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The Division of Workers’ Compensation has posted the 2013 DWC Audit Unit annual report on its website . The Audit Unit annual report provides information on how claims administrators audited by the DWC in 2012 performed and includes a ranking report. Labor Code sections 129 and 129.5 provide the framework for oversight and enforcement of the regulations of the Administrative Director for the prompt and accurate provision of workers’ compensation benefits. The performance of any insurer, self-insurer or third-party administrator is rated for action in specific areas of benefit provision. Of foremost importance is the payment of all indemnity owed to the injured worker for an industrial injury. The timeliness of all initial and subsequent indemnity payments and compliance with the regulations of the Administrative Director for provision of notice for a qualified or agreed medical evaluation are also measurable factors for performance.

In 2012, the DWC Audit Unit completed a total of 64 profile audit reviews (PAR audits). Of the PAR audits, 61 were routinely selected and three were target audits, which were conducted based upon failure of a prior audit. The total number of PAR audit subjects included 15 insurance companies, 14 self-administered / self-insured employers, 30 third party administrators (TPA), and five insurance company / third-party administrator combined claims adjusting locations.

At all audits, claim files were selected for review on a random basis, with the number of indemnity and denied cases being selected based on the numbers of claims reported in each of those populations for the audit subject in the three calendar years prior to audit commencement. In addition, if any complaints were received regarding possible violations of the Labor Code or regulations of the Administrative Director, each respective claim file related to a complaint may have been part of the audit.

Fifty-nine audit subjects (92.2%) met or exceeded the PAR 2012 performance standard thereby having all penalty citations waived. Five audit subjects (7.8%) failed to meet or exceed the PAR standard and the audit expanded into the full compliance audit of indemnity claims (FCA stage 1). Four of these audit subjects (6.3%) then met or exceeded the FCA-1 2012 standard. For these four audits, the Audit Unit issued notices of compensation due and assessed administrative penalties for late and unpaid indemnity. One of the 64 audit subjects (1.6%) that failed the PAR audit also failed to meet or exceed the FCA performance standard thereby demonstrating poor performance and this claims administrator will be subject to a return target audit within two years. The complete list of the performance ratings for the 64 audit subjects can be reviewed in order, from the best to worst performer. In 2012, two claims administrators disputed one or more penalties cited in the course of their respective audits. The disputes will be reviewed by the Workers’ Compensation Appeals Board.

As a result of PAR/FCA audits conducted during the calendar year 2012, the Audit Unit found and cited 4,690 violations against claims administrators with administrative penalties totaling $1,273,489. Not all administrative penalties are subject to collection. Under the Labor Code, no penalties are assessed on those “cited” violations unless the audit subject fails the audit at a specific level.