Self-insured employers can have a good safety program, an established return-to-work program and knowledgeable nurse case managers, and still pay way too much on their workers’ compensation claims.  Ineffective claims management can wipe out most or all of the cost savings achieved through your efforts to control cost.  Whether you have your own claims office, or have a third party administrator (TPA) handling your workers’ compensation claims, poor claims handling will always result in higher claims costs.

Need to Know If Following Best Practices

The challenge for the risk manager is to know whether or not the work comp claims are being handled properly.  The risk manager can personally be involved in each claim for compliance with the Best Practices for Workers’ Compensation claims guidelines, but that defeats the purpose of having company claims adjusters or a TPA if the risk manager has to direct all the work on the claims.

An alternative approach is to have the claims supervisor or claims manager review each claim file for proper claims handling, but that often results in minimal improvement.  The claims supervisor or claims manager has a vested interest in not pointing out what could be construed as their failure to properly manage the claim adjusters.

Determine If You Need An Independent Claims Audit

The best solution to determine the quality of the claims handling is to bring in an independent claims auditor.  The independent claims auditor has no conflict of interest when reviewing the claim files and can provide an unbiased evaluation of the quality of your claims handling.  Here is a checklist to determine if you need a claims quality audit.

[  ]     You have noticed deviations from your Best Practices guidelines

[  ]     You have noticed gaps in the investigation of claims

[  ]     Information that should have been known during the initial investigation of the claim turns up later in the life of the claim

[  ]     The adjusters are not staying current on their diary system

[  ]     You have received an inquiry from the Industrial Commission, Work Comp Board, or Insurance Commissioner’s office

[  ]     You have received complaint calls from employees or from the employees’ supervisors or managers

[  ]     Your claim cost is increasing faster than the rate of inflation

[  ]     The average age of your claims is increasing

[  ]     Your claims are open longer on average than your industry’ average

[  ]     Your loss run contains errors on loss location, injury description, type of claims

[  ]     Your claim reserves are being stair-stepped (many reserve changes on one file)

[  ]     Your actuary’s recommended reserves differ significantly from the reserve on the files

[  ]     You have noticed significant reserve increases right before claim settlement

[  ]     You have noticed missed subrogation opportunities

[  ]     You have noticed experienced adjusters being replaced with adjuster trainees or significant personnel turnover in the claims office

[  ]     The adjusters have high caseloads

A Claim Audit Is Recommended If You Checked One or More Above

If you checked one of the above categories you should consider an independent claim file audit.  A claim quality audit is recommended if you have checked two or more of the above categories.

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.

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

©2018 Amaxx LLC. All rights reserved under International Copyright Law.

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

Self-insured employers, insurers, third party administrators, and government entities all use workers’ compensation claim quality audits to measure the performance of the claim adjusters, supervisors, and over-all claim staff. Common uses of claim file audits include measuring compliance with Best Practices, verifying the accuracy of reserves, identifying leakage, preventing fraud, and improving subrogation recoveries. As self-auditing often results in the inability to see the forest due to all the trees, claims management frequently turns to an outside independent claim file auditor to ensure unbiased and objective opinions in the claim audit.

Both Closed and Open Claims Files Should be Audited

Critics of claim file audits often complain that audits are retrospective, as the Best Practices have already been missed or the leakage has already occurred. The critics are correct if only closed files are being reviewed. However, when open claim files are audited, and the audit results are acted on promptly, substantial savings can be had.

When open workers’ compensation claims are reviewed, issues that have been missed can often can still be corrected. This is true because once the claim is paid and closed, it is too late to investigate compensability, arrange for an earlier return to work, provide proper medical management, adjust incorrect reserves or negotiate a better settlement.

A complete claim file audit not only provides a report on the correct or incorrectness of individual files, but also includes an aggregate report of the various claim handling procedures that have been reviewed. The most common way of tabulating or scoring an audit category is based on 100%. Usually, a score of 90% or higher is considered acceptable, and a score of 95% or higher is considered good. Hence, a score of 96% in the category of medical management would be good, but a score of 76% would indicate a lack of quality in medical management and the need for the adjuster to improve in this area.

When the claim file audit is limited to open files, the adjuster/supervisor/claims manager has the opportunity to correct files where an important part of proper claims handling has been missed. In the above theoretical example where the claims office scored 76% in the medical management category, the aspects of the medical management that have been missed could be completed. This would positively impact the overall medical cost of the claim and possibly also reducing the indemnity portion of the claim by getting the injured employee back to work faster.

Management Benefits By Identifying Weak Spots In Claims Handling

By identifying both individual files where claim handling errors occurred and by identifying claim handling categories where either an adjuster is weak or the entire claims office is weak, management benefits in several ways, including:

• Management can focus training resources on specific issues, whether with a single claims adjuster or the entire claims office
• Data provided can be used by claims management to support the need for procedural changes, additional personnel, or personnel restructuring
• Reserving data can be used to verify the accuracy of, or the need to adjust coverage underwriting

By having an independent claim file audit, the self-insured employer, insurer, third-party administrator or government entity can use the information gathered to improve the overall quality of the claims handling, and in doing so, significantly impact the cost of workers’ compensation claims. For more information on how an independent claim file audit can improve claim quality and reduce the cost of claims, please contact us.

