Report Finds North Carolina Fails to Punish Uninsured Firms

The state agency that decides how thousands of people are compensated for workplace injuries does a poor job of making sure companies obey a law requiring them to carry insurance, the state’s internal government watchdog reported Tuesday.

The North Carolina Industrial Commission has not done enough to track of companies that fail to cover their workers, which could leave the employees without guaranteed payment for lost work, suffering injuries that don’t heal, and stuck with costly medical bills, according to State Auditor Beth Wood’s office.

“Employees of a noncompliant business are not likely to learn that they do not have workers’ compensation coverage until after the employee suffers loss and files a claim. The commission’s current policies and procedures only identify noncompliant businesses after an employee is injured or dies,” Tuesday’s report said.

More than 11,000 businesses either cancelled their coverage or let it lapse during the year that ended in June, the report said. As many as 30,000 employers required to carry insurance don’t, The News & Observer of Raleigh reported last year.

The Industrial Commission decides on disability and medical benefits in about 65,000 workers’ compensation claims filed each year from employees who say injuries occurred in a workplace accident or that they contracted an occupational disease.

The commission also has been insufficiently aggressive in slapping uninsured companies with financial penalties, punishing companies that fail to follow the law, and has collected only a fraction of the assessed penalties, the report said.

“Noncompliant businesses have had little to fear from breaking the law because very few penalties have been assessed and collected,” the report said.

The commission last year changed its procedures and began assessing more penalties, from $79,025 in 2011 to $6.5 million in 2012. But only 2 percent of that has been collected, auditors said.

“In many cases, enforcement of the penalties has been put on hold pending the employer’s agreement to pay the injured worker all or a portion of his lost wage benefits and medical bills,” the commission said in its response to the report.

The commission added that it’s working on a system using employment and other data that would allow it to spot uninsured companies sooner and warn businesses they’re obligated to have coverage. The commission said it also will work with state prosecutors to collect penalties and is exploring whether to hire outside bill collectors.

North Carolina law requires that all businesses with at least three workers have insurance to cover the medical bills of employees hurt on the job. Exceptions from the law include some railroad workers, domestic servants, farm laborers and federal government employees.

A law approved last summer requires insurance company records of workers’ compensation coverage to be shared with the state Labor Department and the North Carolina Industrial Commission to increase the odds cheating companies will get caught. Bills introduced in the General Assembly earlier this month would undo part of last year’s law that made data private on employers and their insurance policies.

Republicans in the General Assembly also are considering legislation that would dismiss all Industrial Commission members and let GOP Gov. Pat McCrory make his own picks.