Every major piece of insurance legislation contains trade-offsthat are designed to ensure that there is a level playing fieldbetween all the parties involved, no matter how adversarial therelationships might be. This emphasis on fairness is a key part ofthe legislative process as lawmakers seek compromises that clearthe way to enact a major reform bill. Take for example the workers'compensation reforms enacted by lawmakers in 2003. Much of thecomprehensive re-write of the law was aimed at reducingemployer/carrier costs by making certain changes in areas such asattorneys' fees and injured workers' benefits. The law also soughtto remedy certain inadequacies, such as increasing thereimbursement amounts for medical services.

Many view the 2003 reforms as a victory for carriers, the proofof which is seen in the dramatic reduction in employers' workers'compensation premiums. But in so much as carriers successfullyfought for changes, lawmakers also felt the obligation to ensurethat carriers and third-party administrators met their ownobligations under the law. To that end, lawmakers stiffened therequirements for carriers and third-party administrators to payinjured workers' benefits and medical bills within certainstatutory time frames or face substantial penalties.

Recently, the Division of Workers' Compensation Bureau ofMonitoring and Audit (BMA) is reporting that an overwhelmingmajority of insurers are meeting the standards for the timelypaying of injured workers' benefits and medical bills. Afterevaluating more than three million medical bills from roughly 900insurers and third-party payers, auditors found that the majorityof payers are meeting the statutory performance standards designedto increase the efficiency and accountability in the system. Theaudits examined both indemnity payments to injured workers and alsomonies owed to health-care providers, dental-care providers,hospitals, and claims for drugs and supplies. The figures arecontained in the latest DWC annual report that covers the periodfrom June 30, 2005 to July 1, 2006.

Background

The Bureau of Monitoring and Auditing is responsible formonitoring claim-handling practices of employers/carriers to ensurethey are meeting their obligations under the law for promptlypaying injured workers' claims and health-care providers' bills.Among other things, the audits are designed to make sure thatemployers/carriers are not engaging in a pattern of delayingpayments or failing to provide accurate benefits to injuredworkers. Engaging in such business practices and failing to provideaccurate payments in a timely manner can lead to a variety ofadministrative fines.

Under Chapter 440.525, Florida Statutes, the bureau has theright to investigate any carrier, third-party administrator, or anyother claim-handling entity as it sees fit. The division's auditmay cover an employer/carrier's records dating back five yearssince the payer was last audited. The law grants the bureau theright to conduct on-site inspections to determine if the payerexhibited a pattern of delaying action on claims or engaging inother business practices that are designed to coerce or intimidateinjured workers to curb their requests for benefits and/or agree tounfair settlements. If necessary, the law grants the bureau thepower to issue subpoenas to compel employer/carriers to turn overrecords. If the bureau finds the payer unwittingly committed suchacts, the payer could face finds of up to $2,500 for each violationup to a total of $10,000. For purposely engaging in these businesspractices, the payer could face fines reaching $100,000.

The claim-handling process laid out in the law begins when aworker informs his or her employer that they have experienced anon-the-job accident. As stated in Chapter 440.185, within sevendays of being notified of an on-the-job injury by an employee, anemployer is required to report the incident to their carrier,which, in turn, must notify the DWC with 14 days. The employer alsohas three days after being informed of an accident to provide theemployee with an informational brochure that explains theemployee's rights under the law.

Under Chapter 440.20, Florida Statutes, employer/carriers mustpay the first indemnity benefits to an injured worker within twoweeks after being notified of an on-the-job injury. Theemployer/carrier retains the right to investigate the claim for 120days if it disputes the request for benefits. Further, theemployer/carrier must pay a 20 percent penalty for each tardybenefit payment. In addition to paying individual claims, auditorsalso examine the total performance of the employer/carrier inproviding benefits. By law, the payer must meet a 95 percentperformance standard or face further fines. Specifically, thebureau may levy fines of $50 for each late payment that falls belowthe 95 percent performance standard, but falls within a 90 percentstandard. Each payment falling below the 90 percent standard canresult in a $100 fine.

Chapter 440.20 also requires employer/carriers to pay allmedical, hospital, pharmacy, or dental bills within 45 calendardays after receiving a request for payment unless they notify thehealth care provider otherwise. The Agency for Health CareAdministration has recently finalized a rule (59A-31) that sets outthe process to resolve medical reimbursement and utilizationdisputes between health care providers and insurers. Among otherthings, the rule codifies a statutory provision that grants healthcare providers up to 30 days to petition the agency upon receivinga notice from an insurer that a reimbursement request has beenrejected or substantially adjusted downward. Once the carrier hasbeen notified of the appeal, it has 10 days to respond to thepetition. The two parties can then negotiate a settlement or AHCAcan make a determination.

As is the case with injured workers' indemnity benefits,employer/carriers must also meet certain overall performancestandards for paying medical bills or face a series ofadministrative fines. Specifically, for each bill that fallsbetween a 95 percent and 90 percent performance standard,employer/carriers can be fined $25 per bill. Payments falling belowthe 90 percent standard can lead to fines of $50 per bill.

Audit Results

The BMA has a number of responsibilities, including auditingcarriers to determine whether they are complying with the law withregards to paying injured workers' benefits and medical bills on atimely basis. The bureau also monitors employer/carriers to makesure they are paying permanent total disability benefits andpermanent total supplemental benefits on time. The bureau alsoparticipates in hearings, depositions, and mediations to resolvepayment disputes while also being responsible for overseeingself-insured programs set up by government and other publicentities.

To assist employer/carriers in monitoring the performance oftheir claim-handling entities, the DWC has established aCentralized Performance System. The system is accessed through theInternet and allows employer/carriers to communicate with thedivision and compared the employer/carriers performance against theindustry averages. The centralized system is made up of two parts,one that monitors benefit payments to injured workers and anotherthat monitors payments to medical providers. The audit results areas follows:

In fiscal year, 2004-2005, the bureau audited 34employer/carriers and examined a total of over 4,635 claim files.Auditors reviewed over 10,000 indemnity payments to workers andidentified 224 claim files with underpayments. As a result, injuredworkers collected a total of $63,277 in back payments andpenalties, and interest of $39,929. The audits also establishedthat employer/carriers provided injured workers with theinformational brochure within three days of receiving notice of aninjury 86 percent of the time.

The bureau audited nearly 20,000 other required forms anddocumentations. Auditors identified $1.4 million in underpaymentsof permanent total disability benefits, which yielded $500,000 inpenalties and interests. They also examined the $20 million inpermanent total supplemental benefits for claims with dates ofaccident prior to July 1, 1984.

The bureau evaluated 46,000 first reports of injury formsthrough the centralized performance system. The overall filingperformance was 91 percent and the payment performance 90percent.

Auditors examined the timely filing of 6,500 DWC claim formsthat are required to be submitted as per administrative rule 69L-3.Additionally, auditors reviewed the accuracy of 5,000 medical billsthat were submitted to the division. As a result, auditors found 14instances in which claim-handling entities unwittingly failed tofile medical data.

Examining the use of the centralized performance system medicalcomponent, auditors reviewed over 3.2 million medical bills fromroughly 900 claim-paying entities. The overall industry performancelevel was 98 percent for health care provider claim forms, 98percent of forms for drugs and medical supplies, 95 percent ofdental claim forms, and 97 percent of hospital bills.

Auditors completed 20 payroll audits of self-insured employersand reviewed 67,800 payroll records. As a result, auditorsuncovered $8.8 million in under-reported payroll dollars, whichgenerated $1.3 million in under-reported premium dollars. Thebureau also calculated 335 experience-modification factors forself-insured employers.