How to Identify EARLY Indicators of Expensive Workers’ Comp Claims

This video is a 12-Minute Preview of the 60-Minute WC Mastery Training Course How to Identify EARLY Indicators of Expensive Workers’ Comp Claims.  



Okay. Hello everyone and welcome to workers’ comp mastery training. My name is Michael Stack and this is going to be a fantastic session. This is an extremely interesting and important topic. It’s actually one that I find quite fascinating. So the title is how to identify early indicators of expensive and problematic claims. So these are the claims that really keep us up at night. These are the ones that you’re like, I can’t believe it got to this place. These are the most frustrating claims. Really. The headline type claims when you’re telling stories, you know by the campfire, you are not going to believe what happened in this one type of thing. And the idea here is to get in front of those, get in front of those claims so that those stories by the campfire never have to happen. Those doozies of claims we can get in front of prevent and get them going in the right direction.



Hindsight is 20-20; Foresight is Priceless


They say that hindsight is 20-20 you look back and you say, Oh man, I wish we would’ve done this if we would’ve done this. And it wouldn’t have caused that, hindsight is 20-20 but foresight, which is what we’re talking about today, is really priceless for the impact that we can have on the individual lives of the injured workers. Because each one of those stories has a person behind it as well as then the costs that are associated with those claims, which we know are significant and major, major drivers of the entire cost of our program. So looking forward to going through this information. We have a tremendous guest, Dr Jake Lazarovic, Dr Jake, welcome to you. Happy to have your expertise on this session.


Well hopefully we’ll, we got your audio going here in just a minute. So let me get through and let me go through our three major points and let me go through the three major topics that we’re going to be covering. So the first topic is going to be talking about the cost and cause of these claims. So what is the cost and what is the cause behind these claims? What does that underlying piece to understand what’s actually happening. Next piece is then we’re going to talking about accurate claim screening techniques, accurate claim screening techniques. And we’re talking 90 to 95% accuracy on getting in front of these claims. One in fact are those techniques. And then the last piece, the third major point is we’re going to talk about those interventions strategies and actually implementing them. So once we understand the drivers, what’s causing them, understanding the techniques and how to identify them, then third pieces is gonna be, then how do you go ahead and implement those as this should feel like a live interactive session.


So we’ve got my computer and the bright behind the big screen right behind the camera here. So go ahead and type in questions, type in comments. This should be interactive. You can get feedback from myself if feedback from Dr Jake as we’re able to do throughout the session. But I do want to encourage you to make this interactive. That’s one of the greatest things about being live here together. All right, so let’s get down into this first major point and actually, oh one more administrative point is the outline for today’s session is in the GotoWebinar interface, so two places you can get that in the final email that I just sent you that said we’re starting now. There’s a link in there that you can download it and it’s also in the GotoWebinar interface so you can follow along. There’s a lot of content we’re going to be talking about today.



Cost & Cause of Expensive Claims


You can download the word document, take notes, write on there as we’re following along. All right, so let’s get down to business and let’s get into this first major point, which is the cost and cause of these really expensive and problematic clans. So firstly you want to talk about is the cost, and I want to put some context kind of behind this and have this really start to resonate. As far as a picture, I don’t want to do as good of a job as they can sort of drawing this. It’s probably not going to be as good as I would like it to be, but it will give us an idea of what we’re talking about. And so if you look at this picture on the board here, it’s a reverse pyramid. So we all sort of know the idea of a pyramid and at the bottom is most of the stuff, and typically at the top is at least, and we’ve seen this a lot of sort of different contexts, you see this and the hierarchy of needs and sort of a lot of different sort of contexts.



5% of Claims Account for 80% of WC Costs


We see this and I want it to present this just kind of visually so we can understand these costs and the drivers of them. We’ve heard so many times that 5% of costs are 5% of claims anyway. I account for 80% of costs, so 5% of work comp claims, I account for 80% of costs. And I’ve seen various statistics on that. That’s not maybe exactly 100% accurate. I’ve seen a lot of different places say, oh, it’s 10% that’s causing 80 to 90% of costs. I see. It’s 10 to 15% I see various references in various different places talking about this. So the numbers, exact numbers don’t exactly matter, but we need to understand the concept that its very few claims, whatever the exact percentage is, five or seven or 10 very few claims are causing the vast majority of the costs. So these are the big ones.


These are the ones we’re talking about today. Now in the middle here or sort of on the bottom or the top of this pyramid, you’re going to see about 80% which is the opposite of this. 80% of claims are only causing about 5% of costs. So the exact opposite of the top of this reverse pyramid is that the vast majority of the clams are pretty simple. Medical only claims, no big deal. Get your stitched up, get you back to work, Bada Bing, Bada boom, you’re rocking and rolling. So most of the claims we’re cranking right through the system and they’re not causing a huge amount of financial burden or much burden on the individual’s life, which is fantastic. And then in the middle here you have, you know about 15% of claims causing 15% of costs. And these are the last time the indemnity claims. No, you guys, these are the ones that you’re out of work for.


