The workers’ compensation claim file should have Seven Sections of documentation that relates to the claim in a properly organized manner.

1- Claim Investigation:

The claim investigation section of the file should contain the adjusters claim file notes on everything that has occurred during the entire course of the claim. This includes a summary of each telephone call and a summary of all medical reports, state forms, letters, attorney reports, etc.

The claim investigation section should also contain either the transcript of the employees recorded statement or the claim file notes should contain a detailed review of the employees recorded statement. If a recorded statement was not obtained, the details of the employee’s initial interview should be summarized in the claim file notes. The claim investigation section should also include the employer’s supervisors recorded statement or a detailed review of the supervisor’s version of the accident.

A copy of the Employers First Report of Injury should be included in the claim investigation section for a comparison of the claimants version of the accident with the insured’s version of the accident.

When there is the potential for subrogation, for example – injuries involving an automobile accident or injuries involving a machine malfunction, documentation to support the subrogation should be included in the file investigation. This can include anything from a police report to a mechanical engineers evaluation of the machine that malfunctioned.

If there is a question of compensability or subrogation, the claim investigation section of the claim file should also include the recorded statement of witnesses or others who have detailed knowledge of the accident or occurrence.

If the claim lingers and there is a question of malingering by the employee, the claim investigation section will also contain the surveillance reports on the employee.

2- Medical Documentation:

The medical documentation section of the claim file should be divided into two categories, medical bills, and medical reports. Each of these two areas should be further divided into medical providers, with all medical bills by each medical provider grouped by date of service, and all medical reports by each medical provider grouped by the date of service.

Miscellaneous medical documentation – ambulance bills, prescriptions, durable medical equipment, etc., should be grouped by the category and organized chronologically.

3- Indemnity Documentation:

The employer’s wage statement reflecting the total compensation (over the state determined pre-injury period for benefits calculations) should be clearly identified in the claim file. Attached to the wage statement should be the calculations used to determine the temporary total disability benefit. If the disability benefit rate for permanent partial disability or permanent total disability is different from the disability rate for temporary total disability, the calculations used to determine the permanent partial disability or the permanent total disability rate should be shown.

Any documentation submitted by the employee to claim a higher rate of indemnity benefits should also be included in this section. This could include W-2 forms, copies of previous bonus checks or commission checks, etc.

4- State Forms:

A copy of every form submitted to the state by the employer, the employee or the insurance company should be included in this section of the claim file. State forms can be organized either numerically by the state form number, alphabetically by the state form name or chronologically by the date the state form was submitted to the workers’ compensation commission/bureau/agency/department, etc.

5- Hearings & Legal:

If any party requests a hearing, trial or other legal determination of benefits, this section would contain the documentation of the legal proceeding. This can include petitions for benefits, request for hearings, discovery documents and transcripts of depositions or transcripts of hearings.

This section of the claim file should also contain all correspondence between the work comp adjuster and the employee’s attorney, all correspondence between the work comp adjuster and the defense attorney, and all correspondence between the employee’s attorney and the defense attorney. If outside experts have been brought into the claim, the correspondence between the outside experts and any other party would be included in this section of the claim file.

6- Medical Management:

The medical management section of the claim file should include all correspondence and communications between the triage nurse and any other party. It should all obtain all reports, correspondence and communications between a nurse case manager assigned to assist the employee and any other party.

7- Vocational Rehabilitation:

The vocational rehabilitation section of the claim file will contain all the reports and activities of the vocational counselor assigned to the employee. This can include a broad range of information from vocational testing results, to available jobs in the community, to vocational retraining of the employee.

Summary:

The properly organized workers’ compensation claim file will prevent mistakes in the claim handling. It will also reduce the amount of time the adjuster works on the claim file by eliminating time spent searching for specific information. When the claim file is complete and well organized, everyone – employee, employer and insurer – benefit by having all aspects of the claim handled and concluded timely and properly.

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.

MYTH: The best way to reduce workers’ compensation costs is to change insurance companies or TPAs.

REALITY: Wrong! The best way to reduce workers compensation costs is to build a better relationship with your current claims administrator. The major cause of discontent between carriers and the insureds is lack of communication which causes a perception that something is being done improperly.

