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REPORT OF MARKET REGULATION EXAMINATION
Sedgwick Claims Management Services, Inc.
1100 Ridgeway Loop RD STE 200
Memphis, TN 38120-4057
Pursuant to Title 24-A M.R.S.A. § 221, I have caused a Targeted Market Conduct Examination to be conducted of Sedgwick Claims Management Services. I hereby accept this Report of Examination and make it an official record of the Bureau of Insurance.
TABLE OF CONTENTS
February 29, 2012
The Honorable Eric A. Cioppa
Dear Superintendent Cioppa:
Pursuant to the certification of findings in accordance with Title 39-A M.R.S.A § 359(2) from the State of Maine Workers’ Compensation Board (hereinafter, “WCB”) and under the authority of Title 24-A M.R.S.A. § 221 and in conformity with your instructions, a targeted market conduct examination (hereinafter, “Examination”) has been made of:
Sedgwick Claims Management Services, Inc.
hereinafter referred to as the “Company”. The examination covered workers’ compensation claims with dates of injury from July 1, 2008 through June 30, 2009 (hereinafter, “Review Period”), for employees residing in the State of Maine or claimants involved in losses in the State of Maine. The Maine Bureau of Insurance (hereinafter, “Bureau”) staff conducted the on-site phase of the Examination, from March 29, 2010, through April 9, 2010, at the Company’s branch office located at:
179 John Roberts Rd, Suite 300,
A preliminary review of information provided by the Company, transactional testing, and follow-up communications were also conducted at the offices of the Bureau.
The following report is respectfully submitted.
The Bureau’s Examination focused on claims handling for the Company’s Maine workers’ compensation line of business. The Examination tested the Company’s compliance with Maine statutes and the National Association of Insurance Commissioners’ Market Regulation Handbook Standards (hereinafter, “MRH”).
The Examination identified these substantive issues:
The Company’s compliance rate for Memorandum of Payment filings is 84%, which is below the WCB’s performance benchmark of 85%.
The Company’s compliance rate for Notice of Controversy filings is 71%, which is below the WCB’s performance benchmark of 90%.
The Company’s compliance rate for initial indemnity is 84%, which is below the WCB’s performance benchmark of 87%.
The Bureau considers a substantive issue as one in which corrective action on the part of the company is deemed advisable, or one in which a violation of Maine insurance laws, regulations or bulletins was found to have occurred.
Pursuant to 39-A M.R.S.A. § 153(9), the WCB established a monitoring, audit and enforcement (“MAE”) program. The functions of the MAE program include but are not limited to audits of payment timeliness and claims-handling practices of insurers in accordance with 39-A M.R.S.A. § 359. The MAE Audit Division examined one hundred (100) claim files for the period under examination (dates of injury between January 1, 2005 and December 31, 2005) in part to determine whether the Company had violated the claims-handling provision of 39-A M.R.S.A. § 359(2). The findings relevant to 39-A M.R.S.A. § 359(2) of the WCB Compliance Audit Report dated August 30, 2007 (“WCB Audit”) include:
This examination is pursuant to the certification of findings to the Superintendent of Insurance in accordance with 39-A M.R.S.A. § 359(2), as described by the August 4, 2008 Consent Decree entered into by the WCB and the Company. Title 39-A M.R.S.A. § 359(2) requires the Superintendent of Insurance to take appropriate action to bring such practices to a halt.
In order to meet the responsibilities set forth in 39-A M.R.S.A § 359(2), the Superintendent of Insurance had to determine whether or not the patterns of questionable claims-handling techniques found by the WCB had come to a halt. Therefore, an examination was planned in accordance with the MRH. The Bureau examiners developed compliance verification procedures based on the MRH to measure whether the Company had brought themselves into compliance with 39-A M.R.S.A. Specifically, the scope of the Examination included a sample of claims with dates of injury from July 1, 2008 through June 30, 2009.
Some unacceptable or non-compliant practices may not have been discovered in the course of the Examination. Failure to identify or criticize specific practices does not constitute acceptance of such practices by the Bureau.
Audit Command Language (hereinafter, “ACL”) audit software was utilized to obtain the Examination’s claims sample of 60 lost-time claims. Electronic data files were provided by the Company, which contained workers’ compensation claims that were initiated by 1,657 Maine employees during in the years 2008 and 2009. The data file indicated a population of 122 lost-time claims initiated during in the years 2008 and 2009. The sample parameters specify results at a 95% confidence level and a tolerable error ratio of 5%. Fifty-three claims in the sample had activity during the Review Period, and 58 had one or more medical payments and therefore were selected to test timely payments to health care providers.
The examiners tested the 53 workers’ compensation claims that had activity in the categories listed below. Six claims did not have activity within the Review Period, although they may have had activity in either the year 2008 or 2009. Further, one claim was excluded because it had been examined by the WCB.
NAIC Market Regulation Handbook - Chapter XVI, Section G, Standard 3
To determine if health care provider payments were made in compliance with WCB Rule 5.7(2).
The Company’s compliance rate for initial indemnity payments is 84%, which is below the WCB’s performance benchmark of 87%.
NAIC Market Regulation Handbook - Chapter XVI, Section G, Standard 4
Examiners tested the 53 claims with forms filed at the WCB.