We’ve recently been inundated by requests to assist employers and insurance agents with out of control experience modification rating problems. Three out of four increased EMR’s were driven by claims. Maybe this is a good time to talk about claim audits and how they fit in!
Out of control claims lead to high experience modification rates. When it comes to experience rating, claims can be divided into several categories.
- Small medical only or first aid type where there’s no loss time or lost wages for the injured worker.
- And larger more serious injuries where the employee is away from work for an extended period of time.
Both have an effect on the experience mod rate.
A claim audit is a detailed review of each workers compensation claim. It’s a very important step when establishing the validity of open reserved claims and closed claims. A claim audit will help identify non-compensible claims that have been imappropriately paid by the insurance carrier and reported to the rating bureau for inclusion on the employers experience modification rate.
Claim audits typically identify:
- The compensibility of a specific claim – was this in fact a valid workers compensation claim.
- The claim handling by the insurance carrier – was this claim properly handled? Were mistakes made that contributed to an increase in payout or settlement of the claim?
- Mistakes made in claim reserves – are reserves unusually high for a particular claim or in some way out of line with other similar claims.
- Claims that continue to show open with reserves when in fact they have been closed with settlement less than reserved.
- Incorrect or improper reserve adjustments.
- Fraudluent claim situations.
There’s more to this list but you’re getting the idea!
Think of a claim audit as one tool in a workers compensation repair tool box. Sometimes it can stand on its own but most of the time it needs to be used in combination with other tools to get the job done. Audit review, classification code review, EMR review and claim audits all have their place in identifying workers compensation premium problems. And all should be used!
Hope this helps you out! Thanks!