Say What! Workers Compensation Abbreviations Defined

May 6, 2013 by Rebecca Shafer, J.D.

When a person who is not familiar with the vocabulary of workers’ compensation reads a claims report or the adjuster file notes, it can be similar to trying to read a foreign language. There are many words and phrases in worker’s compensation that are subject to repetitive use throughout the day or throughout a claim file. Rather than constantly typing out the words or phrases, abbreviations are used.

The most popular workers compensation abbreviations include:

AWW Average weekly wage – the average earnings of an employee based on a set number of weeks (or months) prior to the injury

C Claimant – the injured employee

Clmt: Claimant

CMS: Centers for Medicare and Medicaid Services – the federal government agency that oversees the Medicare and Medicaid programs

CMS: Claim management system – within context, the computer system used with the claim handling

DA: Defense attorney – the attorney representing the employer

DB: Death benefits paid to a deceased employee’s dependents

DME: Durable medical equipment – medical equipment that can be used multiple times, like canes and wheelchairs

DOB: Date of birth

DOH: Date of hire

EE: Employee

EFR: Empoyer’s First Report (same as FROI) – This is the state mandated claim report form which gives the details of the claim – the employee’s identifying information, the employer’s identifying information, the details of the injury, and the information on the initial medical provider.

ER: Employer

FCE: Functional Capacity Evaluation – a type of testing that measures an employee’s ability to perform various physical functions including lifting, twisting, bending, range of motion, etc.

FCM: A nurse case manager who works outside of the office by meeting with the injured employee and by attending medical appointments with the injured employee.

FD: Full duty

FRO: I First Report of Injury (same as EFR). This is the state mandated claim report form which gives the details of the claim – the employee’s identifying information, the employer’s identifying information, the details of the injury, and the information on the initial medical provider.

FT: Full time employee

IC: Industrial commission – in some states, the name of the state agency overseeing workers’ compensation

IME: Independent medical examination or independent medical evaluation – A medical examination/evaluation by a medical specialist who has not been involved in the medical care of the injured employee to verify the validity of proposed medical care, or the level of disability impairment of the injured employee

IND: Indemnity – the compensation paid to an injured employee while they are off work, or compensation paid to the employee for a permanent injury

Insd: Insured – the employer

IR: Impairment rating – a measurement of the level of impairment an injured employee has incurred, often stated in percentage terms

IW: Injured worker – the employee who got hurt

LD: Light duty

Mods: Modifications and restrictions placed on the injured employee returning to work, normally stating as restrictions on lifting, bending, twisting, carrying, stooping, etc.

Leakage: Any payment on a workers’ compensation claim that should not have been made

LT: Lost time – the injured employee is out of work longer than the state mandated waiting period

MCO: Managed care organization – a group of doctors, hospitals and other medical providers who work together to provide medical care for an injured employee at a pre-agreed reduced price

MM: Medical management

MMI: Maximum medical improvement – the point where the medical provider advises the injured employee that they will not recover any further from their injury

MMR: Maximum medical recovery – same as MMI

MO: Medical only – the injured employee will receive medical benefits but is not eligible for any type of indemnity compensation.

MP: Medical provider

MSA: Medicare Set-aside Arrangement – aka Medicare Set-aside Agreement, an agreement with CMS on the future cost of medical services an injured employee will need, and the setting aside of the agreed dollar amount in a trust for the future payment of medical expenses

MSP: Medicare Secondary Payor – a federal law that requires all future medical benefits owed under workers’ compensation to be paid by the work comp insurer and not shifted to Medicare or Medicaid

OC: Opposing counsel – the attorney representing the injured employee

OH: Occupational health – A medical specialty focusing on the health, safety and welfare of employees

Ortho: An orthopedic doctor

OT: Occupational therapy

OW: Off work – the injured employee is physically unable to return to work either light duty or full duty

NCM: Nurse case manager

PI: Permanent impairment – the level of disability the injured employee has once the doctor has placed the employee at MMI

PP: Preferred provider – a medical provider within a MCO or PPO that has demonstrated superior medical service and medical results while returning the injured employee to work in shortest period of time

PPO: Preferred provider organization – similar to MCO, a group of doctors, hospitals and other medical providers who work together to provide medical care for an injured employee at a pre-agreed reduced price

PPD: Permanent partial disability – the degree of impairment the injured employee has after reaching maximum medical improvement

PRS: Physician review service – a group of board certified physicians who provide utilization review services and peer to peer reviews

PT: Part time employee (look for the context in which PT is used)

PT: Physical therapy

PTD: Permanent total disability – the injured employee injury is such that the employee is permanently unable to return to any type of work

Reserves: The amount of money set aside to pay the future cost of a work comp claim

RTW: Return to work

SNR: Senior nurse reviewer – a highly experienced nurse case manager involved in the most complex medical cases

Subro: Subrogation – the process where the insurer recovers the cost of the claim from a responsible third party, for example – when the employee is injured in a not at fault automobile accident

SSDI: Social security disability income – the payment an injured employee receives from the federal government when the employee is totally and permanently disabled

