workers Comp premium reduction program.   Worksheets prepared by the Workers Comp premium auditor, can be either hand-written or computerized, showing how the auditor arrived at the payroll numbers that are used to determine the audited premium. 

Picture of Auditor Hand Audit Workpapers Using Magnifying Glass And Calculator

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As the insured, you have the right to see all of your premium auditor’s workpapers including if any checklist is used by the auditor. Almost all workpapers are presently computerized and usually in spreadsheet form.

Many times the workpapers answer most of the questions that an employer has concerning the just-completed workers compensation audit.  

If you have questions after reviewing the audit workpapers, most premium auditors welcome questions on the audit.  It is critical to keep a copy of the auditor’s contact information.  

Most auditors use a template provided by the insurance carrier of freehand them on Excel (r).   J&L Risk Management always requests the documents from employers if we help them review their premium audits.  

Employers should request the workpapers from the premium auditor immediately if none were left at the conclusion of the audit.   This request should be in writing, preferably email.  See the premium auditor Term of the Day (c) for more info on interacting with the auditor.  

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Filed Under: Audit Workpapers Tagged With: freehand, spreadsheet form

Workers Comp Premium Audit Bill Payments – Correction

February 17, 2010 By JL Risk Management Consultants

Workers Comp Premium Audit Bill Payments

I need to make a correction on workers’ comp premium audit bill payments. I do not go back and change any of my prior posts. I decided to add in a post to lessen any confusion on my last post.

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One of my colleagues has pointed out that I should not leave any of our blog readers and Google searchers with the idea that the premium audit bill should not be paid even if overdue. I had posted last time that if your company pays its workers Comp audit bill, it will lose leverage.

The main point here is that if you know or feel that your company has been overcharged, you are required by each state’s insurance laws to pay the undisputed premiums when due. The amount of disputed premiums is a grey area. How would you or your company know what the undisputed amount is without assistance?

The other point I wanted to cover is to never use the premium dispute process as a method to delay paying a bill.  Carriers may just file a collection lawsuit if they discover you have no basis to not pay the bill. 

Workers Compensation insurance carriers have not, do not, and will not accept “I think the bill is too high” as a reason.  Some insurance carriers will make payment arrangements.  The number of carriers allowing payment plans shrinks every year Calling in a non-agent expert is recommended if you or your company is in this situation with a worker’s comp premium audit bill. 

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Filed Under: premium audit bill Tagged With: last post, lawsuit, lose leverage, undisputed

Workers Comp Carriers Cancel Policies For Late Payment of Premiums

February 16, 2010 By JL Risk Management Consultants

For Late Payment Workers Comp Carriers Cancel Policies

According to the Workers Comp it can carriers cancel policies for late payment of premium.We recently received a great question about Workers Compensation carriers cancelling policies for late payment of premiums that resulted from a premium audit.

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Yes, a Workers Comp insurance carrier can cancel your current policies for late payment of premiums after receiving a bill. Often you are only given 10 days to pay ONCE THE CANCELLATION NOTICE IS SENT. Your company will usually have a set amount of time to pay the bill once received. These are usually two separate events.

Please see the last few postings that I have written on what to do once your company receives a premium bill. If you receive a cancellation notice and you have questions on the accuracy of the premium audit and the subsequent billing, you have given you and your company very little time to examine the premium bill and audit.

As I have posted very often, once you receive the premium bill, you have a limited amount of time to act on it. Once you pay the bill, you have lost some of your leverage. The main thing to remember is not to just file the bill or ignore it.

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Due to the economic environment, the Workers Compensation insurance carriers have become much more aggressive in collecting late premium payments. I must say that I cannot blame them for cancelling a new policy if an old one is not paid on time. Even if you think the bill is correct and you cannot pay it, you must still contact the insurance company immediately. If you are unsure if the premium audit and bill are correct, it would be best to call in an expert premium consultant.

Please remember that the clock is ticking when you receive the bill. If you do not agree with it your company can dispute it. However, as I have said in many posts, do not use the dispute process to delay paying a premium bill. That will only ruin the business relationship you have with your agent and carrier.

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Filed Under: premium audit bill Tagged With: delay paying, examine, not paid

Premium Audit Bill – Call To Action – Five Things To Do

February 10, 2010 By JL Risk Management Consultants

Premium Audit Bill – Five Things To Do

The five things that you should do with a premium audit bill.  I am going to let everyone in on a little secret. Where does most of our employer premium audit business come from overall? We very often receive emails and phone calls from employer that have overdue premium audit bills and want to reduce the bill. Our other main source of business is when the business owner or risk manager basically feels that there is something wrong.

Graphic of Gold Coins premium audit bill

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A business will lose some of its leverage when it does two things. The first is to just pay what the premium auditor has calculated. The second one is to sit on the bill and not doing anything about it. A bill that was paid without a review or a bill that is now overdue makes the premium audit review process of employers much more tedious and complicated.

The five things that a business should do when you receive a Workers Comp audit bill are:

1. Look over the premium auditor’s worksheets if available. There will usually be a breakdown of how your company was audited.

2. Call or write the auditor to ask how they came up with their numbers if any part of the audit does not look correct to you. The auditor is bound by state Workers Comp insurance laws to respond to you.

3. If you still disagree with the auditor’s assessments, then you have the right to dispute them. Most insurance company premium bills say that you have only ten days. The state insurance laws usually differ and allow you a longer amount of time to dispute the bill. However, a Workers Compensation policy is a contract. In other words, there is a grey area there. The bottom line is that you are on a time clock to respond to the bill. It is best to not use the dispute process as a way to delay paying a bill. All this will do is ruin the business relationship you have with your insurance carrier and agent.

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4. If for some reason, you are unable to pay the premium audit bill, contact your insurance carrier immediately. Most insurance carrier collection departments will try to work something out with you. This may not apply to all insurance carriers. Making the first contact is much better than trying to work something out with an overdue bill pending.

5. The bottom line is to not let the bill sit or file it away. The Workers Comp premium audit bill is a call to action to either pay it after a full review or to question the audit and to dispute any incorrect areas.

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Filed Under: Premium audit Tagged With: breakdown, dispute process, overdue

Premium Audits – 10 Things To NOT Do During Them

January 29, 2010 By JL Risk Management Consultants

10 Things To NOT Do Concerning Premium Audits

With premium audits, there are 10 things we recommended not doing at all.   As most Workers Compensation policies renew on January 1st of each year, I thought I would post on what NOT to do from the time that the premium auditor calls to set up an appointment to the time your company receives the premium audit bill.

