Workers Compensation Audit Dispute- Don’t get pushed around

Auditor is holding Insurance audit report.

5 Steps to Successfully Dispute a Non-Compliance Audit Charge

As an insurance professional, one of the most common errors I see in audits is the non-compliance audit charge. It’s not uncommon for insurance companies to send their insured parties a hefty bill with little explanation, leaving the recipient feeling confused and overwhelmed. These bills can sometimes be based on a poor guess of the premium amount due, and it’s not uncommon for individuals to simply pay the bill to avoid rocking the boat.

However, there is a way to stop this process in its tracks: by disputing the amount. In my experience, about 80% of the time, the amount due is incorrect. To do this, you’ll need to supply supporting documentation and an explanation for your dispute. Additionally, it’s always a good idea to ask for a copy of the auditor’s worksheet, which will show how the auditor arrived at their conclusion for the additional premiums. This will also help you draft a revision request for the audit.

I’ve seen instances where auditors will assign all of the payroll to the highest rate, either out of laziness or to increase premiums for the company. In some cases, they may even add the payroll of an excluded owner, even though it’s specifically excluded. It’s unclear if this is done for commission purposes, but it’s frustrating to see small businesses being subjected to higher premiums in this way.

There are, however, rate assignments that can be applied to the audit in your favor. For example, the clerical employee class code can be adjusted in a work comp audit. Additionally, some duties and activities are so common to most businesses and may be so far outside of the entity’s operational activities that employees in these positions are considered exceptions to the governing classification rules. In these cases, the payroll for the standard exception classes of employees (including clerical employees, drafting employees, salespeople, and drivers) is subtracted from the governing classification and assigned to the applicable standard exception code, which is rated separately from the governing class.

To qualify for assignment to one of these standard exception classifications, an employee or group of employees must be physically separated from the hazardous aspects of the business by means of walls, floors, partitions, or counters. However, this requirement doesn’t negate the assignment of an employee to a standard exception class if they are only entering the area of operation to conduct duties consistent with the class code, such as a clerical employee delivering paychecks. It’s important to note that standard exception classifications aren’t necessarily limited to just these five class codes.

When initially completing your audit, you’ll need to provide payroll summaries and 941s, as well as job descriptions for each employee. Any subcontractor payments and certificates of insurance for subcontractors should also be provided in order to avoid being charged premiums or payments made to subcontractors. If there are any OCIP or wrap-up projects, the payroll should be removed.

It’s important to remember not to volunteer more information than is asked for during the audit process. The auditor will ask specific questions, and it’s expected that you’ll answer them. However, you should avoid going down a path that may be detrimental to your interests. If you need assistance with your audit or have any questions about the process, feel free to reach out to me.

If you are unhappy with the results of a workers’ compensation premium audit, you have options for disputing the audit. Here are four steps you can take:

  1. Review the audit and any supporting documentation to ensure you understand the audit’s basis and calculations. Look for any mistakes or inconsistencies.
  2. Gather evidence that supports your position, such as payroll records, time sheets, and other documents that show the correct number of employees, their job classifications, and their wages.
  3. Contact the auditor to discuss any questions or concerns you have about the audit. The auditor may be able to explain the audit process or address any errors or discrepancies you have identified.
  4. If you are unable to resolve the issue through discussion with the auditor, you can file an appeal with the insurance carrier or state workers’ compensation agency. You will need to provide evidence and documentation to support your appeal.

It’s important to note that the appeal process can be complex, and you may want to seek the assistance of an attorney with experience handling workers’ compensation matters.