SSN: Social security number of the injured employee

TCM: Telephonic case manager – A nurse case manager who works exclusively from an office and handles the majority of communications via the telephone

TPA: Third party administrator – an independent hired by a self-insured employer or by an insurer to handle workers’ compensation claims

TPD: Temporary partial disability – the employee is able to perform some type of work but is physically unable to return to the prior job duties

Triage: A nurse who arranges and coordinates the medical care for an injured employee, and keeps both the employer and the adjuster up to date on the medical treatment status

TTD: Temporary total disability – the disability compensation paid to an injured employee who is unable to perform any type of work

UR: Utilization review – a medical management service where the medical treatment requested is reviewed for necessity

WC: Workers’ compensation

WC: Work capacity – when used within the context of the employee’s ability to RTW, often stated as full duty work capacity, light duty work capacity, light duty with restrictions or unable to work in any capacity

WCB: Workers’ compensation board – in some states, the name of the state agency overseeing workers’ compensation

WCC: Workers’ compensation commission – in some states, the name of the state agency overseeing workers’ compensation

While this is a comprehensive list, it by no means includes all the claim acronyms that are used. Some claims offices will utilize acronyms that are specific to their state work comp statutes or limited to a particular medical specialty.

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:RShafer@ReduceYourWorkersComp.com.

Editor 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.

Filed Under: WC 101

Develop A Return To Work Policy To Save Money On Comp

April 18, 2013 by Rebecca Shafer, J.D.

The bottom line in any workers compensation situation is that the company needs its employees to get its work done.

Therefore, the top goal of any injury management policy must be getting your employees back to work – ideally in their original state of health. Coordinating organized systems to reach that goal will save your company money. However, the focus should always be on preventing and carefully managing injuries – not on saving a buck.

This focus will, however, save money!

When an employee is injured on the job, the employer’s goal is to return the employee to work as soon as the worker is medically able to return. This reduces the cost of lost wage indemnity payments which are approximately 50% of the cost of workers compensation claims.

Benefits for your company are:

· maintaining the services and skills of a trained employee

· improving employee retention

· minimizing claim costs

· keeping employees involved in workplace activities

Benefits for your injured employee are:

· maintaining the employee’s wage-earning power

· facilitating the employee’s return to productive work

· faster physical recovery that promotes emotional health

Goals for a Return-to-Work Program

An effective return-to-work program should return 95% of employees to work in a transitional duty capacity within one to four days after the injury. There is a direct correlation between the return-to-work percentage and the company’s cost savings.

How to Develop a Transitional Duty Return to Work Policy

First, adopt a corporate-wide injury management transitional duty policy describing how transitional duty will be implemented at your workplace.

This policy should include:

· The length of transitional duty assignments

· The circumstances under which employees will perform transitional duty

· The types of transitional duty offered

· The circumstances under which employees will be returned to regular work

Next, develop a job or task bank by identifying jobs or tasks for use in your injury management transitional duty program. Tasks or jobs will accommodate the injuries of employees out of work due to a work-related injury.

Reasonable Accommodations

Not only will providing reasonable accommodations help get employees back to work sooner, they also might help the company avoid a discrimination lawsuit. Under the Americans with Disabilities Act (ADA), employers must make reasonable accommodations in job duties or employment policies so that employees with a disability can perform a job. These accommodations can be things like providing specialized equipment such as modified desks, wheelchair ramps or telephones. They might mean modifying job duties, such as providing light duty or changing non-essential job duties to accommodate the employee’s medical restrictions. Or, they might mean making accommodations in employment policies such as allowing an injured employee to take longer lunch hours to do physical therapy exercises. Luckily, the national Job Accommodation Network (JAN) has free resources available to help employers provide reasonable accommodations to disabled employees. Their website is available at http://askjan.org/.

The Transitional Duty Cost Calculator

The Transitional Duty Cost Calculator shows transitional duty savings. It illustrates the savings a company can achieve by bringing employees back to work as soon as they are medically able. Our free calculator can be found at http://reduceyourworkerscomp.com/tdc_calc.php.

Filed Under: Return to Work and Transitional Duty

Adjuster Selection Attributes That Will Save Workers Comp Costs

April 9, 2013 by Rebecca Shafer, J.D.

Self-insured employers with successful workers’ compensation claim management programs know one key fact – the better the adjuster, the lower the claim cost. Whether the self-insured employer has dedicated and/or designated adjusters at the third party administrator, or utilize their own in-house adjusters, the selection of the best adjusters can be tricky.

Too often self-insured employers make the mistake of judging adjuster quality based solely on the ability of the adjuster to maintain rapport with the employer. While rapport is important, there are several other key traits the self-insured employer needs in each adjuster handling their workers’ compensation claims. Successful adjusters have many attributes. Four primary attributes the self-insured employer should look for in the adjuster selection process are:

Communication
Documentation
Proactive
Courteous

Communication:

Few things are more dangerous to the self-insured employer than the workers’ compensation adjuster who does not communicate openly and often. Major claim developments that are unknown to the self-insured employer can wreak havoc. With open communications between the adjuster and the employer, the employer is kept informed of each claim’s progress. Open communications allows for the exchange of information about the claim and ideas on how to assist the injured employee while moving the claim forward. Open communications with the adjuster is not for the employer to micro manage the claims, but to facilitate collaboration and claim progress.