For example, in several situations a company believed nurse case management was too expensive; however, upon audit by our medical advisor, the nurse case management service should be used MORE, HOWEVER should be brought in earlier.

It wasn’t effective when it was used (thus seemed expensive and wasteful) because it was used too late in the process.

3 Ideas to Build a Better TPA Relationship

• Start to build a better relationship by becoming more informed about the services your claims administrator offers. Hold a Vendor Day, and invite your TPA in with every one of their services – leave none out. Ask for samples of reports and deliverables so you can understand the product and will know when to request services. Have them bring brochures prior to Vendor Day, and read the brochures so you can ask knowledgeable questions during about the services.

• Visit one or two claims offices, sit chair-side and observe the process. Learn the categories of desks at your carrier, for example, are there 4 levels of adjusters or 5? Do adjusters have backup and clerical support to get medical files or close files? Sit at the intake desk, then join the lost time and medical adjusters for a few minutes at their desks. Ask to see what happens to medical bills when they enter the system until the time they are paid and filed. This will give you a better understanding of how you can interact more effectively, what information adjusters need from you and what information you can provide about your workplace and employees.

• Invite your adjusters to visit your workplace, so they know what your company does, the types of jobs and skills required of the employees. They can then visualize exactly how an injury occurred easier than if they’d never been to your work place. They can see the possible transitional duty tasks, and perhaps suggest a few more. They can even have coffee in the lunch room and be introduced to a few employees who come in. Make them feel like part of the team.

There are times when switching TPAs is the right decision.  However, try working out the problems FIRST, or you may end up with the same grass in a different pasture.

Author Michael Stack, Principal, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is 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/

©2017 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.

If your company is a large organization with many locations and numerous open claims at each location, you may need to consider having several return-to-work (RTW) coordinators. Have one RTW coordinator for each region. For example, one large company has East, Mid-West and Western Region coordinators. The number of coordinators depends on your claims volume, making sure each coordinator has enough claims to justify a full-time position while ensuring they are not overloaded and unable to follow-up on each claim.

Coordinators do not do the work of adjusters, but facilitate transitional duty and guide location management.

Understand What Your Third-party Administrator (TPA) Provides

Start your program with a Vendor Day.  Look at the capabilities and services provided by your claims administrator; regardless of whether it is an insurance company or a TPA, you need to know all of their capabilities in detail.

Have the claims administrator describe each of their services – a formal presentation; have your TPA come to your office to introduce’ and explain each service. Ask them to bring examples of each report. For instance, ask to see a sample nurse case management report, or an investigators report. Make sure you clearly state your expectations. You want the practice leader or a person who can explain everything about the services to attend.

Include all services: medical cost containment, medical management, investigative, recovery, and risk management information systems.

• To prepare for Vendor Day, gather all literature from the claims administrator — have all sales brochures sent to you advance — and review the response to request for proposal (RFP) if the claims administrator was selected through the RFP Process.

• Familiarize yourself with each available service, learn its name and find out how much it costs. For example, is a nurse case manager a telephonic nurse case manager or a field-based case manager who will attend medical visits with the injured employees?

• Ask lots of questions.Is the case manager’ an RN, an LPN, or a non-licensed person with internal medical training? Before you can determine how effectively a service is delivered, learn the specifics of each service.

Companies often start the workers’ compensation correction process by selecting a new TPA without even knowing they are not using all of the services of their current TPA. For example, a major carrier has nurses who will go to each unit to help identify transitional duty jobs, yet their client was unaware of this service and its benefits. They didn’t know what they didn’t know.

Author Michael Stack, Principal, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is 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/

©2017 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.

Employers often wonder if they are getting quality claim handling on their workers’ compensation claims.  At the same time, the third party administrators (TPA) providing claim services to employers often struggle with producing a quality product due to the facts and circumstances of each claim being different.

Top-Tier TPAs Evaluate Every File for Claim Quality

Each TPA will have a set of Best Practices stating what is expected on every claim.  A top-tier TPA will not only have the written set of Best Practices, they will evaluate the adjuster’s claim quality using both performance measurements and diagnostic indicators to evaluate the adjuster’s performance.

