Big Win For a California Client

 We've just received word that we have been successful in drastically reducing the Workers 
Comp audit bill for a California client. This small business specialized in providing life skills training for developmentally disabled adults, and they had been threatened with financial extinction by a bill for around $450,000.00 from the State Compensation Insurance Fund.

Our review found that this huge bill was based on using the wrong Workers Comp classification for this biz, and thus the wrong rate. And this wrong class was around ten times higher than the correct one.

We were able to get the correct lower rate approved for these folks and now the bill has been reduced to a much more manageable $44,000.00.

It's always gratifying when our efforts help save a small business from a ruinous bill, but it's especially so when the client is providing such an important and needed service.

On this case, my son and business partner Scott Priz handled the majority of the work, although I was involved, too, in some important aspects. So it was a team effort that helped produce this very happy ending for our client.

And just in time for the holidays!

Successful Result for Georgia Small Contractor Regarding Workers Comp Audits

 I recently got word that we had made a huge difference for a small Georgia contractor. Based on our presentation to the Georgia Workers Compensation Appeal Board, the audited premium amounts claimed by Travelers insurance were drastically reduced. The appeal board agreed that the insurer had used incorrect classifications and rates and also had used incorrect payroll amounts, computing the $700,000 premium charges the Onwardsought.

The corrections should reduce the premiums by more than half, and help keep this Atlanta small business operational.

We love helping small businesses dispute improper and excessive Workers Compensation insurance bills, and Georgia of late has seen a number of such cases finding their way to us. Onward to the next one!

Facebook Workers Comp Scam

 It's being widely reported that there is a new Workers Comp-related scam happening on Facebook. In this scam, a crook impersonates someone's existing friend on Facebook and, via Messenger, says they spotted the victim's name on a list of people owed money from some kind of Workers Comp fund.

They have you call a number where you talk with an official-sounding person. But at some point, you will be asked to pay a small fee in order to get your big payout..

It's a classic scam, and I suspect most readers of this blog would be unlikely to fall for it. But you may have friends and family who might just be tempted by this fraudulent payday. 

Another Georgia Assigned Risk Workers Comp Audit Finally Fixed

 We just got word we have successfully reduced a Workers Comp audit bill for a Georgia small business client, down from the original $170,121 to $9,660. The insurance company had already turned this over to a collection agency before we got involved and that collection agent had been seeking that wildly inflated premium bill since last year. Fortunately, there are provisions to suspend such collection efforts while an audit is being disputed, and we made sure this client got the benefit of that while we worked to correct all the mistakes in this audit.

Around our shop, we call these situations Shock Audits, and this case neatly exemplifies how extreme these overcharges can be.

This was another Shock Audit from the Georgia Assigned Risk program--we've been seeing a lot of those, for some reason. Assigned Risk policies can be particularly perilous for small businesses, as the insurance agents who sell these policies typically aren't too much help in disputing these audits, even with the best of intentions. In the Assigned Risk plan, the agent has just about no real leverage with the insurance company and usually lacks the technical expertise to fight these excessive audits effectively.

And some of the insurers who issue these Assigned Risk policies, it seems, have been getting rather carried away in doing these premium audits, as this case illustrates. If not for our assistance, the usual course would have seen this insurer filing a lawsuit for this excessive amount, once the collection agent was unsuccessful (and he would have been, as this small business had no chance to pay that hugely inflated audit bill.) And that likely would have been the end of this small business.

Instead, the fair and proper premium has been paid, and this small contractor gets to continue.

As I like to say, we don't sell insurance--we fix it.

A Somewhat Unusual Phone Call This Morning

 Got a call this morning from the UK, which is somewhat unusual for me, as my specialty is consulting on the US system of Workers Comp insurance pricing. But this caller said that his company had recently purchased a US-based operation, and had some questions about our somewhat unique system.

The American system of Workers Comp coverage, using private insurance companies to a great extent, is different from what is done in most other places, after all. This caller wondered about why the manual rates on his policy were significantly higher than NCCI rates would suggest.