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1. Ignore the premium auditor’s request for appointments. The premium auditor can assess a severe state-mandated penalty for not setting an appointment. This will also cause the auditor to raise a yellow/red flag of what is the company trying to hide?

2. Keep changing the premium audit appointments at the last minute. See #1.

3. Just handing the auditor a big pile of records and letting he/she sift through them. See my last post on what to do for record presentation.

4. Being argumentative with the auditor. Please remember that this person is just doing their job.

5. Not asking questions of the auditor. The worst time to discover a premium auditor’s opinion/thoughts is when you receive the premium audit results and billing. They are supposed to answer your questions as much as you owe them answers.

6. Ignoring the premium audit results or bill. Your state may have a specified time limit on how long you have to question the premium audit bill. If you wait too long, you will owe the bill.

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7. Just writing a check. We see this so many times. The business owner or risk manager sends the check with the premium audit bill even though they may have questions. Question the auditor while they are at your business or when you receive the bill. Your company loses a large amount of leverage once the bill is paid.

8. Letting the audit bill sit on your desk. If your company cannot afford the premium audit bill, call their billing department immediately. Insurance carriers are somewhat flexible if you contact them early in the process.

9. Using the dispute process as a way to lengthen the time to pay. Always make sure that your point of dispute is solid. If you feel you have been overcharged, it may be a good time to call in an expert.

10. Not documenting everything. Always follow up a phone conversation with a letter, email or fax. Document all phone calls.

These are not all of my recommendations on handling the premium audit process. Most of these items came from premium auditors. The main thing to remember is for your company to not stand out from other companies.

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Filed Under: Premium audit Tagged With: appointment, leverage, recommendation

Workers Comp Premiums And Buying Business – Avoid Sticker Shock

January 19, 2010 By JL Risk Management Consultants

Buying Out A Business And Workers Comp Premiums

A  business owner may experience a Workers Comp Premiums shock when buying out a  new business. We have received a few calls on this situation in the last few months. A company or individual decides to buy another company. The deal is cut. A premium auditor then arrives some time later. The business receives a premium bill for a large amount of money. Is there any way to avoid paying the bill or should the previous owner have to pay the bill?

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I do not wish to give legal advice. However, from the Workers Compensation angle, the bill is due and payable by someone IF the premium audit bill is accurate. If the buyout contract does not specify the previous owner should pay the bill, the current liability is owed by the current owner. The new business owner very likely had some length of coverage under this policy.

The best way to avoid the situation is to have an expert look over the current Workers Compensation policy in place to make sure there are no lingering liabilities. Our most recent inquiry was on a $600,000 bill for workers comp premiums. 

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Filed Under: Premium audit Tagged With: business, payable

Changes of company ownership – Workers Compensation Specific Rules

January 18, 2010 By JL Risk Management Consultants

Workers Compensation Changes Of Company Ownership

The E-Mod liabilities change for Workers Compensation during changes of company ownership. I received a question last week concerning company ownership liabilities when a company is acquired by another company or individual.

 

Two businessman changes of company ownership shake hands

Wikimedia Commons – Duisenberg

There are actually very long and somewhat complicated rules on Experience Modification Factors (E-Mods or X-Mod in California) when there is a change in company ownership. I will leave that for another time. The question was more centered around premiums and the audit bill. 

Without giving legal advice, a company’s change of ownership will not affect the premium audit and billing process. The new owner will owe the premiums as if the company had not changed. If an individual is going to purchase a company, the liability of an upcoming premium audit and billing should be factored into the current and future liabilities.

We had a client call us into this very situation a few years ago in California. They were under the impression that the previous owner would be responsible for the billing. The premium auditor assessed a $25,000 premium audit bill against the new owner.

Unfortunately, the new owner had to pay the bill. We were able to reduce the bill due to a classification error by the auditor. However, the new owner did have to pay an unexpected bill.

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Filed Under: company ownership Tagged With: future liabilities, ownership liabilities

Waived Premium Audit May Not Be Great Sign For Employer

January 4, 2010 By JL Risk Management Consultants

Waived Premium Audit May Not Be A Good Idea

The Waived Premium Audit allows an insurance to not perform a yearly audit. I have come across situations lately where the insurance carrier has decided to waive a Workers Comp premium audit and not even attempt to audit the payroll and premiums. Almost all the employers think this is a great relief on the level of avoiding a tax audit.

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I would suggest taking a step back before agreeing to this type of audit. Insurance carriers are very adept at collection premiums for their services. If a carrier decides to waive a premium audit, does that mean that your company has been charged the correct premium? Does it mean that the carrier has decided to not collect additional premium? The answer is usually no in both cases.

Most states REQUIRE the insurance carrier to perform a year audit unless the employer signs off on a waiver. Some states do not allow waivers of the premium audit. 

How does a company know whether or not to waive a premium audit? It is best to call in a non-agent professional to look over the situation. Your company may be leaving money on the table.

As I have said very often, almost all insurance carriers and premium auditors are very honest and upstanding parts of the insurance process. Would licensing premium auditors help in this situation? I would have to say yes.

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Filed Under: Waived Workers Comp Premium Audits Tagged With: collection premiums, licensing, tax audit

Premium Audits – Paying Manufacturing Rates For Office Employee

October 25, 2009 By JL Risk Management Consultants

Can Premium Audits  = Manufacturing Rate For An Office Employee?

 When can premium audits generate manufacturing rates?   Two weeks ago, I posted on how two computer programmers could be rated as manufacturing employees at the year-end premium audit. Unfortunately, I did not complete the next posting on the subject. I will go ahead and do that now.

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Quite often, companies will make the honest mistake of having clerical employees end up in their highest rated classification. My prior example was of two computer programmers that had to cross through the manufacturing area in a plant to go on break. An insurance carrier in California during one of their premium audits charged the company the full rate for the manufacturing classification code and not the computer programmer code.

Was this proper?  If the employees were on break and not performing their job duties, can the break time actually be counted as work time for the premium audit?

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No, it was not as the employees only went through the manufacturing area while on break. In CA, as other states, this would not cause the employees to be rated as manufacturing. The key here is they were on break at the time. If the employees had to cross through the manufacturing area for a job duty, then the premium auditor would have been correct to assign the manufacturing class code.