As every activity of the adjuster on the claim file is recorded in the electronic notes of the computer file, it is simply a matter of data mining to determine if the adjuster is complying with the established Best Practices.  When the workers’ compensation adjuster enters a new file note, the date and time is automatically recorded.  Each file note has two drop-down selection codes, one for type of activity being completed and one for the type of person contacted – employee, employer, medical provider, employee’s attorney, defense attorney, etc.  After the note is coded, the actual details of what was accomplished are entered.  For example: “Requested Dr. Smith’s office to email us the office visit notes.”

With all this data, the grading and evaluating of the adjuster’s performance becomes highly measurable.  To prevent ‘gaming’ of the system, the TPA will have internal auditors reviewing select files, or with some top-tier TPAs all files, to insure accuracy of what is recorded in the system.  For example, if the adjuster coded the file note ‘contact – employee’, but the details of the file note reflect only left a voice mail, the proper coding should have been ‘attempted contact – employee’, and the file note coding can be corrected.

Areas of Evaluation

The areas of quality evaluated and graded through performance measurement include:

• Initial employee contact within 24 hours

• Initial employer contact within 24 hours

• Initial medical provider contact within 24 hours

• Initial reserve within 72 hours

• Reserve review with 30 days

• Initial report to client within 14 days

• Status reports to client every 30 days, or as previously indicated in a prior report

The areas of quality evaluated and graded through diagnostic indicators include:

• File on diary

• Proper completion of claim progress notes

• Reserve worksheet to support reserve changes

• Timely ISO filing

• Timely supplemental ISO filings

• Payments made on closed files

With all the data generated, the computer program calculates the adjuster’s performance.  The computer program can be set to select only indemnity claims or it can include all claims.  The computer identifies all claims reported within the reporting month (normally a calendar month, but data can also be compiled on any 30 day period).  For example:  The computer identifies all indemnity claims assigned to Adjuster Jones during July, it reviews all data for the claims that had initial employee contact within 24 hour, and calculates the percentage of claims where the employee was contacted within 24 hours of the initial report of the claim.

The computer program completes the calculation for each of the performance measurements and diagnostic indicators and assigns a numerical percentage score to each category.  The computer combines all the categories into a numerical score for each adjuster to provide the TPA management a quality score for each adjuster.

Claim Quality Scores are Invaluable Tool for TPA

The quality scores compiled by the TPA are an invaluable tool that can be used for several different purposes. The score results can be used as:

• A component of the adjuster’s semi-annual or annual performance review

• A promotional tool to sell the TPA services

• A motivational tool to encourage the adjusters to perform at their maximum

• A way to encourage friendly, internal competition in each office to see which adjuster can provide the highest level of service

In addition to building adjuster’s pride by scoring well, some TPAs offer bonuses for top scores or a bonus to everyone who exceeds a predetermined mark.  For example – $100 monthly bonus for a score of 95% or higher, or a $500 annual bonus for averaging 97% or higher for the entire year.  Other prizes can be offered for the most improvement, the highest overall performance, etc.

Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is 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 of COMPClub, an exclusive member training program on workers compensation cost containment best practices. Through these platforms he is in the trenches on a working together with clients to implement and define best practices, which allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment. Contact: mstack@reduceyourworkerscomp.com.

©2016 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.

Catastrophic injury claims make up less than 1% of all workers compensation claims, but different studies show they entail approximately 20% of all workers comp costs.  For the small employer, one catastrophic injury claim can distort the severity factor in the workers comp premium calculations and have a major impact on the workers compensation premiums for years into the future.

Catastrophic Injuries Significantly Alter Employee’s Life

Catastrophic injuries are injuries that disable the employee to the extent the employee can never return to work and significantly alters the employee’s life in general. Common examples of catastrophic injuries are:

• Brain/brain stem injuries.
• Severe burns over 50 % or more of the body.
• Spinal cord injuries.
• Multiple amputations.
• Multiple trauma.
• Total vision loss.
• Occupational lung diseases.

The eventual cost of a catastrophic injury is very difficult to establish early in the life of the claim. Even the experienced adjuster does not have a crystal ball to determine if the overall cost of the claim is going to be $500,000 or $5 million when establishing the initial reserves on the claim. With catastrophic claims, as additional medical and rehabilitation information becomes available, the reserves are often adjusted by large amounts (6 figures or more) several years into the claim.