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.

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

©2018 Amaxx LLC. All rights reserved under International Copyright Law.

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

A claims auditor was brought in because a self-insured employer was seeing an acceleration of the average workers’ compensation claim cost. The employer was dismayed to know that, in comparison with other employers in their industry, they were paying nearly double the cost on each workers comp claim. The safety consultant had already reviewed their safety program and had made some minor tweaks, but nothing that would have any significant impact on their claims or their claim cost.

By the end of the claims audit’s first day, the claims auditor knew what was driving the cost of the workers’ comp claims sky high. There was no investigation by the adjusters of any of the claims when they were reported to the third party administrator (TPA). In each claim, the first file note was, “Called employer; they do not question the claim.” That was it. There was no other investigation on the claim.

A proper claims investigation entails various aspects, far more than confirming with the employer that the claim was reported! The claims investigation has to be much more than asking the employer if the employer is suspicious of the claim.

Start Investigation Based on Facts & Circumstances Reported by Employer

Each claim is unique. Sure, there will be a lot of similarities with previous claim files, but the facts and circumstances surrounding the injury will vary. The investigation should be started based on the facts and circumstances reported by the employer. It is the claims adjuster’s responsibility to review all the information about the claim to both weed out the claims that should not be paid and to control and manage the claims that are owed.

It is a commonly accepted premise in the insurance industry that good claims handling leads to good results and poor claims handling leads to poor results. This applies to both the claim of questionable authenticity and the valid claim. If a valid claim has poor claims handling, the claim cost will be higher. The first step in the process of having a successful claims management program is a good investigation of each claim.

Start Investigation Immediately

Immediately upon assignment of the new workers’ comp claim the adjuster should begin the investigation. Immediately (meaning, in the first few minutes) is not always possible. But the longer the adjuster delays to start an investigation, the poorer the results. If the TPA’s published best practices state same-day contact – that is good. If best practices state 24-hour contact – that is acceptable. If best practices have no time limit for making contact with the employee, employer and medical provider, or if the time limit is longer than 24 hours, the TPA is putting their own interest and what is easy and best for themselves ahead of what is best for the employer.

The first investigation step is to contact the employer to review all known information about the claim. The mistake the adjusters made in the claims audit noted above was contacting the wrong person at the employer. They were discussing the claim with the workers’ comp coordinator for the employer. The person(s) the adjusters should have been contacting was the injured employee’s direct supervisor and co-workers who saw the accident. If no one saw the accident, then the adjuster should contact the first person the employee advised of the accident. The reason for this is to establish exactly what happened, the nature of the injury, and the extent of the injury.

It is better for the adjuster to discuss the accident with the employer first, but that is not always possible. If the adjuster is unable to reach the employer, the adjuster should still make immediate contact with the employee. The quality of the adjuster’s contact with the employee is key. The contact needs to be thorough with the adjuster learning as much as can be learned about the claimant and the accident. If there is any question about the validity of the accident, or there is the possibility of subrogation, or the injury is severe, the initial interview should be in the form of a recorded statement from the employee.

19 Points to Cover in a Proper Workers’ Comp Claim Investigation:

1. The details/facts of how the accident happened.
2. The names of aall co-workerswho witnessed the accident.
3. The nature of the employee’s disability.
4. The extent of the injury and all body parts that were injured.
5. Has the employee previously had an injury to the body part(s) involved in this accident?
6. A review of all prior injuries – work, vehicular, recreational, etc.
7. Verification of all information on the employer’s first report of injury.
8. Confirmation of all information to support subrogation.
9. A description of the employee’s job duties.
10. The employee’s job title.
11. The equipment or tools involved in the work at the time of the injury.
12. The experience level of the employee – how long on the job, and prior experience in the same type of work with other employers.
13. Confirmation of lost time.
14. The availability of modified duty work.
15. The identification of all medical providers for the injury.
16. The type of medical care being provided.
17. The nature of any pre-existing medical conditions – obesity, diabetes, etc.
18. Any concurrent treatment with pre-existing medical conditions.
19. The identification of pre-injury medical providers if pertinent to the claim.

At the conclusion of the interview with the employee, the adjuster should discuss the indemnity benefits that will be provided, the employer’s desire to get the employee back to work when the employee is medically capable of doing so, and the need for the adjuster and the employee to stay in contact. The adjuster should arrange for the employee to call the adjuster after each medical appointment to provide an update on the status of the medical treatment and the employee’s work status.

Assess Injured Workers’ Attitude

Contact with the employee should give the adjuster insight into the claimant’s attitude toward:

1. The employer.
2. The medical treatment.
3. The early return to work.
4. The benefits provided by workers comp.

The relationship between the adjuster and the employee should not be an adversarial one, but one of mutual cooperation where the adjuster does whatever can be done to facilitate the employee’s recovery and return to work.