We see this situation occur on premium audits due to miscommunication between the auditor and the employer contact during the time of audit. How can this situation be avoided? I will post on that next time.

The California employer decided to dispute two of their premium audits due to the employee’s work centered being a programmer approximately 99.9% of the time.  The results of that dispute are still pending.   The word “break” makes the audit dispute valid to a point.   

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Filed Under: Premium audit Tagged With: clerical employees, computer programmer

Understanding Premium Or Payroll Audit Process Myths vs Truths

July 6, 2009 By JL Risk Management Consultants

Premium Or Payroll Audit Process

The premium or payroll audit process contains many Myths and Truths. I was going back through some of the post over the last few weeks. In The Five Keys To Saving On Workers Compensation post, I had said I would cover #5 – Understanding Your Premium Audit. The premium or payroll audit is one of the most misunderstood areas of Workers Compensation. I thought I would cover some of the myths about your yearly premium audit.

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Myth – The premium auditor is trying to help my company.

Truth – The premium auditor is there to collect as much premium as possible allowed under the law.

Myth – My premium audit is a smooth process. The auditor comes in, and I usually owe a bill that I pay right away.

Truth – The audit process should be viewed the same as a tax audit. Please see the preceding audit Myth/Truth for clarification.

Myth – I stand a great chance of getting a refund after my premium audit.

Truth – We have found that over 70% actually result in a premium bill. Less than 10% of premium audits return money to the employer

Myth – The premium auditor works for my insurance carrier.

Truth – There are more subcontractors doing Workers Comp premium audits than insurance company personnel.

Myth – I disputed my premium audit back to my agent and he/she said everything looked great.

Truth – There are specific instructions on how to dispute a premium audit. Appealing to your agent is not one of them.

Myth – My company can ignore the premium audit bill and pay it later.

Truth – You may end up having your current policy canceled if you do not dispute or make arrangement for paying your company’s premium billing. I have posted this very often – Never Ignore A Premium Bill

Myth – I received a small refund last year and this premium audit bill is not that large. I am going to go ahead and pay it.

Truth – Just because you have not been hit with a large premium bill does not mean that you are not being overcharged.

Myth – There are no companies out there except my agent that can help me if I have a question on my premium audit.

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Truth – There are quite a few companies that aid employers with their premium audits such as J&L.

Myth – I can only dispute the current year’s Workers Compensation policy or premium bill.

Truth – Except in a few states, you may “look-back” for three years for any policy or premium audit mistakes that resulted in overcharges.

These are only a few of the myths about the Workers Compensation Premium or Payroll Audit process. If you have any further questions, please contact us at [email protected] or [email protected]

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Filed Under: Premium audit Tagged With: Five Key To Save WC, smooth process

Workers Comp Program Caution – Easy Under Radar Way To Harm It

June 29, 2009 By JL Risk Management Consultants

Workers Comp Program Can Be Harmed In Different Ways

How can you harm your Workers Comp program? Most employers have concerns that decisions about what to pay and when to pay can actually harm their business. When Workers Compensation insurance policies are examined for employers, there is one area where large mistakes almost always occur in the policy process.

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The mistake is simply writing a check for a Workers Compensation bill – especially a Workers Comp audit bill – without questioning how the insurance carrier or premium auditor calculated the amount. Insurance policy billing statements must be treated the same as a bank statement. If not, then over payments for Workers Comp coverage are almost guaranteed.

One employer wrote a check for over $50,000 because the insurance carrier audited them and sent them a bill. There were miscalculations during the audit, later discovered by an independent consultant. The true bill ended up being less than $20,000. This is becoming more prevalent in recent times.

Always ask for backup documentation on how the Workers Comp policy or audit bill was calculated.  Ask for your premium audit workpapers.  Look it over carefully. There may be no errors. But, at least the assurance is there that the documentation that justifies the billing was reviewed and anything that could be done, was.

 

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“Just Do Not Write A Check” should be one of the primary mottoes for insurance departments. At a time when every cent counts more than ever, feel 1,000% comfortable with writing the check. If not, trusting instincts and asking questions is Key. The answers to your questions may be very surprising and the results can be very lucrative  for your workers comp program and a huge boost to the bottom line.

***Due to popular demand, this is a repost of this information***

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Filed Under: premium audit bill Tagged With: independent consultant, very lucrative

US Appeals Court Rules On Premium Dispute

May 29, 2009 By JL Risk Management Consultants

US Appeals Court Sides With Employer On Premium Audit Dispute

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An employer disputed the premium audit properly was the US appeals court ruling from last week. I was reading an article earlier this week in The Workers Comp Forum concerning an employer in South Carolina that disputed their Workers Comp insurance premiums. The insurance carrier, Companion Insurance, canceled a second policy as the employer did not pay the insurance premium demanded on an audit billing for the first policy.

The employer sued Companion Insurance for breach of contract as they had paid all undisputed premiums. The employer lost the case on summary judgment but the Court of Appeals overturned the lower court. The reason the employer brought suit was that one of their employees was seriously injured in an accident and was denied benefits/coverage. 

Oral US Appeals Court appeals argument

Wikimedia Commons – tracy collins

The employer disputed the premium audit increase and forwarded its payroll information to dispute the audit’s accuracy. The court found such that a bona-fide dispute existed because the employer disputed the premium by refusing to pay, submitted its payroll data, and informed an insurance agent that it believed it had paid the amount owed on the first policy. The court stated it was “at a loss as to what more [the carrier] could reasonably expect of [the employer] when attempting to dispute the premium charge.”

 Check out my last post as this is all somewhat related. How is it all related? The employer prevailed as they disputed the audit timely. That is why I have posted very often to not let a premium audit statement or billing just sit in the inbox. The employer prevailed as they disputed the audit timely and forwarded the proper information to the carrier and agent. We will have to see how this all turns out as the case now goes back to the lower level court. The case is Triple H Debris Removal, Inc. v. Companion Property and Casualty Insurance Co., No. 08-1137 (8th Cir. 03/30/09)

 

Next Up – Question From A Blog Reader – How Can I Tell If The Workers Compensation Reserves On A File Are Correct?