To establish the value of the catastrophic injury claim, there are various factors the adjuster considers. While it is the adjuster’s responsibility to establish the reserve, the smart risk manager does not leave it all up to the adjuster. It behooves the employer to review the factors that go into reserving to be sure the adjuster is setting the proper reserve and not taking the easy way out by reserving a nice round number like $1 million.

The factors that go into establishing the value of the catastrophic injury claims can be divided into the three areas: indemnity, medical, and claim related expenses. Look for vendors specializing in Life Care Planning.

Lifetime cost of the indemnity includes:

• The employee’s average weekly wage and weekly indemnity benefit.
• The time span of the indemnity; does it last for a set number of weeks, (500 weeks), as it does in about half of the states, or does it last a lifetime, or to a set cut off point in the retirement years?
• The employee’s age and projected life span on the actuarial tables.
• Does the indemnity rate remain the same for permanent total disability as for temporary total disability, or does the compensation rate change?
• What is the amount of the offset for social security disability?

Medical factors in establishing the value of the claim: 

• The cost of immediate medical care following the injury.
• The cost of surgical interventions in the first years following the injury.
• The on-going cost of medical care on an annual basis after the medical status is stabilized.
• The cost of modifications to the employee’s home and current and future vehicles.
• The cost of institutional medical care.
• The cost of durable medical equipment (wheelchairs, artificial limbs, hospital beds, oxygen tents, etc.).

Claim handling expenses for catastrophic claims:

• Nurse case managers.
• Rehabilitation specialist.
• Defense attorneys.
• Actuarial experts.

The above items impacting the value of the catastrophic claim are not the only factors to consider when establishing the future claim cost. If the insurance company decides to settle the catastrophic workers comp claim, they work with the Centers for Medicare and Medicaid Services (CMS) to obtain approval of the Medicare Set Aside Agreement (MSA). The value of the settlement has to be high enough that the claimant (in theory) never has any future medical cost paid by CMS.

Another factor impacting the value of the catastrophic injury claim is the availability, in some states, of a Subsequent Injury Trust Fund to cover part of the future cost of the claim.  Also consider whether or not the insurance company can resolve the claim with a structured settlement and of the future cost of the claim being sold to another insurance company.

While it is possible to calculate the value of the catastrophic injury claim, keep in mind a catastrophic injury is a major life altering event for the employee. The catastrophic injury impacts almost every area of the employee’s life and family. It is a personal tragedy far beyond the financial cost of the claim.

Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is 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 of COMPClub, an exclusive member training program on workers compensation cost containment best practices. Through these platforms he is in the trenches on a working together with clients to implement and define best practices, which allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment. Contact: mstack@reduceyourworkerscomp.com.

©2016 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.

When the Affordable Care Act became the law of the land, the term “pre-existing condition” was often used.

For the workers compensation industry, that same term is not all that uncommon. In fact, it can be used quite often. Take the following scenario:

Following a work-related incident, a good employer makes sure that his or her injured employee is seen by medical professionals; often more than a single type; and often over an extended period of time.

Since it is not uncommon for individuals to hold off going to the doctor for symptoms they are experiencing, there are times a condition is initially diagnosed after one is injured on the job.

More Than Meets the Eye

For example, an MRI after a head injury could in fact diagnose a tumor – clearly the tumor is not a result of the work accident and, therefore, not tied to the obligation of your workers comp program.

When a company’s medical advisor goes over the file and speaks to the employee’s treating specialist, the two doctors can talk over the medical issues peer-to-peer. The result is very credible evidence the injury is or is not tied to what has happened in the workplace.

Use the following tips in your email communication:

• Make sure you include a claim number and all relevant addresses and contact information on the letter.
• Explain the company’s medical advisor has gone over the employee’s medical records.
• Explain the accident along with the recently diagnosed condition.
• Demonstrate how physicians came to the conclusion that one is not the result of the other.
• Make the adjustor aware of these physicians’ findings and that they will arrive soon.
• Explain you will make contact with the adjustor once they have time to go over the notes to be sure you have proper evidence to turn down the claim.