Documentation:

The best workers’ compensation adjusters thoroughly document their files. Each phone call, e-mail, medical bill, medical report, attorney letter, state filing, etc., should be documented either in the file notes, the documents section of the file, or both. If the adjuster accepts employment elsewhere, takes ill, or for some other reason is unable to continue the handling of the claim, the next workers’ compensation adjuster who picks up the handling of the claim should be able to review the file and know immediately both the former course of the claim and the current status of the claim.

Proactive:

The adjuster who allows the workers’ compensation claims to take their own course, rather than directing and influencing the claims, provides little benefit to the self-insured employer. The adjuster who takes charge and actively manages each aspect of each claim keeps the number of unpleasant surprises to the minimum. Ordinary claims that are not actively managed by the adjuster frequently take a wrong turn and become more complex (and more costly). The proactive adjuster will coordinate and manage the medical care either directly or through a nurse case manager. The proactive adjuster will arrange for the employee to return to work light duty. And, the proactive adjuster will coordinate all other aspects of the claim before there is a need for action.

Courteous:

When a workers’ compensation adjuster is not courteous to everyone in every facet of their claim handling, the resolution of the claim becomes more difficult to achieve. Courtesy is much more than the adjuster being polite on the telephone. Each missed telephone call should be returned as soon as possible, preferably the same day. Each email that needs a response should be promptly replied to. Each paper correspondence that requires an answer should be addressed right away.

Courtesy is especially important with injured employees. While a non-injured employee would over-look any unintentional slight, an injured employee who is already anxious about his/her future health and employment, will often take any bluntness or perceived lack of courtesy as the employer and the work comp adjuster not caring about their well-being. A lack of courtesy by the adjuster frequently results in the injured employee obtaining an attorney, which delays the claim resolution while increasing the claim cost.

Other Attributes of an Excellent Adjuster:

While the four attributes listed above are key to the successfulness of an adjuster, there are several other traits the self-insured employer should look for in the selection of an adjuster. The following attributes are also important, and should be evaluated in the adjuster selection (and retention) process.

Negotiation skills
Organizational skills
Time management skills
Customer service skills (customer being both the self-insured employer and the injured employee)
Work ethic
Ability to prioritize competing demands
Compliance with Best Practices
Technical expertise

If you find all of these attributes in one adjuster, it is definitely an adjuster you want to handle your workers’ compensation claims. While few adjusters will be strong in all of these areas, the greater the number of positive attributes the adjuster candidate has, the better his/her selection will be for your company.

Filed Under: Claims Adjuster & Employer Relationship Tagged With: Adjuster-Hiring for Work Comp, Choosing an Adjuster

Structured Settlements – Cost Savings and Future Protection

April 8, 2013 by Rebecca Shafer, J.D.

Content Sponsored by Ringler Associates

Catastrophic injuries make up less than 1% of all workers’ compensation claims, but various studies have shown that catastrophic injuries can consume 20% of all claim dollars. The dollars spent on a few catastrophic injury claims can be the difference in where the employer’s work comp insurance premiums increase or decrease. The best way to control, or at least have an impact on the cost of catastrophic injuries, is through the use of a structured settlement.

Catastrophic injuries that disable an employee to the point where they will always have a permanent partial or permanent total disability, are often difficult to evaluate for settlement purposes. To establish the settlement value and the amount of money that should be used to purchase a structured settlement, the future cost of indemnity, medical and claim related expenses has to be calculated and established.

Future Indemnity Calculations:

The injured employee’s average weekly wage and the amount of the weekly indemnity benefit
The amount of time the weekly indemnity benefit will be paid, including whether or not the number of weeks is limited by state statute, or will be paid for the remainder of the employee’s life
Any change in the amount of the employee’s indemnity payment when the nature of the indemnity payment is changed from temporary total disability to permanent partial disability or permanent total disability
Life expectancy of the employee base on the employee’s actual age or the rated age (how long the employee is project to live given the medical condition)
Any offset available due to the claimant receiving social security benefits or social security disability benefits

This example will show how the futurity indemnity cost has a major impact on the amount of money that can be spent on a structured settlement. Example: The permanent total disability prevents the employee from ever returning to work. The injured employee is man with a weekly indemnity benefit of $600 per week that drops to $500 per week when the medical provider determines he will be permanently totally disabled, at the age of 50. With a 25 year life expectancy, in a state that does not provide for an offset of indemnity benefits when the employee starts to draw social security, the future indemnity exposure is: $500 X 52 weeks = $26,000; $26,000 X 25 years = $650,000.

Future Medical Calculations:

While the future indemnity exposure is normally a straight forward calculation based on the laws of the state where the claim is pursued, the future cost of medical care and the calculations of the amount of money needed for future medical expenses is more complex. Often the adjuster will bring in a certified life care consultant to calculate the future medical cost based on:

The cost of routine on-going medical care
The cost of any planned or projected surgical interventions
The cost of modifications to the employee’s home or vehicle (and future vehicles)
The cost of home health-care services
The cost of institutional medical care
The cost of durable medical equipment (wheelchairs, hospital beds, oxygen supplies, artificial limbs, etc.)

