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Workers’ Compensation Insurance Carrier Bulletin WCIC-2010 #1 Revised Proof of Coverage Penalty Process

Workers’ Compensation Insurance Carrier Bulletins

Date:  August 5, 2010

To:  All Workers' Compensation Insurance Carriers:

The NYS Workers' Compensation Board is attempting to target its communications to its stakeholders more effectively. Accordingly, this is the first issuance of a Workers' Compensation Insurance Carrier (WCIC) Bulletin. It carries all the authority of a Subject Number but is targeted to only the stakeholders that will find the information relevant to their business and/or their technical processes.

That being stated, this first WCIC Bulletin announces a revised process for issuing Proof of Coverage (POC) penalties.


Untimely or incorrect POC filings disrupt the administration of the Workers' Compensation Law and result in unnecessary costs being incurred by all parties. Compensation and medical payments are delayed; employer inquiries and penalties are issued, investigations are conducted; unnecessary hearings may be scheduled; and both hard and soft costs are incurred by claimants, employers, insurers and the Board. Accordingly, POC penalties were created by statute to encourage insurance carriers to file proof of coverage submissions timely and correctly.

However, a large number of carriers have expressed concern over the newly implemented Proof of Coverage (POC) penalty process. As a result of these concerns, the Board met with members of the carrier community. These meetings allowed the Board to gain a better perspective of the carriers' business needs. They also provided carriers with insight as to the Board's primary objective in issuing these statutorily required penalties – encouraging and increasing the efficiency and timeliness of POC filings by carriers.

Revisions to Transactions Subject to Penalty

As a result of a collaborative effort, and as a sign of a commitment by both the carriers and the Board to work towards a better functioning workers' compensation system, the Board will revise its carrier performance standard beginning in the second quarter of 2010 to include only the following transactions:

Transaction Type Transaction Code
Binder 00-05-01
Binder 00-05-80
New Policy 00-10-01
New Policy 00-10-80
Renewal 00-20-01
Renewal 00-20-80
Cancelled by Insurer-Non Payment 00-41-59
Cancelled by Insurer-Underwriting Reason 00-41-64
Cancelled by Insurer-Revocation of Voluntary Market Acceptance 00-41-66
Cancelled by Insurer-Failure to pay deductible 00-41-69
Cancelled by Insurer-Misrepresentation on Application 00-41-70
Non-renew by insurer 00-60-64
Cancelled by WCB- expired term 00-41-CE

This change results in removing transactions that were included in the performance standard but not directly penalizable, and also removes the penalizable reinstatement transactions.

In addition, the Board also recognizes that some carriers and groups are having difficulty including the correct prior policy number in a renewal transaction. Once a renewal is submitted with an incorrect prior policy number, the carrier cannot close the earlier policy. Moreover, a similar problem occurs when certain establishing transactions are submitted out of policy year sequence. While this appears to be a technical issue with the carriers, the Board is programming a new transaction code that will allow carriers to close policies in these situations via the Board's online application. This code will not be subject to penalty or performance.

The Board did not close any open expired polices, with policy expiration dates earlier than January 1, 2010, in the second quarter of 2010. Rather, the expired policy penalty program will be run after the new transaction code has been programmed and carriers have had at least two weeks to cancel those earlier policy terms, as described in the previous paragraph.

Revisions to the Offer of Settlement Program

The offer of settlement program will now be based on the revised set of transactions in the table above. Those carriers meeting or exceeding the 85 percent performance standard in the second quarter 2010 will have their fourth quarter 2009 and first quarter 2010 penalties rescinded. Second quarter 2010 penalties will also be waived.

Carriers with a second quarter 2010 performance meeting or exceeding 75 percent but less than 85 percent will have three options. In the first option, carriers can pay the penalty as issued. In the second option, carriers that file a detailed action plan, as described below, and agree not to appeal the penalties, will be eligible for a 50 percent reduction of all three quarters' penalties. In the third option, carriers can decline the reduction and file appeals of the penalties.

Carriers with a second quarter2010 performance below 75 percent will not receive a reduction in penalties. However, they can appeal the penalties.

Carriers, whose penalties have not been rescinded or reduced, can appeal the penalties even though they are valid. Appeal instructions will be included with the penalty letters. However, in return for a reduction in penalties, as part of their appeal, carriers must submit an action plan. In absence of an action plan, a carrier's appeal must fully explain why their processes or technical programs, or their agents/brokers' processes or technical programs, were not responsible for the penalties.

The offer of settlement program issued to carriers for wrap up-related penalties will be similarly revised.

Carrier Action Plan

  1. Provide a detailed description of the business processes related to policy issuance and practices that have been identified as impacting the carrier's inability to submit timely POC filings. Some of the problematic areas may include:
    • Procedural deficiencies in customer service or underwriting
    • Collection of information - insufficient data fields on policy applications
    • A particular market segment may present challenges in underwriting
    • Relationship to writing other lines of business, if applicable
    • Policies that are not renewed
    • Agent or broker issues - sales and distribution of information/requirements
    • Education and outreach - statutory or regulatory requirements
    • Administration's responsiveness
  2. Explain technical issues existing in the carrier's system or issues related to the submission of data through a third-party vendor which impacted timely submission of POC filings.

    Specifically identify or detail:
    • System limitations-in house
    • Problems related to, but not limited to:
      1. Frequency of transmission
      2. Process of transmission-transmission of data and confirmation (acknowledgment) of processing
  3. Provide a detailed description of actions already implemented by the carrier to address filing deficiencies as outlined in Section 1 and 2 above.
  4. In detail provide a plan of action to address issues identified in Section 1 and 2 that will assist carrier in reaching 85% performance rate. Include:
    • Procedural changes
    • Technical enhancements
    • Proposed deadlines
    • Staffing requirements
  5. Project Management - Provide the name, phone number and email address of the contact(s) for carrier's action plan.

Next Steps

The Board is enacting these changes on a good faith assumption that carriers will work towards the mutual goal of improving the Proof of Coverage process. This will entail the creation of a small workgroup who, with the Board, will specifically address the issues that impact our mutual constituency and customers.

The Board will continue to monitor those transactions that were previously included in the performance standard as well as reinstatement transactions. If the Board detects a decrease in performance for these transactions the Board will again consider including these transactions in the performance standard.

The cooperative effort between the Board and the carriers regarding the POC penalty process has resulted in a course of action that is fair and will achieve more timely POC filings. Accordingly, the Board looks forward to working collaboratively with the carrier community on other issues in the near future with the goal of continually improving the workers' compensation system in NYS

If you have any questions, please contact the Bureau of Compliance at:

Robert E. Beloten