Timely Investigation Allows Adjuster to Better Manage Claim

A timely initial investigation allows the adjuster to better manage the claim. By establishing contact with the employee and discussing thoroughly the aspects of the claim, the adjuster significantly reduces the likelihood of attorney involvement, the treatment of unrelated medical conditions, the inclination of the employee to take extra time off work, and the likelihood of co-workers thinking it is easy to “take a vacation on comp.”

A proper investigation allows the adjuster to manage the many facets of the claim as it develops. It allows the adjuster to make an early and proper determination of compensability and to pay benefits quickly and correctly. It facilitates the timely involvement of medical management. And, the proper investigation leads to much lower claims cost.

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the co-author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:.

Contact: RShafer@ReduceYourWorkersComp.com.

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

©2018 Amaxx LLC. All rights reserved under International Copyright Law.

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

While every workers’ compensation claim is unique, every claim contains certain key events and documents. The best practices established either by the insurer or the third party administrator creates a certain amount of uniformity in the claims.

When you review the workers’ comp claims of your employees, you will see established criteria in the handling of the claims. Each claim will contain information on:

• Coverage
• Contacts
• Investigation
• File Documents
• Evaluation and Settlement

Coverage: 

The very first step the adjuster takes when handling a claim is the verification that there is coverage. This includes checking the policy number to be sure it is accurate; the policy dates to be sure the injury occurred during the time frame covered by the policy; the state(s) covered by the policy; and, any endorsements to the policy or any exclusions of coverage. If any aspect of the coverage verification is missing, the wise adjuster stops any further activity on the file until there is proof insurance covers the claim.

Contacts: 

Once the workers’ comp adjuster verifies there is insurance coverage in effect for the named insured, on the date of the injury, and in a location covered by the policy, the adjuster contacts all involved parties. Whether the adjuster contacts the injured employee first or the employer first depends on the nature and extent of the injury and the time frame of known events. The adjuster also contacts the medical provider’s office to obtain the initial medical treatment information, to provide information to the medical provider on billing for their services, and to provide the medical provider with information on the return to work policy of the employer. Any other parties who may impact the claim are also contacted; for example — witnesses on questionable or severe claims.

Investigation: 

Contact with all parties involved is the start of the claim investigation, but a proper investigation contains many other actions impacting the future outcome of the claim. Some of the investigation steps include:

• A comparison of the details of the accident as provided by the employer, the employee, the medical provider, and any witnesses. Any deviation in the information obtained from the various parties needs to be analyzed by the adjuster.

• The filing of the Insurance Service Office inquiry to determine if the employee has made prior insurance claims, and if so, do they impact the present workers comp claim. For instance, the employee, who suffered a lower back strained in your claim, also had a lower back injury workers comp claim with a previous employer.

• A determination if there is a third party responsible for the employee’s injury, and if so, the documentation needed to pursue a subrogation claim.

• An analysis of the nature and extent of the employee’s injury, the medical treatment plan, and the prognosis for the employee’s recovery.

• An analysis of the employee’s job duties, equipment used, the return to work restrictions from the medical provider and the modified duty information obtained from the employer to determine if a modified duty job is an option.

• A determination as to the future course of action needed on the file, also known as an Action Plan.

File Documents: 

Every claim file has basic claim documents to support the claim and the activity taken on the claim. Depending on the extent of the injury, the file may have additional documentation that might not be found in a simple injury claim. The documents you may see in the claim file include:

• The Employer’s First Report of Injury (FROI).

• The recorded statement summary of the employee and possibly the recorded statement summary of the employee’s supervisor and/or witnesses.

• The required state forms filed with the governmental office enforcing the workers’ compensation statutes of the state.

• The wage statement is showing the employee’s earnings during the required calculation period.

• The Insurance Service Office report.

• The medical records.

• Vocational and/or rehabilitation reports.

• Subrogation documentation.

• Correspondence to and from defense counsel, correspondence to and from the employee’s attorney, and correspondence between defense counsel and the employee’s attorney.

• Reserve worksheets used to calculate the cost of the claim.

• File notes (a log of activities undertaken) making a record of every telephone call, piece of mail, e-mail, fax or other communication on the claim.

Evaluation and Settlement:

When the claim file has progressed to the point where the adjuster can start the evaluation process (usually when the employee has reached maximum medical improvement); there will either be a reserve worksheet or an evaluation worksheet establishing the financial exposure of the claim. The evaluation of the claim includes the compensability, the disability rating, the jurisdictional law, and any legal questions that need to be resolved. The file notes should describe the adjuster’s settlement discussions when they have taken place.

An essential part of risk management is to know as much as possible about the exposures your company faces. We recommend obtaining electronic access (on a read-only basis) to the insurer’s or third party administrator’s claim file. By knowing what is in your claim file, you can contribute any additional information benefiting the adjuster in bringing your employee’s workers’ comp claim to a satisfactory conclusion.

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.

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

©2018 Amaxx LLC. All rights reserved under International Copyright Law.

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