Depending on the nature and extent of injury, the future cost of medical care could be anywhere from a few thousand dollars to a few million dollars, hence the need for an expert to project the future medical cost, including the amount needed for a Medicare Set-Aside Agreement. If significant, the future medical cost should be a separated structure settlement created to pay the future medical expenses.

In addition to the calculations of future indemnity cost and future medical cost in the determination of how much future money will be spent on the claim, consideration must be made for the expenses associated with an on-going workers’ compensation claim. This would include the cost of:

Defense attorney
Nurse case manager
Rehabilitation specialist
Vocational consultant
Actuarial expert

Structured Settlement Can Create Savings of 30% – 40%

Once the future cost of the claim has been established, the amount of money that can be spent on a structured settlement can be calculated. Using the above example where the future indemnity exposure was $650,000, let’s estimate a future medical exposure of $300,000 and a future claim expense of $50,000. On this hypothetical claim the total exposure is $1,000,000. The claim can be settled for a lump sum payment of $1 million dollars, but it makes a lot more sense to settle the claim with a structured settlement.

The cost of a structure settlement, where annuities are purchased now to cover future indemnity and medical cost, there is often a savings of 30% to 40% of the long term cost of the claim. This is because the life insurance company providing the annuity or annuities will invest the amount paid for the annuity or annuities to provide the future structured settlement payments as they become due. With this example the exposure to the insurer or self-insured employer created by the catastrophic workers’ compensation claim is $1 million. With the structure settlement, the insurer or self-insured employer could save $300,000 to $400,000.

Outside of the cost savings component, structured settlements provide future protection. The employee with the catastrophic injury is often worried about his/her future. Conscientious attorneys will explain to their employee clients how a structured settlement protects them by providing guaranteed future payments of both income and medical care, while also providing them with peace of mind. Hence, the structured settlement reduces claims cost, facilitates the settlement of the catastrophic injury claim and offers the benefits that come with future protection.

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.

Filed Under: Structured Settlements Tagged With: Structured Settlements

5 Solutions to Lifetime Claims in Workers Compensation

March 27, 2013 by Rebecca Shafer, J.D.

Lifetime claims and their ongoing wage and medical coverage demands can often be the elephant in the room in a claims office. In a perfect world, claims would settle with ease with an easy agreed indemnity and medical expense. The paperwork would be signed and everyone would move on with their life.

Unfortunately, this is an almost impossible scenario. The truth is that lifetime claims are complicated and can be difficult to resolve for a variety of reasons. A couple of the factors include Medicare Set-Asides (MSAs), failed vocational rehab, and the inability to find new employment. It is very important to get a MSA approved in order to move forward with full/final redemptions if your claimant also receives Social Security Disability, which is most often the case with a lifetime claim.

Carriers now see that settling one factor in a claim is better than settling none. True, resolving future indemnity cost is slaying one of the evils of a work comp claim. It can be done fairly easily through negotiation of the parties, with little costs involved other than legal expense for going to court and signing the paperwork.

Lifetime Claim Challenges

Medicare Set-Asides

This leaves a question begging to be answered: Why is it now common practice to give up on reviewing the future medical costs, especially since many studies show that the medical can cost up to as much as 60% of the expense over the lifetime of a claim? One answer could be getting the necessary information needed for a good MSA is labor intensive. You need a great vendor that specializes in MSA work. You need a lot of medical information to submit to get the MSA negotiations rolling. You need to wait for months and months to hear back from CMS, and when they do answer they send you a billing statement with years and years of medical services they think they covered in error. In addition, getting the medical reports that coincide with those dates of service can be nearly impossible. You will be lucky to get a procedure code and an amount billed.

So, in order to avoid spinning the wheels, these cases get ignored. Bills will come in, and will get paid that probably have nothing to do with the actual injury or lingering side effects from countless years of surgical procedures. Most often the biggest expense in this scenario is prescription cost. Many carriers pay Rx bills with little more than the bat of an eye, and the click of a mouse. This is a significant error, but it happens every day. This large medical leakage is the culprit of understaffing, and a lackluster attitude.

Failed Vocational Rehab & Lack of New Employment

A severe injury will lead to permanent restrictions, and if you attempt vocational rehab and job placement with no avail, you have the choice of paying a claim for life or attempting to settle his/her case in order to end your involvement. Indemnity expense will lead the charge at the start of negotiations. This is especially true if an injured worker is treating sparingly, meaning they are going to the actual doctor office once every 4-6 months. There is a likelihood that the doctor is treating with prescription medication month after month after month. This is where carriers get in to trouble because the cost of certain medications can be jaw dropping. Take the monthly expense and make it a yearly cost, then multiply that by 20-30 years for life expectancy and you have a number that would catch the attention of every management personnel at even the biggest carrier out there.

