Massachusetts Workers’ Compensation Test Audit Program

The Governing Committee of the Workers’ Compensation Rating and Inspection Bureau of Massachusetts (the Bureau) has approved a new Test Audit Program to begin January 1, 2019. They may be contacting you to set up a test audit for your Workers’ Compensation policy.

Each carrier will be subject to a quota of randomly assigned policies to be audited annually, as determined by the Bureau. Unless the carrier underperforms, the number of risks selected for each participating carrier will not exceed 25 policies per quarter.

The primary purpose of the Test Audit Program will be to monitor the accuracy of audits carried out by the carriers and to ensure that the Bureau rules are being applied correctly. Additionally, the test audits will assure statistical data that is reported to the Bureau by the carriers is consistent with the business operations of insured risks. The Test Audit Program is intended to improve auditing proficiency, establish minimum auditing standards among carriers, and will maintain incentives to meet or exceed performance standards. The Bureau will also be reviewing claims data provided by the carriers for those test audit polices to determine if any claims are misclassified.

When the facts differ between the carrier’s audit and the Bureau’s test audit, those facts that are most credible shall be used for the test audit. After confirmation, if a Reportable Difference in the test audit results in a return premium to the insured, the carrier is required to prepare a revised premium adjustment statement and return the appropriate premiums to the insured.

If the test audit results in an additional premium, the carrier is not permitted to bill the additional premium on the test audited policy. Those changes in classifications, and allocation of payrolls between classifications, shall be deferred until the next renewal, effective at least 60 days after notice has been given to the employer.
A revised Unit Statistical Report reflecting the results of the test audit will be submitted to the Bureau within 60 days of completion.

The Bureau also specifies the following types of risks will not be subject to a test audit:

  1. Test audit has been completed within the last 5 years.
  2. Selected policy has been cancelled flat.
  3. Temporary staffing contractor.
  4. Part of a wrap-up and/or OCIP.
  5. Cancelled mid-term with no current coverage.
  6. Per Capita classifications.

Should you have any questions, please let us know.

DeSanctis Insurance Agency, Inc.