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Filed Under: Premium Audit Dispute Tagged With: Forum concerning, summary judgment

How Would Company Dispute Workers Compensation Premium Statement

May 28, 2009 By JL Risk Management Consultants

WC Premium Statement and Bill

 Did your company dispute your WC premium statement and bill?  If your company feels the insurance carrier has not billed you correctly – especially at the time of premium audit, then by all means do not wait to send in a premium dispute letter.  Your insurance policy should have an address for premium disputes.  Each state has its own set of premium dispute rules that may differ somewhat between each state.

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The three main concerns that we have seen with premium disputes are:

  • The employer does not dispute the billing timely.  All states allow the insurance carrier to cancel an existing Workers Comp policy if a prior policy billing has not been paid or disputed timely.  If you are going to seek the services of a Workers Compensation consultant, make sure you do it quickly after receiving a billing.
  • The employer ignores the due date of the premium audit billing. This goes along with the first bullet point.  In this economy, insurance carriers are not very flexible if a company does not pay or contact them by the bill due date.
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    The employer uses the dispute letter as a way to stall the bill payment.  This may ruin the business relationship between your agent, the carrier and your company.  Be very careful what you include in the dispute letter.  It is very difficult to add more disputes to the original dispute letter.

If your company is unable to pay the full amount of the undisputed part of the premium audit bill, contact the insurance carrier immediately upon receipt.  Some carriers will accept payments over a few months time.  The key here is contacting the Workers Comp carrier before the due date.

Next Up – A Supreme Court Case That Covers Premium Disputes

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Filed Under: Premium Audit Dispute Tagged With: due date, payments, policy billing

Two Employers Are Having 23 Years of Workers Comp Premium Audits

May 1, 2009 By JL Risk Management Consultants

Workers Comp Insurance Carrier – Two Employers = 23 years of premium audits

Two employers are suffering through 23 years of Workers Comp premium audits. These are sad but true cases of where two Workers Comp Insurance carriers are trying to audit their clients a total of 23 years in the past.  

One of the employers has already been audited twice per year for eight years, but

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that is not good enough for the insurance carrier. The other employer is having audit requests going back 15 years.   

This is becoming more prevalent as workers comp insurance carriers are trying to increase their intake of premiums without having to incur any more risk.

Did these two employers do anything wrong?  No, as they allowed the premium auditors to go over their books each year.  Do the insurance carriers have the right to re-audit or re-re-audit employers?  

The answer to both questions is an emphatic – no.  The insurance carrier premium auditors get their one shot to audit premiums.

 After that, there is a little grey area, but insurance companies are not allowed to keep auditing the employers.

What can an employer do if there are multiple audits with requests for even more audits for the same year?  If the insurance carrier threatens cancellation if they are not allowed another audit, the scenario can become very complicated.

I recommend:

  • Knowing or exploring your state’s Workers Comp audit rules
  • Writing a letter to the premium auditor advising them that they have already audited your company’s Workers Comp payroll and class codes
  • Contacting a premium expert
  • Complaining to your state’s insurance commissioner only as a last resort and/or if there is a pending cancellation

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One of the caveats of this advice is the employer must have  100% cooperated with the premium auditor during the premium audit.  I have posted previously on cooperating with the premium auditor.  You may want to use the search box at the top right part of the web page or just scroll down until you find the information on what information a premium auditor can examine.

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Filed Under: Premium audit Tagged With: pending cancellation, threatens cancellation

How Can I Question My Premium Audit Without Filing A Dispute?

March 29, 2009 By JL Risk Management Consultants

Can I Question My Premium Audit Without A Dispute?

How can I Question my premium audit without going through a formal dispute process?

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This is a question that came in from a few of the blog readers over the last two weeks.  Most Workers Compensation premium auditors are very reachable if you have questions about your audit.  Calling or emailing them with a question does not violate any rules.  I always recommend emailing the questions as premium auditors are very busy and are usually overloaded with audits on their schedule.

This is the main reason that we always advise our clients to ask for their Workers Comp audit workpapers that are filled out by the premium auditor.  The workpapers can sometimes explain the thought process of the auditor.  Filing a premium dispute is the last thing that should be done if your company simply has questions about the premium audit.  There are a few premium auditors that only want premium disputes if you have a question.  I do not understand why certain auditors require premium disputes.  As I mentioned previously, emailed questions will usually suffice.

US Dollars Question My Premium Audit Cah

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Emailing a question or disputing the fact that your premium audit bill just seems high may only muddy the waters as you need to be very specific in your questions.  Then again, we see so many companies just writing a check when they receive a premium audit bill without even questioning the basis of how the premiums were calculated.  The premium audit bill is like any other account balance.  It should be reviewed thoroughly before any payments are made on the policy.

If you feel there is something wrong or are in over your head, please consult with a non-agent expert.  I have posted very often that when CFO’s, Risk Managers, Owners, etc. have a gut feeling that something is wrong they are usually correct. Please do not just set the premium audit bill aside as there are time limits on making a payment or filing a dispute.

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Filed Under: Premium Audit Dispute Tagged With: account balance, CFO, filing a dispute

Workers Comp Audit Workpapers – What Are They?

March 22, 2009 By JL Risk Management Consultants

Workers Comp Audit Workpapers =Premium Auditors Paper Trail

The Workers Comp Audit Workpapers are the auditor’s complete calculations that were created during the audit.  They are very important to understand what calculations, payroll, and other information were used to produce the final calculations on the policy.

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If you receive an audit billing, you can trace back to see the audit trail of the auditor.  Some of the audit workpapers can be very complicated.  Most audit workpapers are computer generated.  There are a few workers comp auditors or audit companies that may still use paper forms to perform audits.  There will very likely only be computer based audits very soon as this allows the auditor to share their findings much more easily.

We recommend NEVER paying a bill unless you fully understand the workers comp audit results. If you do not, the audit workpapers can sometimes easily point out how the bill was calculated. As I have said many times in this blog, the policy, policy audit, and anything to do with your Workers Comp policy should all be available to you as it is your Workers Comp policy that you are paying for with your company’s hard-earned money.

Most auditors will leave a copy of their audit workpapers with the employers when they do the audit.  It may be a good idea to ask the workers comp auditor for a copy of their workpapers while they are performing the audit.

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Filed Under: Audit Workpapers Tagged With: calculation, information, workers comp audit results

Premium Auditor – What Information Can They Examine At Audit?

