Members of the claim management team face many challenges when it comes to dealing with injured employees seeking entitlement to permanent total disability (PTD) benefits.  Exposure for these types of claims is high.  It is important to be proactive on these claims in order to reduce costs in a workers’ compensation program.

The Aging Workforce and Workers’ Compensation

Notwithstanding the recent economic upturn and increasing wages, Americans continue to suffer from the effects of the Great Recession.  Proof of this can be found labor market statistics from the U.S. Department of Labor.  According to a recent survey, the “greying” of the workforce continues:

• In 1994, 11.9% of the U.S. labor marker was 55 years old and older.

• In 2014, this age group comprised 21.7%.

• By 2024, people 55 years old and older will make up 24.8% of the labor market.

Older people miss work for longer periods of time compared to their younger counterparts.  On average, someone over the age of 55 will miss up to two weeks following an injury.  Those between the ages 20-24 will only miss four days.

Permanently and Totally Disabled Defined

According to Prof. Arthur Larson, someone is totally disabled when the “claimant has been able to earn occasional wages or perform certain kinds of gainful work does not necessarily rule out a finding of total disability or require that it be reduced to partial. The task is to phrase a rule delimitating the amount and character of work a man can be able to do without forfeiting his total disability status.”

Reduced into a general rule, courts in many jurisdictions will review the following factors when determining if someone qualifies for permanent total disability benefits:

• Job Search: Employee’s in most jurisdictions are required to conduct a reasonable and diligent job search.  Examples of what is “reasonable and diligent” includes time spent looking for work, the location where one seeks employment, and the overall effort spent.

• Cooperation with Vocational Rehabilitation Assistance: In many states, employees have access to a Qualified Rehabilitation Consultant (QRC) to assist in job search efforts.  A QRC performs a variety of roles when it comes to assisting an injured employee re-enter the workforce.

• Earning Capacity: This factor takes into consideration the employee’s ability to work and earn a wage comparable to what they were making prior to the injury.  It is important to note an employee working in a limited capacity can be successful in their efforts to obtain permanent total disability benefits.

• Refusal of Suitable Job Offer: The employee’s willingness to accept a job offer often comes down to concerns of whether they are able to perform a job offered by the employer.  When reviewing this factor, it is important to evaluate medical and vocational evidence to determine if the work offered by the employer is similar to what they were performing at the time of injury, and uses their training and experience in a manner that would advance the interests of all parties.

Other Defenses to Consider in Defending PTD Claims

There are other issues to consider when defending PTD claims.

• Withdrawal from Labor Market: Employees seeking workers’ compensation benefits are required to stay active in the labor market until they demonstrate an inability to secure suitable gainful employment.  A withdrawal from the labor market can include a move to another geographic location that has fewer job opportunities, or an area where jobs pay lower wages.  It may be necessary to secure a vocational expert to successfully employ this defense.

• Retirement Defense: Most states allow for the termination of PTD benefits when an employee retires.  This is often not a clear-cut distinction, and requires investigation.  This can include statements made by the employee as to how long they intended to work prior to their injury and application for Social Security retirement benefits, and receiving payments from a pension.

Conclusions

The aging workforce is driving members of the claim management team to be proactive when it comes to claims for permanent total disability (PTD) benefits.  This requires a complete investigation and determination as to the employee’s job search efforts, cooperation with their QRC, earning capacity, and refusal of a job offer.  Failure to take the necessary steps can add costs to a claim and reduce a program’s effectiveness.

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 the founder & lead trainer of Amaxx Workers’ Comp Training Center.

Contact: mstack@reduceyourworkerscomp.com.

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

©2019 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 and insurers understand that workers’ comp leakage costs money.  The overpayment of medical cost, indemnity benefits and claim expenses is a waste of money and weakens the overall financial stability of the employer or the insurer.  What to do about workers’ comp leakage is a frequent topic of discussion.

When there is no doubt that a payment should not have been made (example:  a non-recovered duplicate payment), it is referred to as hard leakage.  When a payment is made that is questionable and is subjective (example: a higher than normal settlement), it is referred to as soft leakage.

Employers and insurers frequently attempt to mitigate both hard and soft workers’ comp leakage by providing additional training to the claims staff. Additional training definitely has benefits and will reduce leakage, but additional training normally addresses only the issues the work comp supervisor or claims manager has identified.  This approach will often continue to overlook different types of leakage that is not on the company’s radar.

Independent Claims Auditors Bring Perspective

To identify leakage that is being overlooked, companies have been turning to independent claims auditors who bring in an outside perspective when reviewing claim files.  Senior management often recognizes adjusters, supervisors and even claims managers have a built-in conflict of interest in identifying every source of leakage – the more leakage they identify, the lower their level of competency appears to be.

The independent claims auditor can be completely objective, as the independent claims auditor does not have to worry about the impression the results of a workers’ comp leakage audit will create. The outside auditor is looking for the financial mistakes (leakage) in an effort to assist the insurer or self-insured employer to lower its overall claims costs without the worry that senior management may be critical of the adjuster’s/ supervisor’s/claims manager’s performance.

