Self-insured employers have more leeway in establishing and controlling the quality of claim handling than employers who cover their workers’ compensation claims through a work comp insurance policy. But, both self-insured employers and employers who purchase their insurance from an insurer have the right to expect their claims to be handled in a professional manner and in compliance with the insurance industry’s Best Practices.
The definition of Best Practices may vary slightly from insurer to insurer and from self-insured employer to insurer. The following Best Practices are designed to bring about in a timely manner the highest quality medical care for the injured employee while minimizing the cost of the injury. Properly followed, the Best Practices will obtain a timely return to work for the injured employee and assist the employee to return to the employee’s pre-injury status.
The insurance industry Best Practices are:
Coverage Verification: The adjuster immediately on assignment of the claim should verify there is a valid policy of insurance and the accident occurred within the policy period.
Three Point Contact: The adjuster should contact the employer, the employee and the medical provider within 24 hours of the claim assignment (some insurers and self-insured employers have reduced the contact time to different, shorter time frames such as 2 hours, within 4 business hours or same day contact). The purpose in making these contacts is to thoroughly investigate the circumstances of the claim and to determine the compensability of the claim. The employee contact includes a recorded statement of the employee if there is any question as to the validity of the claim or if there is a possibility of subrogation.
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Compensability: Based on the investigation completed by the adjuster, a determination of compensability (whether the claim will be paid or denied) should be made and documented in the claim file within 14 days of the receipt of the claim.
Investigation: The adjuster should address all issues affecting coverage, verify the nature and extent of injury, determine benefits due, investigate the possibility of subrogation, and address any second injury fund possibilities within 14 days of the receipt of the claim.
Reserves: Upon completion of the three point contact, the adjuster should have adequate information to set the initial reserves for medical, indemnity and expenses. Initial reserves are normally set within 72 hours. Reserves are subject to change and are frequently updated at 60 or 90 days into the claim. The reserves also should be updated at any time the adjuster receives medical information or other documentation that impacts the overall value of the claim. Regular reviews of the reserves, at least every 6 months, should be completed to verify the reserves for future payments remain adequate.
Average Weekly Wage: Most states have statute requirements as to when indemnity benefits must be paid. To comply with these legal requirements, the adjuster should obtain from the employer documentation of the employee’s pre-injury compensation within 14 days of receipt of the claim.
Indemnity Benefits: The adjuster using the average weekly wage information obtained from the employer should calculate the employee’s indemnity benefit rate and arrange payment of the initial indemnity check within 14 days of receipt of the claim (less time if the state statute requires an earlier payment of indemnity benefits).
First Reports: Self-insured employers should expect their third-party administrator (TPA) to provide a detailed report of the work done on the claim within 14 days of the claim being received by the TPA. The detailed report should review each of the Best Practices categories discussed in this article.
Status Reports: The TPA should provide the self-insured employer with regular status updates on the developments of the claim. Status reports can be at 30 or 60-day intervals, depending on the developments of the claim.
Plan of Action: The claim file should contain an outline of the steps the adjuster will take to either move the claim forward and/or to bring the claim to a conclusion.
Insurance Services Office: A filing with the Insurance Services Office to identify other insurance claims brought by the employee should be completed within 14 days of receipt of the claim. This information will assist the adjuster in preventing the employee from claiming a pre-existing medical condition as a part of the employee’s new workers’ compensation claims. A repeat filing with the Insurance Services Office should be repeated every 6 months far as long as the claim remains open.
Medical Management: Upon the initial contact with the medical provider’s office, the adjuster should confirm the date of the first office visit, the medical provider’s diagnosis, prognosis, treatment plan and the date of the next office visit. If applicable, the adjuster should give the medical provider the contact information for pre-certification and utilization review, along with contact information for the medical bill review office. The adjuster should also coordinate the involvement of the nurse case manager if the injury is serious enough and nurse case management is not automatically assigned to every loss time claim.
Return to Work: During the initial contact with the medical provider’s office, the adjuster should determine the employee’s Return to Work status. The adjuster should provide the employer with the employee’s work restrictions and make the necessary arrangements for the employee to return to work on modified duty or full duty, if appropriate.
Subrogation: Based on the adjuster’s investigation, subrogation should be pursued against any third-party responsible for the employee’s injury.
Settlement Evaluation: The claim file should contain an evaluation completed by the adjuster of all exposures for benefits that are a part of any settlement. The settlement evaluation should also include any offsets or credits due to the employer.
Litigation Management: All files referred to a defense attorney should contain a referral letter outlining the facts of the claim and providing the defense attorney with instructions on how the adjuster wants the attorney to proceed. The referral letter should also request the defense attorney to provide an analysis of the strong and weak points in defending the claim, along with the attorney’s recommendations. The attorney should be required to provide a litigation budget outlining the projected cost of defense. All billings provided by the defense attorney should be reviewed by the adjuster for the appropriateness of the charges.
Diary: All future handling activity planned by the adjuster should be placed on a diary (calendar) for follow-up on a timely basis. This includes all Plan of Action issues as well as routine file follow up.
Claim File Notes: All activities on the file should be documented in the claim file notes sections of the file. This includes all telephone discussions, emails, letters, medical reports, state forms, and any other file developments.
If your insurer or TPA is not following the above industry Best Practices, it will have a negative impact on the outcome of your claim files. If you know or suspect that the Best Practices are not being followed, you should arrange for an independent claims auditor to review your claims files.
A claim file audit will provide you with the needed insight into your claims, allowing your company to take the necessary steps to improve the claim handling of your work comp claims, lowering your overall workers’ compensation cost. For assistance in finding a claim files auditor, please contact us.
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.
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