March 8, 2009 By JL Risk Management Consultants

Workers Comp Premium Auditor Can Look At All Records 

We often receive this question in a phone call from an employer who has just been through a Workers Comp audit.  The employer is usually frustrated that the insurance company’s premium auditor has asked for so much information.

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According to your Workers Comp policy, the auditor has a right to examine all records that are in a  company’s possession. The auditor will usually examine various forms of documents that are the norm for a payroll audit.  However, the auditor can ask for any and all documents they need to finish the audit.

The best way to proceed is by pre-audit planning.  Prepare the same documents that the auditor asked for the previous year and provide those along with an Excel sheet or a QuickBooks summary report.  We never recommend having the audit at an off-site location such as the accountant’s or bookkeeper’s office as these seem to cause many inaccuracies in the audit as the auditor is not on-site.

If you do not remember what was asked for last year during the premium audit, you will need to provide the work comp premium auditor with all the documents (in a very organized manner) that feed into your audit.  Often, the premium auditor will send a letter requesting certain documents.  If you do not understand what is needed or have questions about the audit, it is best to call or preferably email the auditor before they arrive at your place of business.  Providing organized documents to the premium auditor is key.

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Filed Under: Premium audit, Workers Comp Documents Tagged With: accountant, Bookkeeper, Pre-Auditing Planning

Insurance Carriers Becoming Very Assertive Workers Comp Audits

March 6, 2009 By JL Risk Management Consultants

Workers Comp Insurance Carriers  and Premium Audits

One of the major trends that we are seeing right now is that quite a few of the Workers Comp insurance carriers are becoming much more assertive on their Workers Comp audits.  In this economy,  one cannot blame the insurance carriers for trying to collect all funds that they are owed by the employers.    

However, we have seen where a carrier has performed three premium audits in one year.   This is quite excessive as the year end premium audit would have taken care of any premium underpayments .

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The client called us in asking why there should be so many audits as it basically shut down their offices for one or two days.  That made our client have to shut down their offices for 6 working days per year.  Is this outrageous?  If you check your Workers Compensation insurance policies, the insurance carrier has a right to audit your company’s insurance policy anytime during the policy and for up to three years after the policy period expires.

We are of the opinion that the employer should be audited once per year just after the policy period expires, and only once.

Next post – We will discuss what you have to turn over to the insurance company’s premium auditor during a premium audit – the answer may shock you.

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Filed Under: Premium audit Tagged With: quite excessive, underpayments

Workers Compensation Premium Audits – Its That Time Of Year

January 7, 2009 By JL Risk Management Consultants

Almost The Time Of Year for Workers Compensation Audits

Its that Workers Compensation Premium Audits Time of the year – almost. 

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With the largest number of employers renewing on January 1, the number of audits increase dramatically in January and February.  If your Workers Comp policy renewed on 1/1, you should very soon hear from the insurance carrier’s auditor for your 2008 – 2009 policy year.

How do I know this info?  

We receive many calls from employers right after their Workers Comp premium audits and 100% of them are not happy.  That is why we receive calls very heavily in the months of January, February, and March.  The employer has received the Workers Comp audit bill and they do not agree with the results.   If your company is in this situation, what should you do first?

We recommend getting out your original Workers Comp policy and compare it to your audit.  Does it make sense?  Things such as a sharp increase in your payroll may make the audit bill larger than was anticipated.

One big mistake that an employer can make upon receiving an audit bill is to ignore it or just refuse to pay it.  Insurance carriers are now very assertive in cancelling your current policy with just a few days notice for not paying the prior year’s audit bill.  We do not recommend disputing the bill and audit unless there are areas on the audit that are incorrect.

How do you know whether or not your insurance premium audit and bill are correct?  I have posted many blog posts about this situation.  You can use the search box at the top of this blog and search for the word audit.  This should give you a very long list of articles.   If you still are not sure, please email or call me.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium Audit Dispute Tagged With: employers renewing, receive calls, refuse to pay it

Payroll Audit Notice Received In The Mail – What Do We Do Now?

September 25, 2008 By JL Risk Management Consultants

Workers Comp Payroll Audit Notice Very Important

My company has received a Payroll Audit notice.  This is one of the most popular questions that we receive about the Workers Compensation premium process. A workers comp payroll auditor contacting a company can make for a stressful situation. From what I have seen, the word audit tends to make someone feel they have done something wrong.

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A payroll audit is just what it is – an audit of your company’s payroll to make sure that your company has paid the correct premium. I think the word “correct” should be changed to “more.” Unless there is a reduction in payroll, almost all audits we have seen either leave the premium “as is” or increase the premium owed.

There are a few things your company can do to make the audit process easier:

  • Have concise and complete records available. The auditor may ask for “everything.” Request a list of what is needed for the auditor. Provide no more or no less than the requested amount of records. Spreadsheets are an invaluable aid.
  • An audit is a contentious situation. Try to be as congenial as possible.
  • Do not be intimidated. This seems to be a pattern of when we are called in at the end of a worker’s comp audit. We have seen the auditors try to intimidate the employers more now than in the past.
  • While the audit has to fit in the auditor’s schedule, the audit also has to fit into your company’s schedule. As indicated in the last post, do not refuse the insurance company’s auditor access to the records. As with any type of audit (tax, insurance, etc), the refusal may send a red flag that there is something amiss.

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  • Ask the auditor at the end of the audit to provide all workpapers that had to do with the audit. You have a right to have a copy of them, as they are the basis of your audit.
  • Make sure that the auditor knows who is a sub-contractor, temp, volunteer or any other type of worker beside the normal positions.

The first time that someone has to go through a worker’s comp payroll audit can be a very tense situation. Good luck with the audit. If you feel uncomfortable, it may be good to call in an expert.

http://www.parma.com

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: invaluable aid, notice, premium process

Insurance Company Auditor Workers Comp Financial Record Access

September 23, 2008 By JL Risk Management Consultants

Workers Comp Insurance Company Auditor Financial Records Access

Should an insurance company auditor access my financial records?  This was a question from one of our blog readers. We have seen this situation a few times when we audit workers comp reserves or premiums for employers.

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It is never a good idea to refuse access to your records by the workers comp auditor. The auditor will report your company as being non-compliant back to the insurance company. Every state has its own rules on how an employer can be charged premiums for non-compliance with a workers comp auditor’s request.  

Many states have bolstered the audit non-compliance laws.  Some states have increased the penalties for non-compliance.     

