Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) In its discretion, the Audit Unit may
treat an affiliated group of insurers at a single adjusting location as
individual insurers, or may combine all or any of them as a single insurer
audit subject. In its discretion, the Audit Unit may treat parent and
subsidiary self-insured employers at a single adjusting location as individual
self-insureds, or may combine all or any of them as a single self-insured audit
subject.
(b) The final selection of
audit subjects shall be within the discretion of the Audit Unit. The Audit Unit
may investigate information or complaints instead of, or in addition to,
conducting an audit. Investigations and/or audits may be conducted if
complaints or information indicate the possible existence of claims handling
practices which would be assessed as a civil penalty under Labor Code Section
129.5(d).
(c) The Audit Unit shall select at least half
of its audit subjects at random from any available listing of adjusting
locations of workers' compensation insurers, self-insured employers,
self-insured joint powers authorities, legally uninsured employers, and
third-party administrators. If, after the results of an audit become final,
none of the criteria qualifying an audit subject for a return non-random audit
pursuant to subsection (f) of this section exist, the audit subject shall be
removed from the pool of potential random audit subject selection for three
years. However, eligibility under this subsection for removal from the pool for
random audit subject selection shall not bar the non-random selection of the
audit subject pursuant to this section or Labor Code Section
129(b).
(d) In order to establish priorities for
audits pursuant to Labor Code §
129(b),
the Audit Unit shall review and compile complaints and information that
indicate a claims administrator is failing to meet its obligations under
Divisions 1 or 4 of the Labor Code or regulations of the administrative
director.
(1) The information and complaints
shall be tracked and compiled into a list of Claims Administrators Identified
for Potential Non-Random Investigation as follows:
(i) Complaints or information available to
the Audit Unit which indicate possible violations of the kind which, if found
on audit, would be subject to the assessment of administrative penalties or
issuance of notices of compensation due shall be retained in potential audit
subject files by claims adjusting locations. Factual information and complaints
shall be weighted on the basis of apparent severity of the alleged violation,
using the assessment categories set forth in the subsections (a) through (d) of
§
10111 and §
10111.1 to set a point value.
An alleged violation that would fall within subsection
(a) is given one point, an alleged violation that would fall within subsection
(b) is given five points, an alleged violation that would fall within
subsection (c) is given ten points, and an alleged violation that would fall
within subsection (d) is given fifty points. When multiple violations are
alleged in one complaint, each potential violation is given the appropriate
point(s).
Points assigned for violations which are evidenced by
decisions or findings rendered by the WCAB or Rehabilitation Unit shall be
multiplied by ten.
(ii)
Periodically, the audit unit shall review and analyze the complaint and
information data in order to establish a list of Claims Administrators
Identified for Potential Non-Random Investigation. The total number of points
assigned to a claims administrator at an adjusting location shall be compared
to the total number of claims reported at that claims adjusting location as
indicated on the Annual Report of Inventory or the Self Insurer's Annual
Report. The claims administrators shall be ranked on the list of Claims
Administrators Identified for Potential Non-Random Investigation on the basis
of the ratio of weighted complaints to case load size at each adjusting
location. It is within the discretion of the Audit Unit to determine when new
lists shall be established.
(2) The audit unit shall select any number of
the highest ranking claims adjusting locations for investigation from the list
of Claims Administrators Identified for Potential Non-Random Investigation.
(i) The Audit Unit shall notify the claims
administrator that it will conduct an investigation, and shall specify the
files it will review by providing the names of the injured workers. The Audit
Unit shall give the claims administrator a minimum of three working days notice
of the date of commencement of the investigation. Notice may be given by
telephone. The claim files shall be made available to the Audit Unit at the
time of the commencement of the investigation. The Audit Unit may examine claim
files and require a claims administrator to provide documents and
information.
(ii) The Audit Unit
shall examine the selected files and shall assign points for each violation
found in the files in accordance with the point system set forth in subsection
(d)(1)(i), except that there shall be no multiplier for violations evidenced by
decisions or findings of the WCAB or Rehabilitation Unit. Points shall be
assigned for every violation found in the file, both violations that were
alleged in the complaints and additional violations found by the audit
unit.
(iii) The Audit Unit shall
send a notice to the claims administrator which outlines the violations found
in the files investigated. The claims administrator may request copies of the
complaints relating to the files investigated. The complaints may be kept
confidential by the audit unit if confidentiality is requested by the
complainant.
(iv) The claims
administrator may present documentation and/or argument to the Audit Unit to
disprove any or all of the violations found by the audit unit in the
investigated files. The documentation and argument must be post-marked or
personally delivered to the Audit Unit within fourteen days of receipt of the
letter outlining the violations.
