Three Ways Indemnity Payments Are Delivered, or Not

The employee has presented the workers compensation claim and the medical provider has confirmed the employee cannot work. The work comp adjuster has properly investigated the claim and there is no known reason the employee is not entitled to temporary total disability benefits while he remains unable to return to work. In most states this means a weekly payment of indemnity benefits (a few states allow biweekly payment of benefits).

There are basically three ways for indemnity payments to be delivered from the work comp claims office to the employee. The most prevalent way is the computer issuance of a check each week that is sent by the U.S. Mail to the employee. With the advent of direct deposit for payroll and the electronic transfer of money from one account to another, direct deposit of the indemnity benefit has become common. The third method is the issuance of the check and the employee comes by either the employer’s location or the claim office where the check is handed to the employee.

While there is a lot of debate about which of the three methods of delivering the indemnity payment is best, each of the three methods have their pros and cons. Let’s look further at each method.

The first and most prevalent method involves the computer generating a check each week that is stuffed into an envelope and mailed to the employee. The pros and cons are:

In some computer systems, the adjuster has to approve the release of the indemnity check before the computer will generate it. This is a good thing as it makes the adjuster consider the status of the claim and why the employee is still off work.
In other computer systems, the computer generates the check each week without any adjuster approval. This is not a good thing as the adjuster can easily lose track of the indemnity status of the claim when the adjuster has no weekly input or control over the issuance of the indemnity payment.
A negative of mailing the check is the uncertainty of the delivery date, with postal holidays, inclement weather and human error causing delays in the employee receiving the indemnity payment.
A positive to paying by U.S. Postal Service is that receiving checks that one is not entitled to is sometimes considered mail fraud and prosecutable. Employees who play this game regularly know that fact and are weery.

The second method, direct deposit of the indemnity payment each week into the employee’s checking account has:

A major advantage in the reduction in the amount of money spent on printing, envelopes and postage.
When there is no human involvement, the claims office saves time.
A major disadvantage of no human involvement – it is a good way to lose connection with the employee.
The employee receives the weekly check like clockwork, on the same day every week.

A MAJOR drawback of direct depost is the employee does not sign the Fraud Statement on the check endorsement line on the back of the check. In some states, there is a statement the employee must sign indicating they are aware that working while collecting workers compensation is fraud and is a criminal act. If you knew this, you are in the minority, as few people even know the fraud endorsement exists, yet is some states it is mandatory, others permitted. Last time I looked, RI was mandatory and NY was optional, and I haven’t reasearched others, but YOU should! If you don’t research this, you are missing a big opportunity to state your position and communicate that to the employees.

A third method of indemnity payment delivery that was common several decades ago and then went out of style is beginning to make a comeback. That is having the employees that are physically able to do so to come to either the claims office or the employer’s location and pick up the check. The pros and cons of this method are:

The employer or adjuster gets to see the employee movement and physical appearance.
The employer or adjuster has the opportunity on a weekly basis to converse with the employee, and discuss with the employee the progress the employee is making toward recovery. Druing this meeting, they can SHOW the employee potential transitional duty positions.
If the employer has an aggressive return to work program with light duty or modified duty, it is often easier to get the employee back to work when they have to come to the employer’s location to pick up their indemnity check.
For the employees who are physically unable to come in and pick up their check, the checks either have to be hand delivered or mailed. (WCxKit)
This approach to delivering the indemnity check each month to each employee can be very time consuming when the claims office or employer has numerous employees out of work at the same time.

Employers often think the best approach to delivery of the indemnity disability check is to have the employee come in and pick it up, as it gives them the opportunity to gauge the ability of the employee to return to work. Third party administrators and insurance claim offices tend to prefer either mailing the check or having the money direct deposited to the employee’s checking account as these two approaches saves them time. Employers, especially self-insured employers, should discuss the feasibility of hand delivery of the disability check with their claims office and make a determination as the method of disability check delivery that works best for them.

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. See www.LowerWC.com for more information. Contact: RShafer@ReduceYourWorkersComp.com or 860-553-6604.

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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.