STUDY OF DWC's AUDIT FUNCTION

The Senate Industrial Relations Committee and the Assembly Insurance Committee jointly requested that the Commission undertake an evaluation of the effectiveness of the Audit Unit of the Division of Workers' Compensation.

As requested by the Legislature, the Commission worked to develop recommendations:

• To make the DWC Audit program more effective.
• To determine whether or not the program is adequately staffed.
• To determine whether or not the penalty levels are adequate and/or appropriate to deter violations.
• To make the $100,000 civil penalty for a pattern and practice of poor claims administration more effective.
• To consider whether or not the unfair claims settlements practice act (section 790.03 of the Insurance Code) should apply to workers' compensation.

The CHSWC Audit Study Project team was formed to carry out the study. As a result of the project team's analyses, a draft of the Audit Study report was prepared and submitted to the Commission members. Proposals were made to address system shortcomings or failures. These include:

• Develop equitable selection process
• Improved targeting of poor performers
• Increased incentives for timely and accurate delivery of benefits
• Addressing systemic problems in benefit delivery that create problems for delivery by insurers and understanding by workers
• Simplify Benefit Notice program
• Improve audit function administration

At its June 25, 1998 meeting, CHSWC deferred approval of the draft report until some of the recommendations were taken to a working group to be "fleshed out a bit more". The project team is working with the community to develop detailed implementation plans. A revised report is expected at the end of November 1998.