The insurance carrier will usually charge 300% of the estimated premium. The workers comp carrier will also issue an immediate cancellation notice if they are the carrier of record.  California’s WCIRB will leave out the payroll data to offset the claims, which can be a very severe penalty for a small employer.  

The auditor will also be very inquisitive to why they were not allowed access.   Causing a controversy before the audit begins may result in your company facing extra scrutiny.  This will also harm the relationship you have with your agent.

There are many ways to dispute an audit if you disagree with the results. It is not a very good idea to dispute the audit before it even occurs. You have the right to have the audit at a time that is convenient for you and your company.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: bolstered, extra scrutiny, financial records

Premium Audit Bills – Insured Cannot Afford Unexpected Increase

September 14, 2008 By JL Risk Management Consultants

Workers Comp Question About Premium Audit Bills

An article reader recently emailed a question on the premium audit bills. When we were named “One of the Top 25 Blogs on Workers Compensation” last week, our blog has increased in popularity dramatically. The #1 Question that we have received from our increased web traffic is one that we have answered before a few times, but it is worth repeating.

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The Question – We have just received our Workers Compensation billing from one year-end premium audit. The premium bill was 25% more than our original Workers Comp premium. We are not sure if we can pay the bill. We do not understand the basis of how the premium auditor came up with the figures. What can we do?

The first thing to do is to not pay the premium audit bill until you understand what the billing was based on by the premium auditor. Make sure that the complete audit bill is provided to you, including the audit workpapers. Review the bill very closely to see if it makes sense.

If the bill does not make sense, call or write the premium auditor with your questions. Often, the insurance carrier will say that you only have 10 days to pay the billing. This may not necessarily be true. If the premium billing is disputed, you may have up to 30 days to pay the bill. Do not use the dispute as a way to delay paying the bill.

One of my prior posts covers the “RED FLAGS” of Workers Comp audits. It may be good to look over that post. One of the main red flags is if there is a major change from your original policy.

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If you are unsure of whether or not the premium audit bill is accurate, call in an expert. The best thing to do is not to just write a check if you have questions about your bill.

Attorney Guide: 101Attorney.com is an online attorney resource website that provides attorney news, attorney guide, attorney finder, etc.

 

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: 30 days to pay, Attorney Guide, web traffic

Audit Bill Handling and Response – Question From Blog Reader

July 20, 2008 By JL Risk Management Consultants

Workers Comp Audit Bill  – Readers Question

The Blog readers question about handling a WC \audit bill. We received a huge bill from our Workers Compensation Yearly Payroll Audit. We cannot afford to pay it. What do we do? We do not want to lose our Workers Comp coverage.

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I would advise you to do four things:

  1. Do not panic, as you need to make sure you are taking care of the rest of the business.
  2. Check to make sure that you really do owe that amount; if not, then dispute the amount you think that you do not owe. Do not dispute the bill as a way of delaying your payment.
  3. If you owe the whole bill, then immediately call the contact person on the bill and tell them of your situation. Almost all carriers will let you pay the audit bill over time.
  4. Make sure the payroll figures for the next year’s policy are adjusted to the audited payroll amounts, or you will end up owing a huge bill again at the end of the year. Have your reserves examined by an expert before your next UNIT STAT date.

I will cover each of the four points below.

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1. As you are very busy running your company or the financial end of the corporation that you work for, worrying about the bill will not help. We have never seen an employer lose their coverage when they are making attempts to pay the bill.

Often you will see a phrase such as , “please pay immediately”, or “you have 10 days to pay.” Most state insurance rules will let you have a longer period, even if your Workers Compensation insurance policy says 10 days. However, if you do owe the bill, then at least make contact with the insurance carrier. DO NOT IGNORE THE BILL as this will only cause more problems later on with your insurance carrier.

2. If you are not sure that you owe the bill, then you do have a right to dispute the audit. You must have some basis besides – The bill looks high, or There is no way we can owe this much. If you know something is wrong and you need help, call in an expert to look over the bill. We do not mean your insurance agent. We do provide this service. It takes time to get the records together, so getting help with your audit quickly is crucial. As mentioned before, do not use the dispute process as a way to delay paying the bill.

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I have blogged How to Dispute a Bill very often. Please check my prior blogs on how to dispute a premium billing, or contact us.
Quite a few states now require the insurance carrier to inform the employer of how to dispute the bill. California is one of the states that is very specific on this point.

3. If you are sure that you owe the whole bill, but cannot pay it, do not just ignore it and hope that it will go away. On the bill, there will usually be a phone number, address, and sometimes email address of the billing department.

Call or email them ASAP and let them know that you will pay part of the bill. Making a good faith payment is a great way to keep your current insurance coverages. Send a check as soon as you can with the bill. It may be a good idea to call the billing department when the check is mailed.

Unfortunately, some carriers now are not accepting a partial payment, or at least they say they do not. I have never seen an insurance carrier to date send a partial payment check back to the employer. NOT EVER.   Pay what you can when you can pay it.  Communicate with your insurance carrier’s billing department. 

One of our mottoes is STOP JUST WRITING checks. Make sure that you owe the Workers Compensation premium bill and be sure to question how the bill was calculated.  Ask for the audit workpapers to see the complete documentation from the premium auditor on your audit.  Your company has a right to see that information.  Many times the auditor will send you a copy of their workpapers.  However, the audit results may not ever been seen by the company, only the premium audit statement or bill. 

4. Make sure the payroll figures for the next year’s policy are adjusted to the audited payroll amounts, or you will end up owing a huge bill again at the end of the year. Unless your company has had a decrease in payroll, you will likely owe another big bill. It is best to pay it through the year on a payment plan versus having to pay a huge surprise bill at the end of the policy year.

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We have often seen the situation lately where an insurance carrier will write a policy in complete contradiction to the audits. Check to make sure what was on the original policy resembles what is on the Workers Comp payroll audit.  Agents will sometimes just copy what was on the policy from the previous year regardless of the audit results.   The time to ask questions concerning your Workers’ Compensation policy happens before you sign off on the new policy.

Have your reserves examined by an expert before your next UNIT STAT date. A huge increase in Workers Comp reserves will make your next years’ policy increase sharply, as your Experience Mod (E-Mod) will increase exponentially.