One of the leading causes of litigation is the denial of a claim.  Anytime a claim is going to be denied, communication with the injured worker is critical for the individual to understand the reasons and documentation behind the denial.

Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, and founder of COMPClub an interactive training program teaching workers’ comp cost containment best practices.  Through this platform he is in the trenches on a monthly basis with risk managers, brokers, consultants, attorney’s, and adjusters teaching timeless workers’ comp cost containment strategies, as well as working with members to develop new tactics and systems to address the issues facing organizations today. This unique position allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment. Contact: mstack@reduceyourworkerscomp.com.

In most states,  employers  who have over five employees are required to insure workers who may be injured on the job. This article may help you determine the best partner to choose and best administrative practices to employ under your policy.

Depending on the policy, you will be partnering either with an insurance adjuster or a third-party administrator (TPA) to handle your claims.

Claims administration involves the following: payments of benefits and medical bills; processing of claims within state guidelines; file auditing, documentation and reporting; and negotiating claims settlements. Choosing a poor administrator may erase all savings gained from the best safety and return-to-work efforts.

Hopefully the following hints will help you develop a long and rewarding relationship with your claims administrator.

1. Claims Office… The administrator should be located in your state or have adjusters familiar with your state’s workers’ compensation laws. Visit the claims office. Nothing compares to “seeing” an efficient operation.
2. Claims Adjusters… These individuals must be very well trained and highly experienced. Case Load… The average case load is about 165; more than this historically leads to poor performance.
3. Dedicated Adjuster… This is preferable. If this is not possible, obtain a designated adjuster who works only on a designated group of employer claims.
4. Three-Point Contact… Ensure this is done with each claimant (a call to the patient, employer and medical provider).
5. Medical Management Services… Make sure these are available and pre-arrange pricing.
6. Medical Specialists… A good administrator will have access to a range of medical professionals. Ask for the list.
7. Investigative Services… Administrators should have established relationships with investigators who use technology and proper reporting for your state.
8. Attorney Selection… Your administrator should choose an attorney for litigated claims that allows for the most control over the file.
9. Risk Management Services… Up to date IT systems are a must.
10. .. Claim detail and customized reports are essential to accurately manage a claim. Every policy holder has different needs.
11. Settlement Authority… Ensure that you have input regarding settlement amounts being considered.
12. Claim File Review… Arrange a claim review meeting on a quarterly basis.
13. Quality Control… The administrator should be continuously training and providing educational opportunities. Be sure internal quality measures are in place within the administrator’s office. This helps ensure quality outcomes.
14. Process Documentation… Take the time to write directives that document your account management procedures. They are a guidebook to a fruitful accord.
15. Evaluate and Measure… Periodically rate your administrator. You should be quickly receiving claims, accurate reserve adjustments, timely inquiry responses, prompt bill payment history and (hopefully) a low litigation rate.

According to Bonnie Stephens, a case manager for Medcor at the San Diego Zoological Society, “The selection of your Claims Management Partner is vitally important, not only to the efficiency in claims handling and resolution, but also, when performed using best practices, the right selection can save hundreds of thousands of dollars in medical payments, lost time and litigation costs.”

Author: Ben Petersen co-founded Medcor in 1984 and serves as the company’s chief operating officer. Since Medcor’s inception, Ben has led Medcor’s overall operations including hiring and training staff, developing scalable systems, managing logistics, and creating the infrastructure to provide health services for Medcor’s multiple service lines in all 50 states. http://medcor.com.

Twenty percent of all workers’ compensation cost is incurred on less than one percent of the claims.  These high dollar claims are often referred to as catastrophic claims.  The term ‘catastrophic claim’ applies to the nature of the claim, not the dollar cost, even though the severe nature of the claim and the high dollar cost are closely related.

Catastrophic Claims Create Permanent Disability

A catastrophic claim is defined as any claim that creates a high level of permanent disability.  Catastrophic injuries significantly alter the life of the employee in general. Catastrophic injuries prevent the employee from returning to any type of work, even when occupational therapy and vocational rehabilitation is provided.  Examples of catastrophic claims include:

• Quadriplegia
• Paraplegia
• Brain/brain stem injuries
• Second and/or third degree burns over 50% of more of the body
• Death
• Total vision loss
• Multiple amputations
• Mesothelioma, asbestosis and other lung diseases
• Severe damage to internal organs

Almost all catastrophic claims result in the employee being classified by workers’ compensation as having permanent total disability.  The cost of the catastrophic claim will be influenced by the state laws.  While all states provide unlimited medical treatment, the indemnity cost can vary widely. Some state provide life time indemnity benefits while other states will cap the indemnity benefits at a maximum number of weeks, often 400 weeks or 500 weeks.

