Avoid High Cost of Denied Claims With Solid Investigation Strategy

 

There are many reasons for members of the workers’ compensation claim management team to deny a claim. This includes denials of primary liability based on a lack of medical support, evidence of a pre-existing condition, idiopathic claims, intoxication defenses and statutory reasons such as notice and statute of limitations. While the facts of the case may look good at the time of the denial, studies indicate that these denied claims can become costly in the long run. To better manage claims in a cost-effective manner, it is essential even the most seasoned claim handler think twice before issuing a denial.

Program Efficiency and Denied Claims

Various studies indicate that from 2013 to 2017, claims denial rates have increased from 5.8% to 6.9%. Reasons for a workers’ compensation claim to be denied include lack of medical evidence, information indicating the injury is not related to one’s work activities, and documentation supporting the contention the person injured was not an employee. While there has been an increase in workers’ compensation claims denied, this has not translated into program savings. Instead, these same studies indicate that approximately 67% of all initially denied claims will convert to admitted claims within 12 months. The result is over a 50% increase in money eventually paid out to fully resolve the matter. This adds $15,000 to each claim. Multiple this by many claims and workers’ compensation programs end up paying out a lot of money.

Barriers to an Effective Claim Investigation

Members of the claims management team face many challenges when reviewing a claim and making a determination as to primary liability – and other issues of compensability. One of the driving factors is the rigid framework many jurisdictions place on insurance carriers. These barriers are numerous and include the following:

• Inability to issue a retroactive denial of primary liability: In some jurisdictions, members of the claim management team are not able to deny a claim once payment of medical or indemnity benefits has been made. Paying anything on a claim may also diminish the chances of obtaining a $0 Medicare Set-aside allocation under the voluntary review/approval by CMS; and

• Administrative penalties for the late issuance of a denial: Paying administrative penalties does not promote program efficiency. It also does not make a workers’ compensation insurer look attractive to prospective clients as most states publish statistics on penalties issued by a state industrial commission. Penalties can also be cumulative, which result in a system of graduated costs for throughout the year.

The result of these barriers should also have an increased urgency to deny a claim if it does not pass the proverbial “smell test.” While this may seem like a good strategy, the result can lead to decreased program efficiency. Now is the time to implement change and take a more reasoned approach to denying a workers’ compensation claim.

Improving the Claims Process — Making Better Decisions

Studies indicate that claims converted from denied to paid are particularly high in California, Florida, and Texas. Claim management teams who handle claims in these jurisdictions should take note. Additional education and coordination with other interested stakeholders such as employers and defense counsel can mitigate the payment of unnecessary benefits and reduce the percentage of converted claims. Other strategies can include:

• Better communication with insureds regarding accident reporting and injury investigation;
• Education and training on workplace safety and injury prevention; and

• Improvements in the claims handling process via the utilization of analytics and technology. This includes making the claims process more accessible to employers and other stakeholders through web and app-based reporting features.

Conclusion

The only good file is a closed file – but this does not mean files should be closed by simply denying primary liability. Claims management teams seeking to reduce workers’ compensation program costs must make better decisions when denying workers’ compensation claims. This needs to include better communication and involving all interested stakeholders.

Author Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%. He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center .

Contact: mstack@reduceyourworkerscomp.com.

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