5 Great Ways to Lower Your Workers Compensation Reserves

One of the best ways to lower reserves is to how a strong safety program that prevents the accident from happening, but there are additional ways also. But what do you do to control reserves if despite your best efforts you have a serious injury to an employee?

1- If you have ever looked at your monthly lost run and gasped when you saw the dollar amount of reserves the workers’ compensation adjuster has posted on a severe claim – you will understand the need to control the reserves and to try to lower the reserves.

The adjuster has a fiduciary responsibility to post the most accurate reserve possible on each and every claim. The amount of the reserves posted will be based on the adjuster’s evaluation of the employee’s medical condition, the anticipated time the employee will be off work, the anticipated permanency rating for the injury the employee received, the anticipated cost of medical care, and the anticipated cost of associated expenses from nurse case management to vocational rehabilitation to attorney fees.

EXAMPLE: Let’s look at a hypothetical example of a work comp claim. The employee severely injured his back trying to a heavy weight. The doctor’s diagnostic test reveals two severe disc herniations, at L4-5, and L5-S1. The doctor recommends an anterior lumbar fusion of L4-S1.The adjuster has posted $100,000 indemnity reserve, $100,000 medical reserve and a $50,000 expense reserve. If you are self insured, this is $250,000 that needs to be set aside in reserves to pay this claim. If you have insurance with a work comp insurance carrier, this is a claim that is going to affect your experience modification factor. Either way, you would like to see the claim reserves lowered.

A very simple step employers can take to control the cost of their work comp claims, and hence allow the reserves to be adjusted downward, is maintaining contact with the employee after the employee is injured. Most employers do not stay in touch with the employee who has a severe injury. This gives the employee the opinion that the employer does not care about their welfare or their injury. When the employer shows the employee they care about the injury and their recovery, the employee is more inclined to cooperate with the prescribed medical treatment..

The employee with a back fusion is likely to hire an attorney to represent them in the work comp claim if the employee feels the employer does not care about them. When an attorney is brought into the claim, it normally delays the employee’s recovery as the attorney (who is working on a percentage of the employee’s indemnity compensation) will attempt to delay the employee’s return to work in order to increase the attorney’s fee. The attorney will also attempt to increase the disability rating by having a plaintiff’s attorney friendly doctor give a higher disability rating and hence a higher permanent partial disability award. By keeping the employee away from an attorney, the adjuster can eliminate the reserves necessary for legal expense.

2-There are some legitimate approaches you can take to lower your reserves on this hypothetical claim. The first thing you can do to lower the reserve is something we constantly promote – have an effective transitional duty/light duty program available. Until the employee has the surgery, the employee can do desk work (he made need to be allowed to occasionally walk around to relieve the pressure on his back from sitting). After the surgery, as soon as the treating physician will allow the employee to return to work light duty, the employer should have light duty work available for the employee. Instead of the adjuster having to pay the employee 6 months of temporary total disability (TTD) benefits, the amount of TTD benefits can be cut in half to 3 months. The indemnity reserve can then be lowered the equivalent of 3 months of TTD.

3-The transitional duty program will also assist the employee in recovering from the surgery. Employees who stay active after surgery have a faster recovery and normally recover with a lower amount of disability. The reduction in the healing time means fewer medical visits (and associated cost) and the lower disability rating means less money that needs to be in the reserves to pay for the permanent partial disability.

4-In addition to the transitional duty program, the reserves can be lowered by having an active medical management program. A nurse case manager (NCM) should be assigned to any claim this severe. The NCM can manage and direct the medical care to insure the employee receives the appropriate medical care but not superfluous medical treatment. The NCM by keeping the employee on schedule for physical therapy and doctor visits minimizes the time off work. By the NCM controlling the medical care, the adjuster is able to re-evaluate the anticipated future cost of medical care, which allows the adjuster to lower the reserve when it is justified. Also, the NCM involvement will reduce the likelihood of incurring vocational rehabilitation expenses on the claim.

5-The employer who stays actively involved in the claim process will have the most success in lowering the reserves set on a claim. By keeping in touch with the employee and maintaining rapport with the employee, by having a modified duty or transitional duty program and through medical case management, the employer can have an impact on the amount of indemnity, medical and expense reserves on the work comp claim. These are the best ways for the employer to lower the reserves on a claim.

Author Rebecca Shafer, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker and website 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. Contact: [email protected].

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