Next Up – Classification Codes Revisited

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: insurance agent, insurance rules, payroll audit

Readers Question on What To Do With Premium Audit Bill

July 17, 2008 By JL Risk Management Consultants

What To Do (Not) – WC Audit Bill

Workers Comp – what not to do with the premium audit bill. I received my Workers’ Comp payroll audit results. The auditor says that I owe $67,587 more than I originally paid for my policy. We are a small company and that is going to kill our budget. Any ideas on what to do?

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Wikimedia Commons – Sar Maroof

We have commented on this question very often. Please check out prior blogs on this subject. The main thing I wanted to mention today was what not to do, which can possibly cost you even more premium dollars.

Do not:

  • Call up your agent or auditor and protest the bill without any backing to the protest. That may damage the relationships you have established.
  • Ignore the audit results or the bill – you may lose your chance to protest the bill, if necessary, and your carrier may cancel your current Workers Comp coverage
  • Panic, as you have time to look into the bill. Sometimes the bill will give you ten days, but in most states, you have up to 30 days. 
  • Write a protest letter without looking at the numbers.
  • Write the insurance commissioner – worse thing to do initially
  • Try correcting the bill on your own – you may cost yourself more $.

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  • Think you can only protest the one bill – you may be able to go back many years to protest old bills, depending on the state
  • Think hiring a premium expert is too expensive
  • Protest the bill without reading your initial policy
  • Protest the bill without knowing your classification codes and what they mean
  • Just give in and write a check if you feel something is wrong. The word WHY is a very strong word to use. Most of the contact we receive from employers is when they have a “gut feeling” something is wrong.

Up Next – We will review what to do when you receive a Workers Comp Audit Bill

©J&L Risk Management Inc Copyright Notice

Filed Under: premium audit bill Tagged With: payroll audit, premium dollars

Loss Control By Workers Comp Insurance Carriers

June 2, 2008 By JL Risk Management Consultants

Insurance Carrier Loss Control – Another Premium Audit? 

Loss Control efforts by insurance carriers sound like such a good idea.

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We have had two clients recently (one in California and one in Kansas) where the insurance carrier sent out what was really another auditor that was called loss control. According to the rules, insurance carriers are only supposed to audit employers one time per year, after the expiration of a policy.

Your insurance policy will have all the rules on whether or not you have to allow a loss control representative to do an audit of your operations.   This person is not usually seen as a loss prevention representative. 

However, there are rules that prevent the auditor from doing certain things to increase the premium for the expired policy. That is where a person that is supposedly there for a safety inspection is actually looking for ways to charge more Workers Comp premium.

One cannot forget and should always remember the 120 day rule for this type of premium audit.   

However, your company should not forego these risk audits as they are often very helpful in controlling risks specific to your company.

I will cover the rules that I just mentioned in the next post.

©J&L Risk Management Inc Copyright Notice

Filed Under: Loss Control, Premium audit Tagged With: 120 day rule, safety inspection

Disturbing Trend From Workers Comp Insurance Carriers

May 31, 2008 By JL Risk Management Consultants

Insurance Carriers Disturbing Trend

We have noticed a very disturbing trend from Workers Comp insurance carriers.

Often, after accepting a new policyholder, the insurance carrier will send out what is considered to be a Loss Control Consultant.

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Often, we have seen the Loss Control Consultant actually fill out Work Comp Audit Workpapers and submit these to the carrier.  We do not see this as any type of Loss Prevention or Control function. 

If the insurance carrier or employee is more of a premium auditor, then the carrier should inform the employer that they company will be doing a premium audit of sorts.   

I have six of those back on my desk at the office.  Hopefully, this will not be a trend that continues.  The most concerning item is the employer is never shown the workpaper.  One has to wonder why the employer is not advised of the initial premium audit part of this visit. 

I will keep you updated on this trend if it develops.  BTW, this is not one carrier that is doing this type of premium audit. 

Do not take this appointment as just Loss Prevention or Loss Control. Many times, and in one very particular instance, we have found the appointment to be a Premium Audit of sorts. Please see our post tomorrow for more information. I am having trouble with the hotel wireless system I am on as of now.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: disturbing trend, Loss Control Consultant, loss prevention, workpaper

Is A Payroll Audit Dispute Worth Your Company’s Time And Effort?

April 29, 2008 By JL Risk Management Consultants

Payroll Audit Dispute And NCCI

Is a Payroll Audit Dispute worth our time?  How long do we have to dispute the premium audit results that we just received?  Should we call in NCCI to do an inspection?

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We have often seen where the insurance carrier tells the employer that they have ten days to pay or dispute an audit when sending an audit billing. Most State Rating Bureaus and the NCCI allow a dispute up to 30 days after receipt of the audit results. That does not mean the receipt of the billing if a notice of audit adjustment has preceded the billing.

Calling in your State Rating Bureau or the NCCI and disputing the audit may cost your company more than it is worth. It is usually best to dispute the audit with the insurance carrier. If you call in NCCI, you will have to pay for the inspection, which can be expensive.

What happens if the NCCI causes your rates to be ever higher after their inspection? You can possibly cost your company even more Workers Comp premiums. There are certain times such as these to call in an expert such as J&L to examine the premium audit.

If you have a legitimate disagreement with your company’s final audit, the first person to contact is your agent.   Please remember that your policy and Rate Bureau rules usually require the employer to make the written dispute.    

The dispute should not come directly from your agent.  The agent should help you with your dispute.    Always follow what is in your policy.  Watch the time limits you have to dispute a premium audit.  Do not just file it away to get to it later down the road.   Take action as soon as possible.  The clock starts ticking when your receive the audit bill.  

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium Audit Dispute Tagged With: audit adjustment, expensive, legitimate disagreement, receipt

Workers Comp Audit Bills – Your Company’s Call To Action

November 19, 2007 By JL Risk Management Consultants

Workers Comp Audit Bills – Do Not Just File Them Away

The Workers Comp audit bills from your insurance carrier require some type of action.  The insurance carrier’s Workers Comp payroll auditor has been in for an audit.

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A few days later you receive a bill. What are your options?

  • Pay it – which is what we see most of the time. Companies should not just write a check without questioning how the increase occurred. We have seen companies that will at least look through the audit and question the auditor. This may result in a reduction in the bill. What do you do if the auditor says no to your disputes?
  • Review it – going through the original policy, any modifications during the policy period by the insurance carrier, and the payroll audit thoroughly may result in savings. Were the savings all you were supposed to receive for your efforts? 
  • Call your agent – that may be a good tactic, but your agent has already looked over everything previously, or have they?
  • Call in a premium expert – that is what we do as part of our services for no fee upfront.

