Workers' Comp Audit for NEMT in 2027: Why the Final Bill Changes and How to Prepare

The premium you pay when a workers’ comp policy starts is a deposit. It is built on the payroll you told the insurer you expected to pay. After the policy year ends, the insurer audits what you actually paid and sends a final bill or a refund. For a NEMT company that hired drivers mid-year or paid some on a 1099, that bill can be large. This guide covers how the audit works, what it counts, the records to have ready, how to dispute it, and how it moves your experience mod.

How a workers’ comp audit works

The California Department of Insurance’s guide (revised June 23, 2025) lays out the cycle. The insurer multiplies your estimated payroll in each job class by the rate per $100 of payroll for that class. The final premium cannot be figured until the policy term is over and your payroll records are audited. If payroll went up, you owe additional premium. If it went down, the insurer owes you a return premium.

Three timing rules matter:

• When the insurer can audit. California says insurers generally have the right to audit during the policy period and for three years after it ends, and may also run interim audits during the term.
• How often. Florida law requires the state’s rules to have employers outside construction audited at least every two years (Florida Statutes 440.381, 2026). At the end, you or an officer and the auditor both print and sign your names on the audit document and attach proof of identification.
• How to avoid a surprise. California notes that some insurers offer monthly payroll reporting, and that telling your agent or underwriter about large payroll changes during the term keeps the audit bill small.

A worked example

Here is a hypothetical NEMT company. The rates are example numbers, not any insurer’s rates: $4.00 per $100 of payroll for the driver class and $0.30 for the office class. At the start, the owner estimated $120,000 of driver payroll and $40,000 of office payroll. During the year the company hired two drivers, paid $30,000 to two 1099 drivers who had no coverage of their own, and had its $35,000 dispatcher drive on weekends.

Line	Estimate at the start	Final audit
Driver class payroll	$120,000	$215,000
Office class payroll	$40,000	$5,000
Driver class premium at $4.00 per $100	$4,800	$8,600
Office class premium at $0.30 per $100	$120	$15
Total premium	$4,920	$8,615

The audit added $3,695. The driver class grew from three sources: $30,000 of new driver payroll, the $30,000 paid to uninsured 1099 drivers, and the dispatcher’s $35,000, which moved out of the office class because the dispatcher also drove.

What the auditor counts as payroll

Payroll for workers’ comp is broader than wages. Pennsylvania’s rating bureau manual (Rule V, April 1, 2026 version) bases premium on total remuneration. It counts:

• Wages and salaries, bonuses, and commissions.
• The extra pay for overtime work.
• Holiday, vacation, and sick pay.
• Expense reimbursements your records do not show were real business expenses.

It leaves out employer payments to group insurance or pension plans, documented business expense reimbursements, uniform allowances, use of a company car, and tips beyond any amount needed to reach the federal minimum wage. Overtime is where states differ. California counts only the straight-time part of overtime pay and leaves out the premium above the regular rate, according to the WCIRB’s online guide. Ask your insurer how your state treats it.

The class each person lands in

The class decides the rate, and the gap between a driver class and the office class is wide. In Pennsylvania, Code 828, Paratransit Service, lists transportation services for older adults and for people with disabilities (version of September 25, 2026). Washington’s state fund puts paratransit companies in class 1404 and dispatchers with no other duties in class 4904 (WAC 296-17A-1404); NEMT insurance cost shows its 2026 rates.

Getting a worker into the office class takes more than a job title. Pennsylvania’s manual allows the clerical office class only for employees who work exclusively in the office, in a space separated from other work. An office employee with any other regular duty is classed with the business. When an employee’s work falls in more than one class, the entire payroll goes in the highest-rated one. The manual allows one person’s pay to be split between classes only in construction, erection, temporary staffing, and stevedoring, and then only with original time records, never percentages or estimates.

For a NEMT company in Pennsylvania, that means a dispatcher who regularly covers a route has all of their pay billed in the driver class. Other states have their own rules, so ask your insurer before you put someone who drives in the office class, and keep office staff out of the vans if you want the office rate.

In California, an insurer that changes your class in a way that raises your premium must tell you in writing within 30 days after the change, and you may ask for reconsideration and appeal (Insurance Code 11753.1).

1099 drivers and subcontractors at audit

Calling a driver a contractor does not keep that driver off your audit. The insurer looks at who you paid and whether they had their own coverage.

• Virginia. The Workers’ Compensation Commission says your carrier can charge premium for any subcontractor you hire, even a sole proprietor with no employees, and tells businesses to keep proof of each subcontractor’s coverage ready for the audit.
• Pennsylvania. The rating bureau bars the charge when the subcontractor carried its own standard workers’ comp policy for the whole time it worked for you, or is a corporate officer who signed a written election out of coverage. For anyone else, the insurer may charge or waive the premium, and that choice is not reviewable by the bureau.
• Florida. State law requires audit rules to review every source of payment to employees, subcontractors, and independent contractors, and to use the certificates of insurance you keep for subcontractors (Florida Statutes 440.381).

Get a certificate of insurance from every contractor before the first ride, and check that its dates cover every day they drive for you. Whether a driver should be on your payroll in the first place is a separate question, covered in NEMT drivers: 1099 or W-2.

Owners and officers

Owners are treated differently by state, and the audit applies your state’s rule.

Pennsylvania. Executive officers of a corporation are covered like employees. An officer who qualifies can be excluded by sending the insurer two state forms, LIBC-509 and LIBC-513, before the exclusion date, and as a general rule the exclusion starts only on the policy’s effective date. Under the April 1, 2026 version of the manual, a covered officer’s payroll counts at no less than $1,347 a week and no more than $5,400 a week (the April 1, 2025 version used $1,325 and $5,300). An officer with no salary in the records is charged at the minimum.