Hard Workers’ Comp Leakage

The independent claims auditor will identify types of hard workers’ comp leakage including:

• Payment of non-compensable claims
• Payment of claims occurring outside of the insurance policy period
• Failure to utilize the medical bill fee schedule for all medical bills covered by the schedule
• Payment of the same medical bill, including overlapping medical bills, more than once
• Incorrect calculation of the employee’s average weekly wage
• Incorrect calculation of the employee’s indemnity benefit
• Incorrect calculation of the number of days or weeks of indemnity benefits owed
• Incorrect handling of the waiting period and the retroactive period
• Erroneous payment of indemnity benefits after the employee has return to work
• Failure to properly calculate the impairment rating value
• Failure to utilize the pharmacy benefit management program
• Failure to apply offsets including unemployment benefits, social security benefits, over governmental programs
• Failure to identify and pursue subrogation
• Failure to obtain Second Injury Fund recoveries
• Failure to obtain reinsurance company recoveries
• Failure to arrange for modified duty work when approved by the medical provider
• Payment of temporary total disability benefits when temporary partial disability benefits are owed
• Overpayment of medical mileage
• Over reserving of the long-term claim resulting in a higher than appropriate experience modification factor with Underwriting

Soft Workers’ Comp Leakage:

The independent claims auditor will identify possible soft workers’ comp leakage including:

• Failure to thoroughly investigate the claim prior to acceptance of compensability
• Failure to complete the Insurance Services Office inquiry
• Failure to properly evaluate future medical benefits when settling a claim
• Poor settlement negotiations
• Failure to properly manage defense counsel
• Failure to properly utilize medical case management, either overutilization or underutilization
• Failure to utilize medical triage
• Failure to settle dispute claims at the optimum cost point

Controlling Workers’ Comp Leakage Can Mean Large Savings

Controlling leakage is frequently the difference between an insurer or self-insured employer making or losing money.  While no claims operation will eliminate all leakage, a five percent (5%) leakage factor on a small self-insured program with $20 million in paid claims each year is an extra $1 million dollars spent, and 3% leakage on a $100 million a year paid out by an insurer is an extra $3 million dollars spent.

The above lists of how leakage occurs in workers’ compensation are not complete.  There are various other ways leakage can occur.  For a workers’ comp leakage audit to provide the maximum benefit to the insurer or self-insured employer, an auditor with a high level of expertise in workers’ compensation is needed.

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/

©2019 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.

Every self-insured employer who has been managing their own workers’ compensation claims program for 3 years or more have “old dog” claims, or for the politically correct folks, legacy claims. These claims include the injured employees who take longer than normal to reach the level of maximum medical improvement (MMI), the injured employees who have reached MMI but need on-going medical maintenance medical care, and the employees who are permanently totally disabled.

Claims Can Stay Open For Many Reasons

If you ask the third party administrator (TPA) adjuster why any particular claim is still open, the adjuster will recite the employee’s medical condition and possibly the industrial commission ruling on the particular claim. While the medical condition and/or the industrial commission ruling are factors in why the claim is still open, there are often many other factors and reasons that the adjuster does not recite (and frequently does not recognize). Some of the reasons that a work comp claim becomes an old dog claim include:

• Inadequate initial investigation into the nature and extent of the injury
• Inadequate claims training of the work comp adjusters
• Inadequate medical management throughout the claim
• A change of adjusters during the life of the claim resulting in a loss of continuity in the claim handling
• The original adjuster, prior adjuster(s) and/or the current adjuster have had inadequate training on how to deal with complicated claims
• The adjuster handling the claim has too many other claims assigned, causing the adjuster to miss opportunities when they occur to settle the claim
• The TPA puts too much focus on closing claims, so the adjusters give priority to the smaller, easier to resolve claims
• Other priorities keeps the adjuster from focusing on the legacy old dog claim
• The TPA does not have a ‘home office examiner’ reviewing and providing guidance to the adjuster on the large or older claims
• The claim is still being handled by a prior TPA who no longer values your business as the prior TPA is not receiving any new assignments

Legacy “Old Dog” Claims Can Be a Financial Burden

When legacy (old dog) claims drag on, they become a financial burden to the self-insured employer. As time goes by, the claims become a bigger and bigger drain on the financial resources of the company. If nothing is done to resolve the claim, it becomes a permanent drain on the company.

To move these claims forward, while mitigating the ultimate claim cost, an in-depth review (file quality audit) of each claim is needed. While the audit can be done internally, most self-insured employers do not have the resources needed to do the audit. Plus, a fresh set of eyes reviewing the claim will often pick up points previously missed. An outside, highly-experienced, independent claims auditor can review each legacy file and craft a detailed action plan with completion dates for each specific file.

Independent Claim File Audit Can Uncover Solutions

The independent auditor’s detailed action plan for each file should provide:

• A review of the reserves to determine the adequacy of the current reserves and make reserve change recommendations to the ultimate value where appropriate
• If the employee is not currently working, a recommended return to work process, whether it is with your company, or vocational training to work somewhere else
• An analysis of the current medical situation and what future medical steps are necessary
• A review of the litigation plan if the case is currently being litigated or appears headed into litigation
• Confirmation or recommendations on compliance with state filing requirements
• Recommendations on whether or not to attempt an all-inclusive settlement of the claim
• Recommendations on whether or not to use a structured settlement of the claim
• Recommendations on possible financial offsets (subrogation, social security disability, state disability, second injury fund or subsequent injury fund, recovery from the excess carrier, etc.)

While the independent, experienced claims auditor cannot undo the damage already done due to prior claim handling mistakes, the independent audit can assist you in mitigating future financial damage from the legacy old dog claims.

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/

©2019 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.