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  • Write the Insurance Commissioner – this is one area where we see a company irreparably harming their relationship with their agent and insurance carrier. Contacting your respective Insurance Commissioner should only be done as a last resort before taking legal action. Never use the Insurance Commission as a bargaining tactic. We have never seen that work to the benefit of any employer.
  • Contact the State Rating Bureau or NCCI – that is sometimes a good idea, but what questions do you ask them? What would you want them to do for your company?

There is a common theme to all the bullets above except the first one. They all involve asking “why?”. That is the most powerful way to reduce your Workers Compensation premiums. See our previous post on asking why. One of our clients just received a premium return of $240,000. How? They started asking “why?”.

Next Up – I left one area out that is more important than anything mentioned in the last three posts. It is the fastest way to reduce your Work Comp premiums and it starts up just about the time of the audit billing.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: Payroll Auditor, premium expert

Workers Comp Questions and Comments From Our Readers

October 24, 2007 By JL Risk Management Consultants

Workers Comp Questions and Comments From Our Readers 

The Workers Comp questions and comments vary greatly.

We received this question recently:

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A consultant came into our offices and sold us on doing Workers Compensation premium reviews. The services looked similar to what you offer to employers.

The consultant said that they found a major error which would result in a premium refund of $36,500. By contract, we had to put up 1/4 of that amount ($9,125) to start the premium recovery process from our Work Comp carrier.

The consultant wrote a letter for us but disappeared after that time. The carrier needed followup information from the consultant. We have heard nothing from the consultant and we have received $0 in refunds from the carrier. What should we do? Is this normal?

PS on the question – I sent back an email and asked them if the contract guaranteed the consultant 25% upfront and it did.

Answer – We see this situation a few times a year. We are contacted by a company that had a Work Comp premium review by a consultant and money was paid upfront and the consultant was nowhere to be found and no help.

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By StockUnlimited

There are many reputable companies in the Premium Audit/Review business that accept no $ until their client company receives a refund or credit. We heavily advise against putting up a deposit or paying upfront until your company receives the Workers Compensation premium refunds first.

PS on the answer – We were able to contact the carrier and we found out that the consultant company was incorrect in the errors that they supposedly found in the Work Comp policies. The consultant would not return our calls.

Next up – Another question from our blog readers – you may email any questions you have to [email protected]m Our main website is at www.cutcompcosts.com. There are archives on our Workers Comp blogs on the right side of the page.   We will answer a few workers comp questions and comments each month. 

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit Tagged With: consultant, deposit, refund, Work Comp carrier

Premium and Reserve Reviews Are Very Different Tasks

October 12, 2007 By JL Risk Management Consultants

Work Comp Premium and Reserve Review Differences 

The difference between Workers Compensation premium and reserve reviews comes up often during one of our presentations or in speaking with current or potential clients.

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To keep from boring you to tears, we will cover Premium Reviews today and Reserve Reviews next time. We avoid the word audit when we can as the audit has such a bad connotation – IRS audit, year-end payroll audit by the insurance carrier, etc. Audits sound confrontational.

Premium Reviews – this is also called a policy review. We look at the “mechanics” of how your Workers Comp premium has been calculated. We look at various items including:

  • Payroll Statements
  • Current and previous Work Comp policies
  • Website advertising and brochures
  • Previous Work Comp year-end payroll audits from the insurance carrier
  • NCCI or State Rating Bureau sheets
  • Audit Billing Statements
  • Audit Workpapers
  • Any type of premium adjustment after initial policy issued
  • Job Descriptions for each employee
  • Description of Operations

We are often asked why we need website info, brochures, advertising, and a description of operations. We want to take the time to understand your company and what your company does in its operations. Without knowing it exactly, we would not be able to do a complete and accurate premium review.

We can usually go back three years from the date of the review. If we find errors, we can usually recover the error for three years, not just one. With a premium review, we are looking at the current Work Comp insurance situation and back in time for three years.

Next Time – Reserve Reviews – the hidden way to save $ on Workers Comp

PS – Our main site is at https://cutcompcosts.com/. Feel free to read our archived articles. They can be accessed by clicking on the months on the right side of the web page.

©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit, Reserves Tagged With: IRS Audit, policy review

Auditing Workers Compensation Policies – Main Errors Discovered

August 29, 2007 By JL Risk Management Consultants

Main Errors – Auditing Workers Compensation Policies

Auditing workers compensation policies involves many steps.  

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We have examined a large number of Workers Compensation policies in our existence. We find errors auditing at least 50% of the time. The most common errors that we have seen are (in order from most common to least):

  • Over-reserving or not closing files timely (see previous post on Total Incurred)
  • Employees misclassified into the wrong classification code
  • Governing classification code wrong – very expensive
  • Subcontractors classified as employees
  • Wrong payroll items counted as Workers Comp remuneration
  • Two or more distinct businesses classified as one business

When you are auditing your Workers Comp insurance policies and loss runs, please remember that there are 130 variables that go into a claim, and there are 34 steps to taking the Total Incurred and converting them into your E-Mod or X-Mod.

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Then, there are approximately 1o more steps once you have your Experience Mod to calculating your premium. As each of the variables feed into each other, you can multiply them to see what a chance of error would be for a given Work Comp policy.

130 * 34 * 10 = 44,200

Hold on, though as that is for one claim figuring into your premium. If you have 20 open claims, then you would multiply 44,200 * 20 = 884,000

So, there are 884,000 calculations or variables that must all be correct for you to pay your correct premium. Are you still willing to just write a check to the Workers Compensation insurance carrier?

I wrote about the Self-Insured Phenomenon yesterday. At this point, if you are self-insured, are you thinking that you’re OUT of this type of system? The actuary that sets your LDF’s or Loss Development Factors has as many variables and combos to examine. If you are self-insured, then the number of open claims may possibly be even higher.

I will talk about each of the above errors in auditing workers compensation policies over the next few days. Notice how many times the word Classification is in the above list.

 
©J&L Risk Management Inc Copyright Notice

Filed Under: Premium audit, workers comp audit Tagged With: Loss Development Factors, subcontractors

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About Me

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James J Moore
Raleigh, NC, United States

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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