I got to explain the modern development where, in most states, insurers are allowed, and even encouraged, to file and use their own manual rates for Workers Comp, often using NCCI rate components as a base but ultimately coming up with their own particular schedule of rates. This is in marked contrast to the way things were in the halcyon days when I first began working with Workers Comp insurance, back in 1978.

Back then, most states required insurers to all use a single schedule of manual rates. The theory, back then, was that price competition might not be in the best interest of the system's stability. But that began to change, and change rapidly, in the very early 1980s.

Nowadays, the operating theory is that "price competition" will benefit employers and help hold down insurance costs. Regulators thought this would even reduce the need for oversight of Workers Comp insurance, with a somewhat naive faith in the power of the marketplace.

The pricing of Workers Comp insurance is complex enough so that insurers very quickly figured out how to turn this "competitive rating" system to their advantage. It is now common, in voluntary market policies, for an insurer to underwrite via a "loss pick"--forecasting the losses they expect an employer to have during an upcoming policy and then determining what premium they need to charge so that the account will be profitable.

The insurer then essentially works backwards from that premium, figuring out how to utilize classifications, manual rates, and other rating factors to have the premium come out to where they want it.

This rather turns the carefully-constructed system of WC premiums on its head, of course. And makes it difficult for policyholders to truly comparison shop, because the pricing system is now fundamentally opaque in important ways.

In our consulting work, of course, we manage to still figure things out, and I guess I could be thankful that the insurance industry has made things so that it requires an outside expert to figure out if they're being overcharged. Heck, they inadvertently created my life's work, as I've now spent more than half my life (and the majority of my working life) doing exactly that--identifying and correcting the hidden overcharges the US system is prone to.

It's been an interesting career, and it's (God willing!) far from over. Nowadays, we're busier than ever, figuring out the latest ways some insurers have devised to generate higher premiums, all while making it harder to figure out their pricing mechanisms.

It's a unique niche, I suppose, but it suits me. And people like my UK caller seem to appreciate my efforts. Employers like us, it seems, even if insurers sometimes don't.

Weaponizing Workers Comp Insurance Against Small Business

 In just the past week, I’ve been contacted by multiple small businesses, located in disparate states, with a shared problem: their insurance company is trying to put them out of business.

Now, of course, that isn’t really the primary objective of these huge insurance companies. It’s just that they don’t give a shit. They think they are owed money for Workers Comp insurance—a lot of money, in fact—and thus these financial giants have put in motion their standard operating procedures for obtaining what they believe is owed them.

And that is how Workers Comp insurance gets weaponized into a very efficient financial equivalent of a thermobaric bomb.

Consider one of these cases, a small construction company in Georgia. This company was required by state law to buy Workers Compensation insurance, so they reached out to a local insurance agent. They were a small company so the insurance agent placed them into what’s known as the Assigned Risk Plan—a state-sanctioned insurance industry mechanism that accepts all applicants, even very small businesses that insurers aren’t normally much interested in.

The premium charge for that policy was $1,500.00.

At the moment, the insurer is now seeking, years after the policy ended, over $700,000 from this small business, for that $1500 policy and the subsequent policy (which the small biz also bought for about $1500).

So a small and unsophisticated construction business bought two Workers Comp policies, policies that state law required them to buy, and now, years after those policies ended, they are on the receiving end of a bill for over $700,000.00.

This is not an aberration. This is not some weird one-off situation. This is an everyday occurrence. I know, because I get calls and emails almost every day from small business owners in the same kind of situation.

Around our office, we call them Shock Audits.

It is difficult to imagine any other industry where this sort of thing could occur, much less be commonplace. Insurance, after all, is supposed to be regulated by state agencies. And Workers Compensation is, according to insurance industry spokespeople, the most highly regulated line of insurance.

And yet.

We have a system that often drives small employers out of business, or saddles them with huge unexpected costs, for something that they are required to purchase. A system that routinely sells an insurance product that is priced very low at the outset, only to balloon outrageously after the policy has ended.

Stay tuned for more information to come on this subject.