The Audit Process

1
The Audit Process

• Helping to keep the Workers Compensation System
  Healthy

2
Introduction

• Overview of Audit Process
• Rating Tables
• Reporting Requirements and Procedures
• Operational Performance
• Claims
• Underwriting, Premium Audit and Loss Control

3
Introduction (cont.)

• Audit Ratings
• Rating Definition
• Rating Thresholds
• Audit Timing
• Pre-Audit
• On-Site Audit
• Post-Audit
• Post-Audit Support Programs

4
The Reporting Requirements and Procedures Audit

• On-site reporting requirements and procedures
  audits are performed to evaluate the servicing
  carriers compliance with established financial
  and statistical reporting guidelines, procedures,
  and applicable bid enhancements.

5
The Reporting Requirements and Procedures Audit
(cont.)

• Claims specialists review and rate the following
  attributes
• Accurate reporting of claim information
• Accurate reporting of outstanding loss
  information
• Claims processing procedures and controls

6
The Reporting Requirements and Procedures Audit
(cont.)

• Compliance with Serious Loss Reporting Program
  provisions
• Accuracy of Claims Self-Audit Responses

7
The Reporting Requirements and Procedures Audit
(cont.)

• Financial specialists review and rate the
  following attributes
• Accurate reporting of policy information and
  servicing carrier allowance
• Timely and accurate reporting of uncollectible
  premium and related transactions
• Accurate calculation and reporting of producer
  fees

8
The Reporting Requirements and Procedures Audit
(cont.)

• Accuracy of underwriting, premium audit, and loss
  control self-audit responses
• Underwriting, premium audit, and loss control
  processing procedures and controls
• Uncollectible premium processing procedures and
  controls

9
2002 On-Site Audit Rating
10
The Operational Performance Audit

• On-site operational performance audits are
  performed to objectively evaluate servicing
  carriers' compliance with applicable servicing
  carrier performance standards, applicable bid
  enhancements and specific state statutes.

11
The Claims Operational Performance Audit

• Claims specialist review and rate the following
  attributes
• Carriers reporting notification procedures
• Early intervention and compliance with state
  regulations
• Compensability and coverage determination

12

• The Claims Operational Audit Performance (cont.)

• Pursuit of Recovery
• Acceptance and Compensability Decision Making
• Reserving
• Medical Care and Cost Control
• Indemnity and Disability Management

13
The Underwriting, Premium Audit, and Loss
Control Operational Performance Audit
The Financial audit team objectively evaluates
servicing carriers in the following areas

• Timely and accurate policy issuance
• Timely issuance of renewal quotes/notices of
• nonrenewal
• Compliance with additional premium
• endorsements

14
The Underwriting, Premium Audit, and Loss
Control Operational Performance Audit (cont.)

• Timely and accurate issuance of requested
  endorsements, cancellations, and reinstatements
• Compliance with non-disputed premium cancellation
  procedures
• Compliance with preliminary audit requirements

15

• The Underwriting, Audit, and Loss Control
  Operational
• Performance Audit (cont.)

• Timely and accurate completion and billing of
  final audits
• Timely completion of qualitative loss control
  services
• Compliance with loss control recommendation
  requirements

16
2002 On-Site Audit Rating
17

• Rating Definitions

• Commendable
• Exceeds established performance standards for a
  particular category. Exemplary work product with
  evidence of complete control of files.
• Satisfactory
• Controls are in place and/or the established
  performance standards have been met.

18

• Rating Definitions

• Marginal
• Controls need strengthening and/or
  adverse trending has been noted.
• Unsatisfactory
• Controls are less than adequate and/or the
  established standards have not been met.
• Significant problems were noted within
  the files reviewed.

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• 2002 Thresholds

The interpretation of audit results depends upon
the number of each attribute tested. The
compliance ratio for each attribute tested is
evaluated using one of three unique rating
scales. The scales have different ranges for
Commendable (C), Satisfactory (S), Marginal (M),
and Unsatisfactory (U) performance levels
depending on the attribute sample size as follows
20
Audit Timing

• Pre-Audit
• Engagement Letter
• Selections Letter
• On-Site Audit
• Entrance Meeting
• File Review
• Comment Forms
• Update Meeting(s)
• Exit Meeting

21
Audit Timing (cont.)

• Post-Audit
• Draft Audit Report
• Final Audit Report

22
Programs Supporting On-Site Audits

• Self-assessment program provides a tool to
  monitor servicing carrier improvement for on-site
  audit recommendations given
• Quantifications provide a vehicle to correct
  errors found during the on-site audit which have
  a financial and/or statistical impact to the Pool

23
Conclusion

• Helping to ensure the Plan Pool are meeting
  their objectives
• Were here to help you
• If any questions, please let us know