(v) The Audit Unit shall consider documents
and argument submitted by the claims administrator to disprove the violations
found in the investigated files and determine whether there is a basis to alter
any of the points previously assigned.
(vi) The adjusting locations shall then be
ranked on a list of Claims Administrators Identified for Potential Non-Random
Audit on the basis of the ratio of violation points to the number of claims
investigated at each adjusting location.
(e) The Audit Unit shall select non-random
audit subjects from the list of Claims Administrators Identified for Potential
Non-Random Audit, and shall endeavor to give priority in scheduling audits to
those administrators that have been assigned the most points. However, the
audit unit may also consider the results and recency of prior audits at the
adjusting location, the resources of the audit unit, and the need to conduct
random audits, in scheduling investigations and audits. The Audit Unit is not
required to investigate or audit every claims administrator on the list, nor is
it required to investigate or audit in the order in which claims administrators
appear on the list.
If the Audit Unit is able to conduct more non-random
audits than the number appearing on the list of Claims Administrators
Identified for Potential Non-Random Audit, it may select any number of the next
highest ranking adjusting locations appearing on the list of Claims
Administrators Identified for Potential Non-Random Investigation. The adjusting
locations shall then be investigated and ranked according to subsection
(d)(2).
(f) Prior audit
results shall be used independently as factual information to support selection
of a claims administrator for non-random audit.
(1) The Audit Unit shall return for a repeat
non-random audit of denied files of the audit subject within one to three years
of the results of an audit becoming final if there is more than one unsupported
denial and the number of unsupported denials exceeds 5% of the audited denied
claims.
(2) The Audit Unit shall
return for a repeat non-random audit of indemnity files of the audit subject
within one to three years of the results of an audit becoming final if:
(i) The number of randomly selected audited
files with violations involving the failure to pay indemnity exceeds 20% of the
audited files in which indemnity is accrued and payable and the average amount
of unpaid indemnity exceeds $200.00 per file in which indemnity is accrued and
payable, or
(ii) The numbers of
randomly selected files with violations involving the late first payments of
temporary disability indemnity, permanent disability indemnity, vocational
rehabilitation maintenance allowance, late subsequent indemnity payments, and
late payments of death benefits, as mitigated for frequency under Section
10111.1(e)(3)(i) through
(v), exceeds 30% of the audited files in
which those indemnity payments have been made, and the number of audited files
with violations involving the failure to issue benefit notices, as assessed
under Section
10111.1(a)(7)(ii)
of these regulations, exceeds 30% of the files in which there is a requirement
to issue those notices.
(g) The Audit Unit shall send a claims
administrator selected for non-random audit a Notice of Audit in accordance
with §
10107. The Notice of Audit for a
non-random audit may be appealed as follows:
(i) Within 7 days after receiving a Notice of
Audit the claims administrator may appeal its selection for audit by filing and
serving a request for an appeals conference or a request for a written decision
by the Administrative Director without a conference.
(ii) Within 21 days after the request for a
written decision or an appeals conference is filed, the appellant shall file
with the Administrative Director and serve a written statement setting forth
the legal and factual basis of the appeal, and including documentation or other
evidence which supports the appellant's position.
(iii) If a request for an appeals conference
or a request for a written decision without conference or if the written
statement and documentation are not timely filed and served under Subsections
(g)(i) and (g)(ii), the claims administrator shall be deemed to have finally
waived the issue of the propriety of its selection for audit. The claims
administrator will be precluded from raising the issue at any subsequent
appeals of Notices of Penalty Assessment or Notices of Compensation
Due.
(iv) Service and filing are
timely if the documents are placed in the United States mail, first class
postage prepaid, or personally delivered between the hours of 8:00 a.m. and
5:00 p.m., within the periods specified in Subsections (g)(i) and (g)(ii). The
original and all copies of any filing shall attach proof of service as provided
in Section 10514.
(v) The appeal process shall be governed by
Section 10115.2.
1.
Relocation of article 3 heading to article 5 and repealer and new section filed
1-28-94; operative 1-28-94. Submitted to OAL for printing only pursuant to
Government Code section 11351 (Register 94, No. 4). For prior history, see
Register 90, No. 4.
2. Amendment of subsection (b), (d)(2), and (e)
filed 2-14-96; operative 2-14-96. Submitted to OAL for printing only pursuant
to Government Code section 11351 (Register 96, No. 7).
3. Amendment
of section and NOTE filed 10-26-98; operative 11-25-98 (Register 98, No.
44).
Note: Authority cited: Sections 59, 129.5,
133 and 5307.3, Labor Code.
Reference: Sections 7,
53,
111,
124, 129 and 129.5, Labor Code; and
Sections 11180, 11180.5, 11181 and 11182, Government
Code.