Employee Income Prior To Injury Is Major Factor

A major factor in the cost of catastrophic claims is the income of the employee prior to the injury.  The higher the wages of the employee prior to the injury, the higher the indemnity cost.  For example, the catastrophic claim indemnity payments of an employee who was earning $600 a week would be double the indemnity payments of an employee who was earning $300 a week.

The employee’s life expectancy will also impact the cost of a catastrophic claim.  If the employee is 30 years old when the catastrophic injury occurs, the amount of future medical bills, and indemnity cost in a state with lifetime indemnity benefits, will be significantly higher than the cost of the same type injury to an employee who is 60 years old, simply due to the longer number of years the benefits will be paid.

In addition to the high cost of medical care and the high cost of indemnity benefits, the claim handling expenses can be significant on catastrophic claims.  The expense factors can include:

• Nurse case managers
• Rehabilitation specialists
• Actuarial experts
• Remodeling of the home to make it handicap accessible
• Home attendants
• Defense attorneys
• Specialized equipment

Catastrophic Claims Often Resolved With Structured Settlement

Due to the high cost of catastrophic claims, the claims are often resolved with a structured settlement, a type of life time annuity that the workers’ compensation insurance company purchases to make periodic future payments.  This often benefits the injured employee by providing the employee with a higher level of income, or in states where the number of weeks of indemnity benefits has a cap, a life time income stream not tied to the maximum number of weeks.  It also provides the insurer with a known fixed cost for the claim, allowing the insurance company to free up its reserves for other claims.

Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, and founder of COMPClub an interactive training program teaching workers’ comp cost containment best practices.  Through this platform he is in the trenches on a monthly basis with risk managers, brokers, consultants, attorney’s, and adjusters teaching timeless workers’ comp cost containment strategies, as well as working with members to develop new tactics and systems to address the issues facing organizations today. This unique position allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment. Contact: mstack@reduceyourworkerscomp.com.

©2015 Amaxx LLC. All rights reserved under International Copyright Law.

Employers/Carriers/TPAs/Brokers/Vendors looking for additional information FREE resources for Workers Comp cost containment best practices are invited to access Amaxx Workers’ Comp Cost Containment Essentials training series

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

Reserves are the amount of money that is set aside to pay the cost of a workers’ compensation claim. The reserve amount is the number of dollars necessary to pay the financial and legal obligations of the self-insured employer or the insurer. The Sarbanes-Oxley Act of 2002 and other regulations require insurers and self-insureds to accurately document their liabilities.  Workers’ compensation claims are consider an owed obligation, a legal liability for the insurer or self-insured.

Reserve is Dollars Necessary to Pay Financial & Legal Obligations

The accurate statement of what the legal liability (reserve) is on a work comp file is often a challenge faced by the workers’ compensation claim adjuster.  The information needed to establish a precise reserve is normally not available at the time of the assignment of the claim to the adjuster.  Often the necessary medical information to establish the reserve will not be forthcoming until weeks or even months into the claim.

There are two primary approaches adjusters use to set the initial reserve early in the claim file when the necessary medical information is not available. The first approach is for the adjuster to “guessimate” (a combination of guessing and estimating) based on what claims with similar injuries have cost in the past.  The second approach is to use a statistical reserve where all claims have the same initial reserve amount based on the historical average cost of claims. All insurers and third party administrators (TPA) require the adjuster to revisit the initial reserve, whether an estimated reserve or a statistical reserve, and revise it when the necessary medical information has been obtained.

Reserve Worksheet Consists of Medical, Indemnity, and Expense

To establish the proper, most accurate reserve, the adjuster will utilize a reserve worksheet.  The worksheet will be broken down into three categories – medical, indemnity and expense (some insurers and TPAs break the expense category into legal expenses and non-legal expenses).

