Audit Hits Minnesota Workers’ Compensation Claims Handling

March 2, 2009

An audit of Minnesota’s worker’s compensation system has found that insurers are mishandling a growing number of claims, including by paying injured workers less than they deserve.

The report from the Legislative Auditor said those mistakes are resulting in about $3 million a year in underpaid benefits, and there’s other evidence that insurers are trying to avoid legitimate payouts.

The $3 million in underpaid claims represents less than 1 percent of overall benefits paid, but auditors recommended that the Department of Labor and Industry improve oversight to catch more of the errors.

They also recommended that department officials keep a close watch on cases where a claim was initially denied but was eventually paid to target any insurer that might improperly deny a claim.

The auditor recommended that lawmakers hire an ombudsman for workers’ compensation to help injured workers who might be overwhelmed by the process.

The audit also faults the state labor department for shortcomings in the enforcement of laws mandating that employers provide workers’ compensation coverage.

State law says the department must seek reimbursement plus a penalty from an uninsured employer when an injured worker’s benefits are paid out of special state fund. But auditors found that between 1998 and 2007, the department’s reimbursement database shows billing records for fewer than half of the cases where the state paid for benefits.

In a written response to the audit, Commissioner Steve Sviggum said his department is working on reforms to the system through an advisory council. Sviggum also said the department is interested in using an ombudsman for workers’ compensation.

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