Proper Compensability Investigation Stops Claim Before It Starts

Many rookie adjusters get ahead of themselves. This probably should not be seen as a surprise, because as a new claim examiner they feel pressure to not screw up. Messing up is usually viewed as missing some detail pertinent to the compensability of the claim. One of the worst mistakes you can make is accepting and paying on a claim that is not compensable to begin with.

A lot of this comes down to training. But when I was reading a recent poll, the top 3 core competencies were ranked as follows:

1. Disability/Return to work management

2. Medical Management

3. Compensability investigations

While I agree with the importance of the three items, I disagree with the ranking. I believe that these should be listed in the opposite order. Disability/return to work and Medical management need to only be addressed if the claim is actually compensable. How can compensability not be ranked first as the most important item in a claim?

It comes down to money. The medical aspects of claims can far outweigh the wage loss, especially in those chronic claims that are around for more than a year or two. Management and other executives focus on ways to save money on the medical end, by using aggressive management tactics to contain medical exposure. They assign certain vendors to their company, all in an attempt to curtail medical cost. They negotiate case costs, rates, assignments, and so on thinking that they are striking a deal and saving money on the back end of a claim instead of focusing on the front end.

Front End of The Claim Is Most Important

In my opinion, the front end of the claim is by far the most important. This is where the key investigation takes place as to if the claim is indeed compensable, or if any red flags are to be raised that can question compensability in general. Adjusters get lost in their routine of taking numerous statements and juggling their own pending claims that they forget that the first statement they take from the claimant is often the biggest key to the claim. All of their attention should be focused on looking for key indicators to compensability issues and not thinking 14 steps ahead as to which nurse case manager they will assign if/when this person has surgery 3 months from now.

These nasty habits begin early on in the career of said adjuster. It is very typical of an adjuster to establish a routine for their claims early on in their career, and rarely will they deviate from that routine unless they are forced to later on. Even when they are forced to change later on it is met with a ton of resistance, because you are changing the way they approach their claims from day one. Even with a forced change, they will slip back into old routines easily, unless you spend countless hours drilling them with reasons why they need to adapt to the new protocol for claim investigation starting at the time the file first hits their desk.

File Transferring Adds to Lack of Compensability Investigation

Another issue with the lack of compensability investigation comes from files transferring from adjuster to adjuster, either due to reserve increases or due to general adjuster turnover. Oftentimes the new adjuster will take the initial investigation as over and done with, and they pick up the claim where the prior adjuster left off. They should be using their experience in the industry to review the file in-depth, starting from day 1 of the claim, including listening to the recorded statement (If one was taken) and reviewing the notes that were input into the claim to see if anything strikes them as being odd or standing out as a potential red-flag issue. Compensability can always be addressed later on in the claim, but the chances you have to curtail what you may have to pay for can be restricted. If it were early on in the claim, the adjuster has several options to file to investigation extensions or to dispute questionable forms of medical treatment.

The reasons for these issues also come down to effective time management. It is not a recent news update that carriers are trying to do more with less staff, and these in-depth claim reviews and analysis just do not happen. The above mentioned poll shows flat out that compensability is not the first hot button issue on the minds of insurance executives. If the management is not pushing that issue, it is just not going to be done. Instead of stopping the claim due to prior adjuster error, examiners and management go in to damage control mode. They try to cap as much future exposure as possible, in order to stop the bleeding.

Maybe had they viewed initial investigation as being the most important step in a file they would not be in the mess they are trying to contain.

Author Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.

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