Labor Code §§ 129 and 129.5, require the Audit Unit of the Division of Workers’ Compensation to conduct a routine profile audit review (PAR audit) for all adjusting locations of California workers’ compensation claims at least once every five years. The performance of an audit subject is rated for provision of specific workers’ compensation benefits and measured against standards set by the results of prior audits within the industry. The Administrative Director annually establishes the profile audit review and full compliance audit standards. The 2015 standards are based on the audit results of calendar years 2011 through 2013.
The Profile Audit Review (PAR) Performance Standard for audits conducted in 2015 is 1.53446. Audit subjects with PAR performance ratings of 1.53446 or lower will be required to pay any unpaid compensation, but no penalties will be assessed. If a PAR audit subject’s PAR Performance rating is 1.53447 or higher, the audit will expand to a Full Compliance Audit, and an additional sample of indemnity claims will be audited.
It is estimated that approximately 80% of audit subjects meet or exceed the PAR Performance Standard and that approximately 20% of audit subjects will be subject to a Full Compliance Audit.
The Full Compliance Audit (FCA) Performance Standard for audits conducted in 2015 is 1.68525. FCA audit subjects with an FCA performance rating of 1.68525 or less will be required to pay any unpaid compensation and penalties will be assessed for all violations involving unpaid and late paid compensation. If an FCA subject’s full compliance audit performance rating is 1.83496 or higher, an additional sample of denied claims as well as the expanded samples of indemnity claims will be audited. Penalties will be assessed for all violations as appropriate pursuant to 8CCR§§10111 though 10111.2.
It is estimated that approximately 50% of FCA audit subjects (10% of the PAR audit subjects) will meet or exceed the FCA Performance Standard and that approximately 50% (the 10% poorest performing of all audit subjects) will fail the Full Compliance Audit.