OIR Rule Development Workshop Report: Application and Audit Procedures for Workers’ Compensation Insurance

 

On Tuesday, March 31, 2009, the Florida Office of Insurance Regulation (“OIR”) held a Rule Development Workshop on Proposed Rule 69O-189.003, F.A.C., relating to Application and Audit Procedures for Workers’ Compensation Insurance. 

The proposed Rule will specify those audit procedures that, under the old Rule, were incorporated by reference to National Council on Compensation Insurance (“NCCI”) publications.  The Proposed Rule also will add additional audit procedures, and will allow, but not require, electronic signatures in an application for workers’ compensation coverage.

Mark Ito of the OIR presided over the Workshop.

To view a copy of the meeting notice and proposed Rule draft, please click here.

Teresa Eaton of the OIR provided those in attendance with a summary of changes to the Administrative Rule for Application and Audit Procedures, which the proposed Rule will affect. 

Summary of Proposed Changes:

1. New paragraph (2)(c) allows for electronic signatures on an application

2. New paragraph (2)(d) allows for electronic notarization on an application

3. Paragraph (4)(a) removes reference to NCCI Audit Rules as contained in its Manual.

4. Paragraph (4)(a) removes reference to the Florida Workers’ Compensation Joint Underwriters Association (“FWCJUA”) Audit Rules as contained in its manual

5. Paragraph (4)(b) incorporates the Final audit rules from the NCCI Basic Manual into the Administrative Rule

NOTE: Ms. Eaton explained that the Administrative Rule originally was written in 1991 and, at that time, it was thought to be easier to simply reference the NCCI Manual.  However, it was not realized at that time that when the Manual changed each year, the Rule would have to be changed as well.

Changes to the current Rule:

a. The threshold for final physical audits to $10,000 for non-construction and $5,000 for construction is increased. Ms. Eaton explained that, currently, the threshold is $4,500 for non-construction, inasmuch as it has not been changed in years.

b. References to Preliminary Audits have been removed by not incorporating them into the Administrative Rule. A question was asked regarding whether the language should be replaced, but no discussion took place

c. References to the requirements of Sections 440.38(3), (5), (6) and (8) were removed by not incorporating them into the Administrative Rule (NCCI paragraphs H-K). Ms. Eaton acknowledged that removing this language was only cosmetic, considering that these provisions are referenced in the Rule and will still have impact even if they are not explicitly listed.

6. Paragraph (4)(c) incorporates the Final audit rules from the FWCJUA Operations Manual into the Administrative Rule.

7. Reference to three-year fixed-rate policies in paragraph (4)(e) of the old Rule was removed and it was renumbered (4)(g). Ms. Eaton explained that these fixed-rate policies no longer exist in Florida.

8. Web site reference in paragraph (4)(f)1.b. of the old Rule was updated and renumbered to (4)(h)1.b.

Following Ms. Eaton’s summary and explanation of the proposed changes, interested parties in attendance testified.

Mr. Simon Blank from the Florida Workers’ Compensation Fraud Task Force (the “Task Force”) addressed his organization’s efforts to fight fraud by identifying undocumented illegal workers who have infiltrated the system.  Mr. Blank explained that the Task Force was working with industries that have been most affected by the problem (construction, agriculture, etc.) to help develop ways to fight fraud. 

The Task Force has proposed three suggestions that would affect both industry and workers’ compensation carriers by helping to alleviate fraud:

(1) Require employers to put all workers on payroll reports that must be submitted quarterly;

(2) Have a process in place to effect carrier action in the event that an employer fails to submit a quarterly payroll report

(3) Establish a form that asks seven simple questions, such as “how many people work for you, in what capacity, what business do you engage in, etc.,” that will give the Task Force the ability to pinpoint the type of workers a company is actually employing.

A representative of the Florida Roofing, Sheet Metal and Air Conditioning Contractors Association commented that these fraud standards should be applied against Employee Leasing Companies as well, otherwise a major loophole in the regulation would exist.   Ms. Eaton explained that the OIR does not have oversight of Employee Leasing Companies, but that the point was valid and well-understood. 

A representative of Summit & Liberty Mutual Insurance Company raised concerns about the fraud combat plan, because it places the burden on the employer, not the carrier; and that these standards are too uniform in their approach.  The representative requested time to sit down with the OIR and provide further feedback.  He also voiced support for mail-in audits.

The Workshop record will be left open for 10 days.

 

Please note that the material above is a brief summary of the discussion and events that took place during the meeting of the OIR.  It is not intended to be a comprehensive review of any particular issues relating to the policies and/or issues discussed.  Further, this report should not be relied upon for making any specific decisions.  Should you have any questions about any of the above matters, please contact this office.  Colodny Fass will continue to follow this, and other issues related to actions taken by the OIR, and provide information on, and analysis of, those issues and events as they arise.

 

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