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

Many view the 2003 reforms as a victory for carriers, the proof of which is seen in the dramatic reduction in employers' workers' compensation premiums. But in so much as carriers successfully fought for changes, lawmakers also felt the obligation to ensure that carriers and third-party administrators met their own obligations under the law. To that end, lawmakers stiffened the requirements for carriers and third-party administrators to pay injured workers' benefits and medical bills within certain statutory time frames or face substantial penalties.

Recently, the Division of Workers' Compensation Bureau of Monitoring and Audit (BMA) is reporting that an overwhelming majority of insurers are meeting the standards for the timely paying of injured workers' benefits and medical bills. After evaluating more than three million medical bills from roughly 900 insurers and third-party payers, auditors found that the majority of payers are meeting the statutory performance standards designed to increase the efficiency and accountability in the system. The audits examined both indemnity payments to injured workers and also monies owed to health-care providers, dental-care providers, hospitals, and claims for drugs and supplies. The figures are contained in the latest DWC annual report that covers the period from June 30, 2005 to July 1, 2006.

Background

The Bureau of Monitoring and Auditing is responsible for monitoring claim-handling practices of employers/carriers to ensure they are meeting their obligations under the law for promptly paying injured workers' claims and health-care providers' bills. Among other things, the audits are designed to make sure that employers/carriers are not engaging in a pattern of delaying payments or failing to provide accurate benefits to injured workers. Engaging in such business practices and failing to provide accurate payments in a timely manner can lead to a variety of administrative fines.

Under Chapter 440.525, Florida Statutes, the bureau has the right to investigate any carrier, third-party administrator, or any other claim-handling entity as it sees fit. The division's audit may cover an employer/carrier's records dating back five years since the payer was last audited. The law grants the bureau the right to conduct on-site inspections to determine if the payer exhibited a pattern of delaying action on claims or engaging in other business practices that are designed to coerce or intimidate injured workers to curb their requests for benefits and/or agree to unfair settlements. If necessary, the law grants the bureau the power to issue subpoenas to compel employer/carriers to turn over records. If the bureau finds the payer unwittingly committed such acts, the payer could face finds of up to $2,500 for each violation up to a total of $10,000. For purposely engaging in these business practices, the payer could face fines reaching $100,000.

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

Under Chapter 440.20, Florida Statutes, employer/carriers must pay the first indemnity benefits to an injured worker within two weeks after being notified of an on-the-job injury. The employer/carrier retains the right to investigate the claim for 120 days if it disputes the request for benefits. Further, the employer/carrier must pay a 20 percent penalty for each tardy benefit payment. In addition to paying individual claims, auditors also examine the total performance of the employer/carrier in providing benefits. By law, the payer must meet a 95 percent performance standard or face further fines. Specifically, the bureau may levy fines of $50 for each late payment that falls below the 95 percent performance standard, but falls within a 90 percent standard. Each payment falling below the 90 percent standard can result in a $100 fine.

Chapter 440.20 also requires employer/carriers to pay all medical, hospital, pharmacy, or dental bills within 45 calendar days after receiving a request for payment unless they notify the health care provider otherwise. The Agency for Health Care Administration has recently finalized a rule (59A-31) that sets out the process to resolve medical reimbursement and utilization disputes between health care providers and insurers. Among other things, the rule codifies a statutory provision that grants health care providers up to 30 days to petition the agency upon receiving a notice from an insurer that a reimbursement request has been rejected or substantially adjusted downward. Once the carrier has been notified of the appeal, it has 10 days to respond to the petition. The two parties can then negotiate a settlement or AHCA can make a determination.

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

Audit Results

The BMA has a number of responsibilities, including auditing carriers to determine whether they are complying with the law with regards to paying injured workers' benefits and medical bills on a timely basis. The bureau also monitors employer/carriers to make sure they are paying permanent total disability benefits and permanent total supplemental benefits on time. The bureau also participates in hearings, depositions, and mediations to resolve payment disputes while also being responsible for overseeing self-insured programs set up by government and other public entities.

To assist employer/carriers in monitoring the performance of their claim-handling entities, the DWC has established a Centralized Performance System. The system is accessed through the Internet and allows employer/carriers to communicate with the division and compared the employer/carriers performance against the industry averages. The centralized system is made up of two parts, one that monitors benefit payments to injured workers and another that monitors payments to medical providers. The audit results are as follows:

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

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

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

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

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

Auditors completed 20 payroll audits of self-insured employers and reviewed 67,800 payroll records. As a result, auditors uncovered $8.8 million in under-reported payroll dollars, which generated $1.3 million in under-reported premium dollars. The bureau also calculated 335 experience-modification factors for self-insured employers.

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