Lifetime Claim Solutions

A fantastic IME, or a few of them with physicians that specialize in medication and possibly addiction, can stop the medical leakage in no time. Just because you have accepted a claim for “life” doesn’t mean that you have to give up on it. Claims people have a lot of weapons in their arsenal of defense, including medication reviews, surveillance to confirm a person is not doing anything outside of their medical restrictions, employment searches to see if they are indeed working somewhere under the table despite receiving work comp benefits, and so on.

Additional Solution options:

1. Use an MSA vendor to help you streamline the process. Use their expertise to your advantage. Pick groups of files, and bring them in and let them do the legwork. This is why they are out there, so use them. Their expense will be nothing when compared to the expense of a lifetime claim that is not being closely monitored.

2. Utilize a Structured Settlement Organization to move claims toward settlement.Structured settlements can help bridge differences during a negotiation by moving the focus from a lump-sum dollar amount today to meeting the financial needs and aspirations of the injured person tomorrow. Dedicate staff toward settlement, set a goal, and give a handsome reward for those that are successful. If you have 40 adjusters on staff, and each took 10 claims that is 400 claims that could be moving forward, instead of sitting still.

3. Utilize a Pharmacy Benefit Manager (PBM). Not only will this reduce medical cost by getting into their medical networks that have reduced Rx costs, but they will have physicians or pharmacists on staff that can review medical dosage, type, and duration and compare it back to the injury to see if it really needs to be dispensed in the first place.

4. Attack those claims that have sat on the shelf and have 10” of dust on them. Chances are these are the claims that are killing your medical reserves. These claimants have gotten comfortable, so it’s time to see what they are up to. It’s time for some surveillance, background checks, pharmacy checks, and so on. You never know what you are going to find.

5. Get an updated IME. This will go hand in hand with the adjusters working on their 10 claims. IME vendors have a marketer or account rep that can come to your office, so let them dig through the file to find the medical and copy the file. This frees up time for your adjuster to work on the actual file itself instead of standing at the copy machine for 4 hours copying medical records.

Lifetime claims are not going to be solved overnight. It is going to take months, even years to get some of these claims settled correctly, and some may never settle. But you have to be proactive. The definition of a lifetime claim is not just one that sits on a shelf, ignored for years because you have more important things to take care of. If you have done all that you can, and the claim just cannot settle, then that truly is a lifetime claim. .

Filed Under: Settling WC Claims Tagged With: lifetime claims

Structured Settlements Can Resolve Legacy Claims Burden

March 19, 2013 by Rebecca Shafer, J.D.

Legacy Claims: 10% of Medical Costs For Services 20+ Years in Future

A January report from the National Council on Compensation Insurance, Inc. (NCCI) states that “it is likely that more than 10% of the cost of medical benefits for the workplace injuries that occur this year will be for services provided more than two decades into the future”. The 10% number was based on the analysis of workers’ compensation claim payments covering the time period of January 1, 2009 to April 1, 2011 of claims with a minimum age of 20 years old, but not exceeding 30 years old. The data was derived from the 35 jurisdictions where NCCI provides ratemaking services and from 7 additional states where the NCCI provides statistical information to independent state rating organization.

While claims professionals refer to work comp claims that have been around for years as “old dogs”, the NCCI and the management level of the workers’ compensation insurers refer to these older files as legacy claims. The age a workers’ compensation claim reaches legacy status will vary by insurers with some insurers considering any work comp claim over three years old a legacy claim, while others refer to the claims as legacy claims when they reach five years old. Probably the best approach is to consider any claim where the claimant has reached maximum medical improvement, and the claimant continues to have indemnity payments or medical maintenance cost to be a legacy claim.

Legacy Claims Major Financial Burden

The most common type of legacy claim over 20 years old are those involving

injury / disease of the musculoskeletal system (43% of the female employee legacy claims, 32% of the male employee legacy claims);
traumatic complications (18% of the female employee legacy claims, 15% of the male employee legacy claims);
diseases not musculoskeletal or nervous system (7% of the female employee legacy claims, 11% of the male employee legacy claims);
disease of the nervous system (6% of the female employee legacy claims, 11% of the male employee legacy claims).

In certain cases, the decision to “opt” to keep the medical component of the workers compensation claim open as opposed to resolve it as part of the settlement can be very costly.

Duke T. Wolpert, Director of Marketing at Ringler Associates, offered some insights.

“At times, the risks associated with increased claim severity are unknown when a decision is made to settle the indemnity side of the workers compensation claim and leave the medical component of the file open. Other times, optimism plays a role when making this decision. Therefore, it is very important to proactively manage this claims population and re-evaluate settlement options (in jurisdictions that allow for the closing of medicals) as a mechanism to address claims that are driving the loss dollars.”

“Historical data suggests that the Pareto Principle (80-20 rule) applies to workers compensation claims. Thus, one’s ability to identify, manage and consider structured settlement alternatives is critical.”

Conclusion

By preventing claims from ever reaching the legacy stage, the claims professional will not be issuing checks on claims 20 years later. Ultimately, the 10% of workers’ compensation cost spent on claims 20 years old or older is eliminated.

