The #1 Question Employers Ask: Should We Pay Small Claims Out of Pocket?

One of the most common questions employers ask is:

“Should we report small claims to the carrier,
or just pay them out of pocket?”

This question has existed for decades, and it comes from a legitimate concern:

“If we report every minor injury, our frequency will increase,
and our mod will spike.”

This intuition is understandable…
but it’s no longer accurate.

Thanks to the ERA, triage systems, and deductible structures, the right strategy is clearer than it has ever been.

Here’s how to handle small claims the right way, backed entirely by the training material.

First: Yes, You SHOULD report small claims

But—and this is critical—
you must report them strategically and correctly.

Let’s make this point clear:

Employers should absolutely report small claims…
but must prevent them from becoming indemnity claims.

That is the distinction that determines whether small claims help you or hurt you.

Why employers used to hide small claims

Before the ERA, reporting small claims was dangerous because:

• Every claim triggered frequency penalties

• Medical-only and indemnity claims were treated the same

• No discount existed

• Carriers counted every penny against the mod

So employers often paid minor sprains, cuts, and strains out of pocket.

But the system has changed dramatically.

Why you SHOULD report small claims today (when done correctly)

1. ERA discount makes medical-only claims safe

As covered earlier, the ERA applies a 70% discount to medical-only claims.

This means:

• A $5,000 medical-only claim counts as $1,500

• A $10,000 claim counts as $3,000

This drastically reduces the impact on the mod.

Small claims are no longer dangerous—
unless they turn into indemnity claims.

2. Unreported claims create legal and compliance risk

If an injury becomes worse over time and wasn’t reported:

• The carrier may deny it

• The employee may litigate

• The employer may face penalties

• Reserves may spike

• Cost control becomes impossible

Small claims turn into big claims when they’re hidden.

3. Injury triage prevents unnecessary claims entirely

If you use nurse triage, a large percentage of minor incidents never become claims.

Employees get self-care instructions, not medical treatment.

This reduces both frequency and cost—without hiding injuries.

4. Net deductibles can eliminate their impact entirely

In net deductible states (15 of them), any claim under the deductible:
does not count in the mod at all.

A $1,000 deductible eliminates the value of countless small claims.

But only if you report the claims properly.

The danger of NOT reporting small claims

1. Employees “go out on their own” to doctors

When employers handle injuries internally, workers often seek treatment independently.

This triggers:

• Lack of direction

• Physician-assigned no-work days

• Lost-time claims

• Indemnity payments

• Litigation risk

Reporting early prevents escalation.

2. Unreported claims become indemnity claims

Once indemnity appears—even $1—the ERA discount is gone.

Then the employer pays:

• Higher reserves

• Higher actual losses

• Higher mod costs

• Higher premiums for three years

3. Hiding claims destroys credibility

Carrier relationships matter.
Underwriters can tell when history doesn’t match exposure.

This affects adjustments, pricing, and audits.

The RIGHT way to manage small claims

To fully protect your mod, you need a system—not guesswork.

Step 1: Use injury triage as the first point of contact

This one step eliminates countless unnecessary claims.

The triage nurse:

• Determines severity

• Directs self-care when appropriate

• Documents the event

• Protects the employer from escalation

• Keeps the claim out of indemnity status

Step 2: Report the claim promptly

Fast reporting reduces:

• Lost time

• Unnecessary medical escalation

• Miscommunication

• Litigation risk

Lag time is one of the most powerful predictors of claim outcome.

Step 3: Keep the claim strictly medical-only

This is the ERA safety zone.

That means:

• Immediate transitional duty

• Clear limitations

• Doctor communication

• Supervisor compliance

No indemnity = ERA discount.

Step 4: Use deductible strategy where available

If you’re in a net deductible state, claims under the deductible don’t hit your mod.

Brokers should analyze:

• Deductible levels

• Claim history

• Estimated future savings

• Mod impact

This combination is often financially unbeatable.

Step 5: Educate supervisors

Supervisors can ruin your ERA advantage with one wrong decision.

Train them to understand:

“One day of lost time can cost this company $20,000+ in premium.”

This changes behavior instantly.

The Bottom Line

Small claims aren’t the problem.
Mismanaged small claims are.

When handled strategically—with triage, immediate RTW, ERA protection, and proper reporting—small claims become:

• Safe

• Discounted

• Low impact

• Predictable

And sometimes they don’t become claims at all.

The employers who win in workers’ comp don’t hide claims.
They manage them—intelligently, proactively, and with systems that protect the mod, the injured worker, and the business.

Michael Stack, CEO of Amaxx LLC, is an expert in workers’ compensation cost containment systems and provides education, training, and consulting to help employers reduce their workers’ compensation costs by 20% to 50%. He is co-author of the #1 selling comprehensive training guide “Your Ultimate Guide to Mastering Workers’ Comp Costs: Reduce Costs 20% to 50%.” Stack is the creator of Injury Management Results (IMR) software and founder of Amaxx Workers’ Comp Training Center. WC Mastery Training teaching injury management best practices such as return to work, communication, claims best practices, medical management, and working with vendors. IMR software simplifies the implementation of these best practices for employers and ties results to a Critical Metrics Dashboard.

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

Injury Management Results (IMR) Software: https://imrsoftware.com/

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