Know The Workings Of Indemnity Payments

As anyone who deals with workers compensation can tell you, indemnity payments play a large role in the industry.

For those not entirely up to speed on these payments, here’s a brief breakdown of information from the Louisiana Workforce Commission on requirements in that state for such payments:

When a worker is hit with a covered injury, he or she might be eligible for weekly/monthly indemnity benefits should the injury prohibit the employee from going back to their job for more than one week (seven calendar days).

The initial payment of benefits payable for Temporary Total Disability (TTD), Permanent Total Disability (PTD) or death comes due on the 14th day after the employer or insurer is aware of the injury or death. No compensation will be paid out for the initial week following the injury except in cases where the disability from the injury continues for two weeks or longer following the date of the accident. This “waiting period” indemnity payment will be paid out following the first two weeks having expired.

Responsibility for Employer or Workers Comp Insurer

During the period of Temporary Total Disability (TTD), the employer or its workers comp insurer bears responsibility for the payment of indemnity benefits to the worker in an amount equal to 66 and 2/3rd’s percent of the employee’s average weekly wage, subject to a maximum/minimum benefit amount in accordance with the OWCA. Maximum/minimum indemnity benefits are determined according to the date of the accident leading to the injury and will not be adjusted annually for increases or decreases in the maximum/minimum benefit amount put in place by the OWCA.

At the same time as the initial payment of indemnity is made to the employee or on or prior to the effective date of any modification (this might include a change from TTD to SEB benefits), suspension, termination, or controversion of indemnity/medical benefits, a Form LWC-WC 1002 (Notice of Payment, Modification, Suspension, Termination, or Controversion of Compensation or Medical Benefits/Notice of Disagreement) needs to be completed by the employer/payor and passed along to the injured employee by certified mail, and to the employee’s attorney, if applicable, by facsimile.

The employer/payor must also transmit a copy of the Form LWC-WC 1002 to the OWCA within 10 days from the date the original Form LWC-WC 1002 was sent to the injured employee. Any subsequently completed Form LWC-WC 1002 needs to be sent to the OWCA on the same day as the original notice was sent to the injured employee and/or employee’s representative.

Any injured employee or employee’s representative who disagrees with any information provided on the Form LWC-WC 1002 (Notice of Payment, Modification, Suspension, Termination, or Controversion of Compensation or Medical Benefits) shall notify the employer/payor of the basis for disagreement by completing the Notice of Disagreement portion of the Form LWC-WC 1002 and returning it with the original Form LWC-WC 1002 (Notice of Payment, Modification, Suspension, Termination, or Controversion of Compensation or Medical Benefits) attached thereto, to the employer/payor via mail or facsimile, or by a letter of amicable demand, stating the nature of benefits and amounts of compensation asserted to be correct.

If the employer/payor does not provide the benefit that the employee and/or employee’s representative claims is due within seven days, the employee may file a new Form LWC-WC-1008 (Disputed Claim for Compensation) or amend a pending disputed claim. Once the Form LWC-WC-1008 is filed, the employer/payor may in its answer request a preliminary determination hearing with the Workers Compensation Judge.

Failure to request a preliminary determination will result in the disputed claim being set for a trial on the merits.

California Costs Sky Rocket

Turning to California, the state saw its projected ultimate cost per indemnity (lost-time claim) sky rocket to a historic high, this according to a WCIRB report in 2013.

According to the report, the estimated average cost of an indemnity claim was projected in the last year to reach $85,785, which represents a $30,852 increase, or more than 50% increase, since the full implementation of the reforms that took effect nine years ago.

When comparing California to the rest of country using National Council on Compensation Insurance (NCCI) data, the average cost of a claim in California comes in at 38% more than that of the NCCI tracked states (CA $69,536 vs. NCCI $50,300, excluding Allocated Loss Adjustment Expense (ALAE) and medical-only claims).
Other findings of the report noted:

1. While the 2010 indemnity claim frequency increase was experienced in a large volume of states, the 2012 frequency increase seems to be unique to California.
2. Both the 2010 and 2012 frequency increases appear to be influenced by a hike in the number of late-reported indemnity claims and cumulative injury claims.
3. The 2012 increase in cumulative injury claims was focused primarily on permanent disability claims and claims involving injuries to multiple body parts. In contrast, the 2010 increase was concentrated across various types of injuries.
4. The 2010 indemnity claim frequency increase was significantly hindered by the impact of shifts in industrial mix towards less hazardous employments. In 2012, as the economy began to come back to life in more hazardous industries such as construction and manufacturing, shifting industrial mix tended to slightly increase claim frequency.
5. While the 2010 indemnity claim frequency increase was generally experienced across all California regions, the 2012 increase was felt mostly in the counties in and around the Los Angeles basin.
6. The economic recovery that continued through 2012 resulted in a higher number of newer workers in the labor force, and newer workers are often more likely to suffer a workplace injury.
7. A major chunk of the 2010 indemnity claim frequency increase was felt in smaller indemnity claims that may have been medical-only in the past. Preliminary information points to the fact that the 2012 increase was more heavily concentrated in larger claim sizes.

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Typical Process for Filing a Claim

When it comes to filing an indemnity claim, these are among the steps taken:

1. Employee presents workers comp claim, medical provider signs off on fact the individual can’t work at the present;
2. A workers comp adjuster goes over the claim, determines employee is allowed to receive temporary total disability benefits while not able to work;
3. The employee will receive the compensation either in the form of a check mailed to their residence or P.O. Box, direct deposit, or the individual can go to either the place of employment or a claim office to pick up their checks.

Author Michael B. Stack, CPA, Principal, 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: [email protected].

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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.