Filed Under: Claims Resolution and Settlement, Structured Settlements Tagged With: legacy claims, Structured Settlements

Excess Insurer Reporting Standards for Work Comp Self-Insured

March 18, 2013 by Rebecca Shafer, J.D.

Self-insured employers seldom are totally self insured. Almost all self-insured employers will have an excess insurer who is responsible for any workers’ compensation claim that exceeds a predetermined cut-off point for self insurance. The reason for this cut-off point is to prevent a catastrophic claim from causing financial damage to the employer.

Excess Insurer Cut-Off Limit Ranges

The determination for when an excess insurer is needed depends on the size of employer and the available financial access of the employer to meet the statutory financial obligations incurred in compliance with the workers’ compensation laws. For some smaller self-insured employers, the cut off limit might be $250,000 or $500,000, while a large company with substantial assets might not have an excess carrier involved in their work comp claims until the catastrophic claim payments reach $2.5, or even $5 million on a claim.

Excess insurers normally require the self-insured employer to report to them any claim that has reached 50% of the self-insured employer’s cut off point. For example, if the employer is self-insured for the first $250,000 and the excess carrier must pay all claim cost over $250,000, the excess carrier will require the self-insured employer to report the details of the claim to them once the reserves reach $125,000.

In addition to the dollar amount where claims become reportable to the excess insurers, it is common practice for the excess insurer to require the self-insured employer to report all potential catastrophic injuries to the excess carrier, regardless of the dollar amount of reserves.

Catastrophic injuries that require reporting to the excess insurer normally include:

Spinal injuries resulting in paralysis
Brain damage with loss of cognitive function
Brain stem injuries
Third degree burns over 25% of the body
Second and third degree burns combined that cover over 50% of the body
Amputation of hand, arm, foot or leg
Total vision loss
Total hearing loss
Reflex Sympathetic Dystrophy
Post Traumatic Stress Disorder
Occupational diseases requiring organ transplants
Major accidents involving injuries to multiple employees at same time
Permanent total disability of an injured employee

The self-insured employer should consult with the excess insurer for a listing of the type of catastrophic claims that should be reported. The excess insurer may have additional catastrophic injury types that are not included in the above list.

The report of the catastrophic injury by the employer to the excess insurer should include all pertinent details about the claim.

The claim report should include a detailed discussion of the following areas:

How, when and where the injury occurred
The nature of the injury
The extent of the injury including the primary medical provider’s identification, the doctor’s diagnosis, prognosis, short-term treatment plan and long-term treatment plan
The anticipated date of maximum medical improvement
The probable level of disability the injured employee will incur
The amount already paid for medical bills and indemnity benefits
The amount of future reserves needed for future medical care and indemnity benefits
The potential for subrogation
The structured settlement company that will be utilized in the settlement process
The potential for a Medicare Set-Aside Agreement
Any other factor that may impact the total claim cost

The information needed by the excess insurer is in many ways similar to the information a workers’ compensation insurer would need if you were not self-insured. By reporting catastrophic claims timely and in detail to the excess insurer, the self-insured employer will have a smoother transfer of the high dollar claims when they are transferred to the excess insurer.

Filed Under: Insurance Issues, Rates, Premiums Tagged With: excess insurer, Self-Insurance & Workers Comp, self-insured employers

Get To Know Your Workers Compensation Claims Supervisor

March 7, 2013 by Rebecca Shafer, J.D.

The employer’s workers’ compensation coordinator who deals with the claims adjusters on a regular basis usually has a decent understanding of the work done by the adjuster. The work comp coordinator knows the adjuster has a claims supervisor as the adjuster will from time to time state they discussed this or that claim with the supervisor, or that they have consulted with the supervisor for claim settlement authority. Beyond this, most employers don’t know exactly who the workers compensation claims supervisor is or what he does.

Duties & Responsibilities of the Workers Compensation Claims Supervisor

The duties and responsibilities of the workers compensation claims supervisor are as varied as those of the adjuster, plus often include addition task and responsibilities related to management. While no two insurers or two third party administrators will have the supervisor with exactly the same responsibilities, the following is a general guideline as to the duties and responsibilities of the claims supervisor.

· Providing leadership to the adjusters in the supervisor’s unit

· Interviewing and hiring new adjusters

· Reviewing and assigning new claim assignments and various task within the unit

· Organizing workflow within the unit

· Providing instructions on the initial investigation of any claim with unusual characteristics or red-flags

· Providing directions and instructions on how to handle various claim handling issues that occur during the course of claims

· Providing training as needed (based on the individual needs of each adjuster)

· Reviewing the work product of the adjusters to verify compliance with all Best Practices

· Monitoring the work load of each adjuster to balance out the work load and to prevent overloading of the adjusters with work

· Monitoring the development on large or complex claims

· Providing directions to the adjusters on jurisdictional requirements

· Leading round table discussions on complex claims

· Overseeing the exchange of computer data with clients, state government and defense counsel

· Completing regularly scheduled reviews of litigated claims

· Analyzing data on new claims, age of claims, average payments and claim closings

· Compiling performance reports for upper management

· Conveying to management all issues that deserve management’s attention

· Conveying to adjusters new information from management or clients

· Identifying performance gaps and assisting adjusters with performance improvement

· Completing performance reviews for each adjuster

· Maintaining rapport and acting as a liaison with clients

· Interfacing with clients on large claims, difficult claims, etc., to keep clients apprised of the claim developments

· Championing the company’s quality control program / Best Practices

· Verifying all adjusters meet state continuing education and licensing requirements

· Verifying all adjusters complete all company required training courses, classes and seminars

The workers compensation claims supervisor normally has years of experience as an adjuster and knows the problems and pitfalls the adjusters encounter. A lot of the job of the workers’ compensation claims supervisor is foreseeing the problems that will be incurred and preventing them from happening.