Medical

To establish the amount of the medical reserve, the adjuster will analyze the medical reports to provide an informed estimate of the cost in the following sub-categories:

• Physicians
• Specialists
• Diagnostic Testing
• Hospitals
• Physical Therapy / Occupational Therapy
• Pharmacy
• Transportation (to/from medical care)
• Attendant Care

Few work comp claims will require an estimated amount in every medical reserve category.

Indemnity

To establish the amount of the indemnity reserve, the adjuster will analyze the medical reports and discuss with the employer the modified duty options, to provide an informed estimate of the claim cost in the following sub-categories:

• Temporary Total Disability
• Temporary Partial Disability
• Permanent Partial Disability
• Permanent Total Disability
• Vocational Rehabilitation
• Death Benefits
• Dependent Benefits

There are very few files where the adjuster would have a dollar amount of reserves in every indemnity category.  Most files will have only two or three of the indemnity sub-categories completed, for example one file might have only reserve amounts for temporary total disability and permanent partial disability, while another file might have only the category of death benefits completed.

Expense

The adjuster will consider all aspects of the claim to estimate the dollar amount of the sub-categories of the expense reserve.  Expense reserves include:

• Defense Attorneys
• Court Costs
• Court Reporters
• Experts
• Surveillance
• State Filing Fees
• Peer Reviews  (some insurers and TPAs put this in the medical reserve)
• Independent Medical Examinations (some insurers and TPAs put this in the medical reserve)
• Medical Reports (some insurers and TPAs put this in the medical reserve)
• Medical Management Cost (medical fee schedule reviews, nurse case managers, triage nurses, etc.)
• Any Other Expense

Once the reserve worksheet is completed, the dollar amounts for medical, indemnity and expenses are combined to produce the total reserve for the workers’ compensation claim.

The completion of the reserve worksheet is not the end of the adjuster’s responsibility for reserving the claim.  When new medical information or legal information is obtained that changes the medical prognosis, extent of the indemnity payment or the legal responsibility on the claim, the adjuster should review the reserves in each of the sub-categories of medical, indemnity and expense and make the necessary corrections, whether they are increases or decreases in the reserve amount.

Goal To Have Final Value of Claim Stated As Soon As Practical

The goal of reserving is to have the ultimate (final) value of the claim stated as soon as practical, with the understanding that the ultimate value of the claim is subject to change. 

It is a rare file where the amount of the total reserve and the final amount paid on the file are the same immediately before the claim file is closed.  With this understood, it is still the adjuster’s responsibility to keep the reserves on the claim file as accurate as possible.

Accurate reserving of the claim file is very important to the employer.   If the claim file reserves are too high, the dollar amounts the underwriter uses to calculate future insurance premiums are overstated causing the insurance premiums to be higher than it should be.  When the reserves are set too low, an upward adjustment in the reserve amount has to be made in order to pay the correct amount when the claim is settled/concluded.

Employers Should Take Notice of Large Reserve Adjustments

When employers’ loss runs reflect large reserve adjustments (10% or more) to the total claim reserve, either up or down at the time of the claim conclusion, the matter should be addressed with the adjuster(s).  If the employer notices a continuing pattern of large reserve adjustments on the claim files right before or when the claim closes, a claim file audit should be completed.  An independent auditor can review the reserving practices of the adjusters and make recommendations on how to make the necessary corrections.  For assistance in identifying a claim file auditor to review the reserves on your claim files, please contact us.

Author Michael B. Stack, Principal, COMPClub, Amaxx Work Comp Solutions. He is an expert in employer communication systems and helps employers reduce their workers comp costs by 20% to 50%. He resides in the Boston area and works as a Qualified Loss Management Program provider working with high experience modification factor companies in the Massachusetts State Risk Pool.  He is co-author of the #1 selling book on cost containment, Your Ultimate Guide To Mastering Workers Comp Costs www.reduceyourworkerscomp.com, and Founder of the interactive Workers’ Comp Training platform COMPClub. Contact: mstack@reduceyourworkerscomp.com. 

©2015 Amaxx LLC. All rights reserved under International Copyright Law.