Oh, maybe a week, two weeks, something like that. Uh, you get you fixed up and you’re back to work. So visually, again, don’t get too caught up on the actual numbers themselves. But what we need to understand, particularly as we’re going into today’s session and we’re talking about sort of this context of how to address these claims and the importance of addressing these claims and the impact of addressing these claims is that we’re talking about a really big bucket of claims costs in a really small amount of actual planes themselves. And so the trick and what we’re going to be talking about today is figuring out when a claim comes along, you’ve got all these claims on your loss runs, which one of these is going to end up here in which one of them is going to end up here. And so if you’re looking at this huge number of claims, you see him coming in all the time.



Which 1 Claim Out of 14 Will Become Catastrophic?


Which one of these, you know, I’ve got six seven, I’ve got 14 sort of little lines on here, which one is going to be up here? And the trick is finding out that early, we know that late, right? A year later, two years later, we know, oh man. Of those 14 claims, that one was a doozy. That was the doozy. That’s the one that really impacts you both financially and then the life of that and very injured worker. And the trick is finding out which one out of this major group early in this process. And as I said, we talk about hindsight being 2020 if you look at that little couple of lines, which represents your claims, if you knew it was that one in the beginning, you would have done it differently. You would have managed that claim differently. But the problem is oftentimes we don’t know.


We don’t know. And we’re just going along. And a lot of times we treat these claims the same and then all of a sudden we’re surprised when a claim that should’ve been down here escalates its way all the way to up here. So I want to have that visual sort of in your head of what it is we’re talking about and then the impact if we can in fact identify these early [inaudible] what a major, major, major benefit that is for that individual and then a huge, huge impact on our costs. So one more little quick illustration that I want to go over here just to continue to resonate. Sort of the importance of this point are two more quick illustrations to continue to get it to resonate. The importance of this point as far as the costs. And what I want you to do when you leave this session is have this process which we’re going to be talking about today, a part of your process.



Early Screening Needs To Be A Part of Your WC Program


So if it’s not a part of your process, some of these screening techniques, some of this awareness it needs to be, it needs to be part of your best practices in your claims management program. So that is going to be a major takeaway. And the importance of this as far as why this is as to why you want to kind of go over some of this context here. So if you think about that concept of one 5% of claims, and again it could be five, it could be 10 but I just think about this concept. Say it was five each percentage of claims represents a big percentage of dollars. So each percentage is small amount of playing represents a big percentage of dollars. Let’s just go run through this very quick. [inaudible] this is percentage of claims and this is cost. So each percentage is representing roughly 16% of your costs, 48 64 and then 80 so each percentage, and if you think about this sort of contextually, each percentage is representing 3% is representing 48% of your costs.


And just kind of let that sink in for a second as far as what that actually means for your program. So if you say, Hey, want to reduce our costs and you’re looking at your loss, running your total loss costs, and you’re saying, hey, we’d love to get a 30% reduction in our total work comp costs, you got 33% just by a very small amount of your claims. And so again, that major, major financial impact of what that can actually do for your program. In one other exercise that I want to recommend you do because when we talk about some of this concepts, we talk about sort of this conceptually and you’re looking at the reverse pyramid and you’re looking at these numbers and you’re like, God, okay. You know, I’m, maybe I’m with you, maybe you’re not with me, but you can kind of start to think about it.



Identify 5 Most Expensive Claims


But I want you to put this in context, and I’ve done this with several employers and it’s always very illuminating when we do this little exercise. I want you to look at your loss runs and I want you to pull out your five most expensive claims. So look at your loss run. Or if you’re a client service provider, if your insurance broker, you’re advising or consultant to customers, you’re advising your customers, take a look at their loss run, you do this together, you can pull it up on excel, grab your five most expensive, and then calculate what percentage of your total costs is that for you. So what percentage of those five most expensive claims is that for you? And so when you go through this exercise and you pull out these five most expensive claims, you’re like, whoa. Like that’s a big chunk of our costs.


When you start to recognize that, and you can put this into context for yourself and again, if you’re a service provider, tremendous way to introduce some of these concepts to them to get them to buy into this and you say, Hey, I want to look at your program. We want to look at our claims handling process, etc. Let’s put some context on that and when you do that now these 1% and 64% and the reverse pyramid and all that sort of theory that we just talked about becomes very real for that individual person. It’s a great little exercise to do very impactful thing. I’ve done that with several, several employers and every time we do it it’s very illuminating and sheds a lot of light on the importance of recognizing I drew out those little lines, which one or which two of those or in this case the five that we just mentioned are going to now be that impactful. And then the importance of us going through some of the things we’re gonna be talking about today as far as these screening techniques.




Michael Stack - AmaxxAuthor 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 .



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