Date: December 22, 2010
To: All Workers' Compensation Insurance Carriers
In the August 5, 2010 Workers' Compensation Insurance Carrier (WCIC) Bulletin-2010 #1, the Board announced that a new transaction code would be implemented to allow carriers to close open expired policy terms for limited processing scenarios.
The new code, 00-41-CC, Closing Prior Term, has been programmed and is now available for use through the Boards' Proof of Coverage-WC web application. This code is not available through the IAIABC EDI Standard or your Proof of Coverage (POC) vendor.
The effective processing of POC data is dependent upon the submission of policy transactions with accurate identifiable information, submitted in a logical, sequential manner. Deviations or errors in this process produce open policies leaving a carrier with an exposure of extended liability for claims and penalties.
As stated in the WCIC Bulletin-2010 #1, use of this new code will be limited to certain POC processing scenarios. The Board has identified the following two scenarios when the new code can be used:
The new code cannot be used for any other reason. The Board will monitor carriers' use of the new transaction code to ensure that it is being used only for the two scenarios described above. The Board will re-open any policy that was closed due to the improper use of the transaction code and will then subsequently cancel the policy via the open expired policy cancellation program. Given that the subsequent Board cancellation can occur months after the improperly used transaction code, the penalty will be significantly higher than if the correct cancellation reason was initially submitted. The carrier's POC performance will be adjusted and the Board will consider the improperly used transactions when evaluating future carrier appeals.
The new transaction code is not subject to penalty or performance measurement. It is expected that carriers will continue to monitor their processes, both technical and business, to reduce the need for using this exception process.
Carriers are encouraged to access the WC Policy Report through the IC Inquiry web application to resolve open policy terms created due to the two scenarios described above. If your company has not registered for access or obtained user ID's, please do so via the following link:
Carriers are required to provide notice of cancellation or non-renewal of policy terms in accordance with Workers' Compensation Law §54.5 for every policy contract. Use of the new code does not supersede the requirements of the Workers' Compensation Law.
Carriers should close policies with the new transaction code no later than January 15, 2011. In late January 2011, the Board will close open expired polices with a policy expiration date of September 30, 2010 or earlier. This action will be considered a "failure to file" and will be penalized with a penalty start date 41 days after policy expiration date. The Board will use a transaction code of 00-41-CE (WCB Closed Term-No Filing Received) when processing these actions, which will be included in the carrier's performance standard. Moreover, if the carrier's performance falls below the 85% standard, these transactions will be penalized.
The first subsequent renewal, cancellation, or reinstatement transaction submitted after the Board's action to close the policy will not be penalized or considered in the performance standard. Please note that a reinstatement transaction following the Board's action is not required to process a subsequent renewal or cancellation.
Effective November 3, 2010, the Board delayed issuing inquiry letters to employers with cancelled policies by 15 days. For example, an employer with a policy cancelled effective March 1, who would previously be issued an inquiry letter on that date, will now be issued an inquiry letter on March 15. This will allow carriers to reinstate or submit a new policy during the 15 day period, thus negating the need for the inquiry letter. If a carrier submits the March 1 cancellation on March 15, the inquiry letter will be issued on March 30, assuming a reinstatement or new policy has not been submitted by then. Penalty letters will also be subsequently delayed so that they continue to be issued 45 days after the inquiry letter, assuming coverage or subjectivity, such as an employer out of business, has not resolved the non-compliance period.
In addition to the improper use of the newly created transaction code, the Board is also concerned about the improper use of all other transactions codes. Therefore, the Board reserves the right to re-open any policy that was closed using any improper transaction code, such as cancelled by insured when the policy was actually cancelled by the carrier for non-payment. The ramifications associated with the improper use of the newly created transaction code, as discussed above, will also apply to the improper use of all other transaction codes.
Any questions regarding this bulletin should be emailed to: email@example.com.
Robert E. Beloten