Workers’ Comp Scofflaws in North Carolina Under Scrutiny

Officials in North Carolina said they will review their efforts to ensure that employers are purchasing workers’ compensation coverage after facing criticism they have done little to make sure that employers comply with the law.

Gov. Beverly Perdue said she and lawmakers are aware of the problem and will fix it. “I don’t know how it got to be this way but clearly there (are) some concern,” Perdue said.

North Carolina Industrial Commission Chair Pamela Young said she is prepared to work with the state’s attorney general to examine the commission’s enforcement efforts.

Under state law, employers with more than three employees must purchase workers’ compensation coverage.

The commission’s actions came in response to a study conducted by the Raleigh, N.C.-based News and Observer that found tens of thousands of businesses may be operating without coverage.

The North Carolina Rate Bureau reported that insurers in the state are providing coverage to more than 140,000 businesses, with another 117 large companies self-insured. The North Carolina Department of Commerce statistics show there are upwards of 170,000 employers with more than four employees in the state.

By law, employers are required to inform the Industrial Commission when they purchase, renew or cancel coverage. However, the commission contracts with the rate bureau to collect that information and provided it to the commission.

Commission officials acknowledge using the database to find the insurer responsible for covering a claim, but do not monitor cancellations. As a result, they only find out an employer is without coverage when an injured worker files a claim.

And in those cases, little is done.

The law states that employers found not in compliance with the law can be fined $100 per day and charged for any benefits and medical expenses the injured worker should have collected.

The Industrial Commission’s Fraud Unit reported that since January 2011, it has only pursued 225 cases where employers where found not to have proper coverage. The unit reported collecting $30,500 in fines, which equals around $135 per case.

Those cases only reflect the employers the fraud investigators can actually track down. Investigators said that it can be hard to find employers who purposely seek to break the law, especially in the construction industry where subcontractors purchase policies to secure a contract only to turn around and cancel it.

Young offered no specifics about the review. “We will continue to meet with stakeholders on this very issue, and, as we always have, the commission will review its operations to make certain they are as efficient and effective as possible,” she said.

Some state lawmakers are calling on the Legislature to take action. One potential proposal would give the state’s Department of Insurance the power to investigate workers’ compensation fraud. Insurance Commissioner Wayne Goodwin indicated the department would be willing to do so.

State lawmakers last year enacted a bill that for the first time placed a cap on the amount of weeks an injured worker could receive benefits due to a permanent injury. The law set a cap of 500 weeks or roughly 10 years on total disability payments and raised the cap on partial disability payments from 300 to 500 weeks. The new law also allows insurers greater access to injured workers’ medical records.