Get Acquainted with Your Claims Supervisor

For a person to be a successful claims supervisor, strong communications and time management skills are essential. Other skills needed include management skills, analytical skills, negotiation skills, leadership skills and motivational skills.

If you are not already acquainted with the workers compensation claims supervisor of your dedicated adjuster(s) or designated adjuster, take the time to introduce yourself and get to know this person. Most claims supervisors enjoy talking with their clients and can be a great problem solver whenever there is an issue with a claim or with an adjuster. By building a connection and rapport with the claims supervisor, you will have fewer claim issues to deal with. When you do have a claim issue that needs to be addressed, the claims supervisor will get it resolved for you.

Filed Under: TPA and Claims Administration

Structured Settlements Provide Significant Tax Benefits And Financial Security

March 6, 2013 by Rebecca Shafer, J.D.

Financial Security Served Through Structured Settlement

The resolution of large or catastrophic workers’ compensation claims through a structured settlement is financially beneficial to the injured employee. However, most severely injured employees develop thoughts of what they can do with a large lump sum of money without realistically analyzing what their future or their families’ life-time financial situation will be. With proper guidance from either their attorney or from the work comp adjuster, the injured employee will stop to consider the long-term ramifications of their injury. Their financial security is normally best served through a structured settlement.

Internal Revenue Code defines structured settlements as periodic payments to settle an injury claim or a work related illness claim. Periodic payments are normally monthly but can be quarterly, annually or other specific points in time. To fund the periodic payments, the self-insured employer or the workers’ compensation insurer purchases an annuity from a life insurance company. (The life insurance company should be financially strong, with an A or higher rating from AM Best or similar service). The periodic payments can be for a set period of time (for example 20 years), for a life time, or for both the injured employee’s life time and the spouse’s life time.

Structured Settlements Are Not Taxed

The Internal Revenue Service (IRS) tax codes create a significant financial benefit to the injured employee through how structured settlements are not taxed. Congress passed the Periodic Payment Settlement Tax Act of 1982 (also known as Public Law 97-473) to provide severely injured liability claimants with tax relief. In 1986 codified the structured settlement rules in sections 104(a)(2) and 130 of the Internal Revenue Code of 1986. Congress would later expand the law to cover workers’ compensation injuries as a part of the Taxpayer Relief Act of 1997.

With a structured settlement the injured employee agrees with the self-insured employer (or work comp insurer) to release the employer of any further responsibility for the medical cost or indemnification obligation in exchange for the stream of periodic payments. The self-insured employer or insurer normally transfers the obligation to pay the employee to a life insurance company through the purchase of an annuity that meets the agreed to periodic payment schedule.

Once the injured employee and the self-insured employer (or the workers’ compensation insurer) have agreed to settle the work comp claim in exchange for periodic payments, the full amount of the periodic payments are tax-free income to the employee. If the injured employee opts for a lump-sum settlement, the lump-sum is not taxed; but all future earnings (both interest and dividends) on the lump-sum are taxable to the employee. Hence, even if the employee is a skilled money manager (most injured employees are not), there is a large future income tax savings benefit to the periodic payments of a structured settlement.

The IRS is not totally benevolent with structured settlements. The IRS codes state that in exchange for tax free periodic payments, the injured employee agrees that he/she does not have the authority to alter the periodic payments. The injured employee cannot increase or decrease the periodic payments, the employee cannot change the agreed to time frame of the periodic payments, and the injured employee cannot delay or defer the periodic payments to a later date.

Structured Settlement Options Should Be Explored

The amount of income tax savings depends on several factors including the amount of the periodic payments versus the amount of a lump-sum settlement, the employee’s other sources of income, the income tax rate, and future changes in the income tax rates. For an estimate of the income tax savings of the structured settlement, the injured employee should consult with their income tax professional.

Overall, a structured settlement is hard to beat for a tax-free source of income. Any employee contemplating a workers’ compensation settlement should consider the use of a structured settlement. Most structured settlement firms provide structured settlement services to their clients at absolutely no cost to their clients. For more information on structured settlements, please contact us.

Filed Under: Settling WC Claims, Structured Settlements

First Report of Injury Accuracy Critical for Workers Comp Success

March 4, 2013 by Rebecca Shafer, J.D.