California. The Workers’ Compensation Insurance Rating Bureau (WCIRB) says certain officers and directors, general partners, and managing members of an LLC may exclude themselves by signing a written waiver under penalty of perjury (Labor Code 3351 and 3352). Since July 1, 2018, a sole shareholder who is an officer or director of a private corporation is excluded unless the owner elects coverage. When these owners are covered, their payroll counts between a minimum and a maximum that are set by the policy’s start date and may change each year.

For the exemption forms in other states, see workers’ comp for NEMT drivers.

The records to have ready

Florida’s law lists what payroll audits rely on: state and federal reports of employee income, payroll and other accounting records, the certificates of insurance you keep for subcontractors, and the duties of each employee. Build your audit folder from that list:

1. Payroll registers for the policy period, by employee, with hours and gross pay.
2. Quarterly payroll tax reports. Bring your federal quarterly returns (Form 941) and your state wage reports. Florida employers must also send the insurer a copy of each quarterly wage report filed for reemployment tax, with a sworn statement that it is accurate.
3. Your general ledger or check register, so the auditor can see every payment for labor, including cash and 1099 payments.
4. Your 1099s and a list of every contractor, with their certificates of insurance and coverage dates.
5. Job duties for each person, showing who works only in the office and who also drives or helps riders.
6. Officer and owner records, including any exclusion or exemption forms on file.

Blocking the audit costs more than the audit. In Florida, you pay the insurer $500 if it cannot finish the audit because you did not provide the records, and you can owe a premium of up to three times your most recent estimated annual premium for refusing access. California’s guide says an employer that blocks an audit may owe three times the estimated premium, and the insurer can cancel or refuse to renew the policy.

Understating payroll costs far more than the premium you save. Florida makes an employer that understates or hides payroll, or hides employee duties to get a cheaper class, pay the insurer 10 times the premium difference plus reasonable attorney’s fees. California law punishes a knowingly false statement made to lower a workers’ comp premium with jail time, a fine of up to $50,000 or double the value of the fraud, whichever is greater, or both (Insurance Code 11760).

Commercial auto and liability audits

Your van policy can be audited too. The standard business auto form (ISO CA 00 01, 10 13 edition) says the estimated premium is based on the exposures you reported when the policy began. The insurer computes the final premium once it knows your actual exposures, bills you the balance, or refunds the difference.

Vans you add during the year are where NEMT owners get caught. If your policy covers only the autos listed on it (symbol 7), a van you buy is covered only if it replaces one already covered or the insurer covers every auto you own, and you tell the insurer within 30 days that you want it covered. Report each new van the week you buy it.

Liability premiums are audited the same way. The Maryland Insurance Administration’s commercial insurance guide (July 2024) says they are typically based on the sales and payroll estimates you give before the policy starts, and an audit at the end of the term can bring an extra bill or a refund. If you also carry hired and non-owned auto coverage, ask your agent what it is rated on so you can report the right numbers.

How to dispute a workers’ comp audit

Start with the insurer and put everything in writing. Name each class, person, or payment you disagree with and attach the records that show why. Keep paying the part you agree with while the dispute runs.

California. Send a written request to your insurer’s dispute office; the “Your Right to Rating and Dividend Information” notice attached to your policy names it. If the insurer does not grant or reject the request within 30 days, you may treat it as rejected. You then have 30 days after the insurer’s written notice of its action to appeal to the Insurance Commissioner, whose Administrative Hearing Bureau hears these appeals (Insurance Code 11737).

Pennsylvania. To challenge how the rating system was applied to you, such as the class you were given, file a written appeal with the rating bureau during the policy period or within 12 months after it ends; later appeals are not granted. If you disagree with the bureau staff’s final decision, appeal to its appeals subcommittee within 30 days. You can take the subcommittee’s decision to the Insurance Commissioner within 30 days of the date it was mailed (Rule XVI).

Florida. Make a written request to the insurer to review how its rates and rules were applied to you. If it does not grant the request within 30 days, you may treat it as rejected and file a written complaint with the Office of Insurance Regulation (Florida Statutes 627.371).

In Virginia, the Bureau of Insurance at the State Corporation Commission answers questions about premiums, classes, and audits at (804) 371-9185 (as of October 2026). In other states, your state insurance department is the place to start.

How audit results feed your experience mod

Your experience modification rate compares your claims with the claims expected for a company with your payroll. NCCI, which runs the mod in most states, says the payroll and claims behind your mod come from the report your insurer files for each policy, which it does not have to send until 18 months after the policy starts (ABCs of Experience Rating, 2025 edition). Expected losses are figured from payroll: the expected loss rate for each class times each $100 of payroll.

That makes the audit part of your mod. Payroll left off your mod also lowers the expected losses your claims are compared against, so the same claims produce a higher mod. California’s guide warns that the WCIRB can issue a mod using your reported losses but leaving out unaudited payroll, which typically raises it. NCCI issues a contingent mod when your audited payroll has not arrived, and revises it once it does.

NCCI’s plan does not apply in California, Delaware, Michigan, New Jersey, New York, Pennsylvania, or the four states where a state fund sells all coverage (North Dakota, Ohio, Washington, and Wyoming). Those states run their own plans. Wherever you are, finish every audit, then check the payroll on your next mod worksheet against the audited figures and the claims on it against your loss runs.