SALES TO PAY FOR ACCIDENTS CALCULATOR:  http://reduceyourworkerscomp.com/sales-to-pay-for-accidents-calculator/

MODIFIED DUTY CALCULATOR:   http://reduceyourworkerscomp.com/transitional-duty-cost-calculators/

WC GROUP:  http://www.linkedin.com/groups?homeNewMember=&gid=1922050/

SUBSCRIBE: Workers Comp Resource Center Newsletter

WORKERS’ COMP TRAINING: https://workerscompclub.com

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

One of the main functions of any claims management team is to evaluate the exposure of a workers’ compensation case.  If done early on in the process, these actions can reduce the overall “cost” of a claim and avoid unnecessary litigation expenses.  Due to this success, teams are now using these techniques to control litigation expenses in liability cases.

Review of Records

The review of records has long been used as a best practice to mitigate exposure.  Medical records hold a treasure trove of information about a claimant including their prior medical history, treatment tendencies, use of various treatment modalities such as chiropractic care and use of prescription medications.   Claims management teams in industrial claims also use proven methods of reviewing medical billing records and peer review to reduce fraud, waste and abuse within the system.  When used proactively, there has been a noticeable reduction in initial settlement demands, which leads to lower settlements.

In the context of liability cases, these same techniques have not been used.  This is mainly the result of third-party administrators failing to transfer an expertise in claims management to non-workers’ compensation cases.  However, some TPAs have received the message from the clients they support and are using these best practices to reduce exposures in liability claims.  The results have provided immediate savings.

Role of Evidence Based Medicine

An important component of this process to reduce exposure in workers’ compensation claims also involves the use of Evidence Based Medicine or EBM.  EBM is a process that utilizes the review of medical records, scientifically supported medical research and an evaluation of trends to make the best decision for a person seeking medical care and treatment.  While EBM is not new, it is making resurgence for claims management professionals seeking to reduce outdated treatment modalities while at the same time providing the most effective care.  It can also be used in liability cases with the same impact.

Implementing Effective Litigation Liability in Your Office

When selecting a TPA for your liability program, it is important to understand the level of experience this vendor has in the area of mitigation exposure through effective litigation analysis.  Part of this process should include investigation into their procedures and background in the following areas:

• Experience level of the claim management team and understanding best practices in cost mitigation.  Some of the necessary components to review include claim volume, specialization of claim handling services and ability to handle complex cases.

• Ability of the vendor to package medical record review, peer review and medical bill review.  This should include the ability of the claim management team to review medical bills and identify trends of fraud, waste and abuse.  They should also be able to document their ability to coordinate with other interested stakeholders and provide creative and cost-effective solutions.

• Team approach to handling claims.  An effective team should include internal senior nurses to coordinate with the claims team on complex liability matters.  They should also be able to quantify how their services can reduce the “cost” of claims.

Conclusions

Any proactive claim management team needs the ability to reduce costs and run an effective claims management team.  One method of accomplishing this goal is to seek partners who are able to run and coordinate and effective litigation liability program.  If done properly, this program will meet the goals and objectives of all stakeholders.

Author Michael B. Stack, Principal, COMPClub, Amaxx Work Comp Solutions. He is an expert in employer communication systems and helps employers reduce their workers comp costs by 20% to 50%. He resides in the Boston area and works as a Qualified Loss Management Program provider working with high experience modification factor companies in the Massachusetts State Risk Pool.  He is co-author of the #1 selling book on cost containment, Your Ultimate Guide To Mastering Workers Comp Costs www.reduceyourworkerscomp.com, and Founder of the interactive Workers’ Comp Training platform COMPClub. Contact: mstack@reduceyourworkerscomp.com. 

©2015 Amaxx LLC. All rights reserved under International Copyright Law.

SALES TO PAY FOR ACCIDENTS CALCULATOR:  http://reduceyourworkerscomp.com/sales-to-pay-for-accidents-calculator/

MODIFIED DUTY CALCULATOR:   http://reduceyourworkerscomp.com/transitional-duty-cost-calculators/

WC GROUP:  http://www.linkedin.com/groups?homeNewMember=&gid=1922050/

SUBSCRIBE: Workers Comp Resource Center Newsletter

WORKERS’ COMP TRAINING: https://workerscompclub.com

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