Risk managers frequently ask “what is the claim worth” when trying to get an idea of the long term cost of a severe injury. A competent workers’ compensation adjuster will only provide a dollar range, not an exact value, as the final cost of a major injury is often not known until the claim is totally concluded, which can be years in the future.
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Factors That Impact Total Cost of Claim
There are many factors that come into play when trying to estimate the total cost of a workers’ compensation claim. Factors that always impact the total cost of the claim include:
• The nature of the injury
• The extent of the injury
• The skill of the medical provider
• The use of ancillary services – diagnostic, hospitals, therapy, pharmacy, etc.
• The motivation of the injured employee
• The compensation rate (including maximum and minimum amounts, if applicable)
• The length of the disability
• The jurisdiction where the workers’ compensation claim is pursued
• The permanency rating assigned by the medical provider
• The permanency rating assigned by an independent medical examination
Other issues or factors that may impact the total cost of the claim include:
• The quality of the adjuster’s claim investigation
• The value of potential future medical cost
• The potential for future wage loss
• Death or funeral benefits
• Rehabilitation costs
• Disputes over any aspects of the claim that create legal costs
• Preexisting disability
• Preexisting medical issues
• The ability of the adjuster to recognize the strengths and weaknesses of the claim during settlement negotiations
Skill of Adjuster & Actions of Employer Have Big Claim Cost Impact
While all of the above factors impact what the claim is worth, there are two other aspects of the workers’ compensation claim that have a big impact on the overall cost of the claim. They are:
1. The skill of the workers’ compensation adjuster handling the claim
2. The actions of the employer in controlling the cost of the claim
Adjuster Should Speak Multiple Persons With Knowledge Of The Injury
The adjuster’s skill comes into play when the claim is first reported and impact the claim throughout the course of the claim. Upon receiving the claim, the adjuster should immediately contact the employer and interview the person with the most knowledge of the claim—the employee’s supervisor, co-worker(s) present at the time of the injury or the first person the employee reported the claim to. A mistake often made by adjusters is contacting only the person who reported the claim to the claims office, not the supervisor, co-worker or other person who has the most knowledge about the injury.
After obtaining the employer’s information first hand, the adjuster should immediately contact the injured employee. A detailed review of the employee’s action right before the injury and a detailed review of how the injury occurred will assist the adjuster in determining if further investigation is needed, in determining the compensability of the claim, or the subrogation potential.
The immediate contact with the injured employee not only allows the adjuster to obtain the most accurate information to handle the claim, it also allows the adjuster to establish rapport with the injured employee and establishes the adjuster as the go-to person for any questions or problems the employee has during the course of the workers’ compensation claim.
Adjuster Can Prevent Claim From Being Expanded
By completing a proper investigation into the claim, the adjuster can prevent the claim from being expanded later to include unrelated prior injuries or health issues of the injured employee. The properly completed investigation also prevents claims of questionable compensability from being accepted.
After establishing rapport with the injured employee during the initial contact, the adjuster should maintain on-going contacts with the employee to deal with any problems that develop during the course of the claim. By working with the employee throughout the course of the claim, the odds of the employee retaining an attorney to assist with the claim (and inflating the claim cost) are diminished.
Employer Plays Significant Role In Workers Comp Cost Containment
The employer’s actions also have an impact on the overall cost of the claim. There are many actions an employer can take to reduce the cost of the claim, including:
• Protective clothing and gear that reduces the severity of an injury (or better yet prevents the injury from occurring)
• Immediate arrangement for medical treatment when the injury occurs
• Advising the initial medical provider of the availability of modified duty work when there is any possibility that the injured employee could do any type of sedentary work
• Immediate reporting of the claim to the claims office
• Same day as the injury follow up with the employee, after the initial medical treatment, to arrange for modified duty work, if appropriate
• On-going contact with the employee until the medical treatment has concluded and the employee has returned to unrestricted work
The experienced adjuster will combine all the above factors to provide an estimated range as to what the claim will cost. At that point, the adjuster will be able to answer with a reasonable degree of certainty what the claim is worth.
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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