Delegating First Report of Injury Can Create Problems

Risk managers and workers’ compensation managers normally delegate the job of filling out the First Report of Injury form (also known in some states as the Employer’s First Report). Delegation of the First Report of Injury to someone who is not extremely careful create numerous problems. All the information on the First Report of Injury needs to be checked carefully before it is submitted to the claims office and to the state Workers’ Compensation Commission / Department of Labor / Industrial Commission / etc. For this article we will use Workers’ Compensation Commission (WCC) for all the states.

The First Report of Injury form is usually given the number 1 in most states, whether it is known as the WC-1, DWC-1, or other nomenclature. The reason the form is given numeral 1 is because normally it is the first form for both the WCC and the claims office. The information and data used by both the WCC and the claims office in setting up their files is taken from the First Report of Injury. Little errors on the First Report of Injury are copied and can create havoc.

Ensure Important Details are Correct

Name Spelled Correctly

The spelling of the employee’s name should be checked. If the last name is misspelled by the employer’s representative completing the First Report of Injury, the WCC will copy it verbatim. When the WCC receives medical information or other state forms which they are unable to match to an existing claim, the WCC will inquire as to why the claim has not been reported, as they could not find the work comp claim in their database.

Correct Social Security Number

An employer should never submit a First Report of Injury without the correct social security number (SS#). Too often when the SS# is not readily available, the employer’s representative will use a fake SS# such as 123-45-6789 or 000-00-0000 or 999-99-9999. This may get the First Report of Injury off the desk of the employer’s representative, but it creates issues for the employer, the WCC and the claims office. For the employer, it can mess up your loss run accuracy. The WCC will being call the employer and/or the claims office for the correct SS#. The claims office can submit the Insurance Services Office (ISO) inquiry with the fake SS#, but the likelihood of identifying previous insurance claims by the injured employee is greatly reduced when the SS# is not accurate.

Correct Date of Injury

When the date of injury is incorrect problems occur. In most workers’ compensation claims, the date of injury is also the date of the first medical treatment. Most claim management computer systems are programmed to kick out medical bills that occur before the date of injury. For example: an incorrect date of injury of 3-3-13 is entered on the First Report of Injury while the correct date of injury is 3-2-13. The medical bills from 3-2-13 will get denied because, to the computer system, they occurred before the date of injury. This results in phone calls from the medical provider(s) and the claims office trying to determine the correct date of injury.

Proper Wage Information

When the wage information on the First Report of Injury is incorrect, it will create problems, especially if the employee is represented by an attorney. Too often the employer’s representative will take the easy way out rather than contacting the payroll department for the correct wage information. When the employer’s representative completes the First Report of Injury reflecting the employee works 5 days a week, 8 hours per day, at the standard hourly rate for the work the employee normally does, without verifying with the payroll department, problems arise. For example, on a 40 hour week with a position that pays $10.00 per hour, $400.00 is entered as the weekly wage. But in reality, work has been slow; the employee has been absent a lot and has only averaged 32 hours per week. In this situation, the employee’s attorney often will request a hearing trying to compel the payment of disability benefits based on the higher payroll information entered on the First Report of Injury. This will force the claims adjuster to spent time and legal fees proving the correct earnings information.

Proper Type of Injury & Body Part Affected

The importance of properly entering on the First Report of Injury the type of injury and the body part affected cannot be overstated. One of the first things an attorney for the employee will do is check the First Report of Injury for the type of injury and the body part. If this information is missing, your represented employee’s injuries will expand dramatically. Neck and back injuries that you did not know the employee had on the date of injury will suddenly appear. The employee’s pre-existing medical problems will be severely aggravated. The additional medical treatment and extended time off work can be very costly when the type of injury and body part is not completed properly.

Double Check First Report of Injury Prior to Submission

Any incorrect or incomplete information on the First Report of Injury can result in problems. A lot of the problems created by wrong information can be corrected with a few phone calls or the resubmission of the First Report of Injury with the correct information. However, this is a waste of time for all the parties involved. Plus, when the First Report of Injury is inaccurate or incomplete, it can often be exploited by the employee’s attorney. To make the job easier for everyone related to the workers’ compensation claim, be sure your representative who completes the First Report of Injury checks it twice to be sure it is totally accurate.

Filed Under: Claim Management Tagged With: Claims Handling, Claims Management, First Report of Injury, Risk Managers Role, Workers Comp and the Risk Manager

Say What! Workers Compensation Abbreviations Defined

Develop A Return To Work Policy To Save Money On Comp

Adjuster Selection Attributes That Will Save Workers Comp Costs

Structured Settlements – Cost Savings and Future Protection

5 Solutions to Lifetime Claims in Workers Compensation

Structured Settlements Can Resolve Legacy Claims Burden

Legacy Claims: 10% of Medical Costs For Services 20+ Years in Future

Legacy Claims Major Financial Burden

Excess Insurer Reporting Standards for Work Comp Self-Insured

Get To Know Your Workers Compensation Claims Supervisor

Get Acquainted with Your Claims Supervisor

Structured Settlements Provide Significant Tax Benefits And Financial Security

Financial Security Served Through Structured Settlement

Structured Settlements Are Not Taxed

First Report of Injury Accuracy Critical for Workers Comp Success

Delegating First Report of Injury Can Create Problems

Double Check First Report of Injury Prior to Submission

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