North Carolina business owners may find it harder to escape having workers’ compensation coverage after state lawmakers approved a bill closing a legal loophole that had resulted in tens of thousands of employers going without coverage leaving injured workers to fend for themselves.
State lawmakers’ approval of HB 273, sponsored by Nelson Dollar, R-Wake, came in the wake of public criticism over the state’s lax efforts to ensure that employers have insurance and that injured workers receive proper medical care and loss wage benefits.
At issue is the flow of information from the North Carolina Rate Bureau, which records insurance information on employers, and the state’s Industrial Commission that is charged with making sure insurers have coverage and resolves injured workers’ claims.
The North Carolina Rate Bureau reported that insurers are providing workers’ compensation coverage to more than 140,000 businesses, with another 117 large companies self-insured.
Under current law, employers are required to inform that Industrial Commission when they purchase, renew or cancel a policy. However, the commission contracts with the Rate Bureau to collect that information.
Commission officials have acknowledged using the database to find out which insurer is responsible for covering the claim, but said it does not monitor cancellations. As a result, they only find out an employer is without coverage when an injured worker files a claim.
Under the bill, the commission would be required to capture all the information from the bureau so that it can pursue non-compliant employers and cases where employers are intentionally avoiding paying premiums.
Rep. Dale Folwell, R-Forsyth, said the provision came from a recommendation by both the Rate Bureau and the Industrial Commission. He said it would help the state pursue employers without coverage on the front-end as opposed to only discovering whether they have insurance when an injured employee files a claim.
“This will give the Industrial Commission the power and information it needs to track people who are not providing coverage to their employees,” said Folwell.
Some lawmakers objected to the provision.
Rep. Deborah Ross, D-Wake, objected to the bill saying that it would in effect create a third database since it would in essence merge the Rate Bureau’s information with that of the commission. However, she pointed out that the database would not be a public record.
“Under this, if there is a problem in the future and there is a need to crosscheck data, the data would not be available,” Ross said.
Fowell defended the need to keep the database private given the nature of the Rate Bureau’s information.
“This involves a lot of proprietary information such as employer’s experience modification and their rates,” Fowell said.
State Pursuing Employers over Unpaid Claims
Another major provision of the bill calls for the creation of a Joint Legislative Committee on Workers’ Compensation Insurance Coverage and Compliance and Fraud Prevention. The eight member commission will be charged with reviewing the state’s current ability to enforce the law and spell-out how non-compliant employers should be handled.
The committee comes in response to a study that found that when the Industrial Commission finds an employer does not have coverage, it has done little to enforce the law. Under the law, non-compliant employers can be fined $100 per day plus the cost of any benefits and medical expenses owed the injured worker.
The Industrial Commission’s Fraud Unit reported that since January 2011, it had only pursued 225 such cases and collected a total of $30,500 in fines, which equals around $135 per case.
In response to those facts, the commission has been holding hearings in attempt to resolve longstanding claims, some of which date as far back as 2006.
In addition to the fines and other penalties, the commission invoked a little noticed provision in the law that allows it to find employers in contempt for failing to meet their obligations and send them to jail. To date, the commission has yet to order anyone to jail, but the threat remains real.
The process has not been without its critics.
Lonnie Albright, representing several employers, said it is one thing for the state to enforce the law by ensuring employers have workers’ compensation coverage; however, he said, the law never contemplated the commission acting like a small claims court to resolve claims.
“The state is not supposed to be collection agency for the injured workers,” Albright said.
He said that as a result of the commission’s action, some employers are scrambling for bank loans and other means to pay outstanding claims. He also noted that even if an employer is driven into bankruptcy, any monies owed injured workers is still payable.
Even though Albright said he disagreed with what the commission is doing, it is sending a powerful message to business owners.
“It certainly has got employers concerned,” Albright said. “You either buy workers’ comp coverage or be exposed to being incarcerated.”