Workers compensation claims have a great impact on both retrospective rating plans and experience rated policies. Identification and correction of improper claims can lead to reduced premiums. What should an employer should do when faced with any workers compensation claims being charged against their policy?
- Have an Independent Claim Review performed!
Lets learn why…
Many thousands of dollars are overpaid by employers unfamiliar with the direct effect that claims have on the cost of their workers comp policy. Most policyholder employers operate under the false assumption that their workers comp insurance carrier, when processing claims, have their best interest at heart. That they believe the insurance carrier will work to settle a claim in the best manner for them, the employer. After all, isn’t it the insurance carriers money at stake? You know, the employer pays the premium and the carrier pays the claim, right? Not so fast!
When an employer uses a retrospective rating plan, a retro plan, as an alternative funding mechanism, claim payments made by the insurance company will be factored directly into the final premium the employer pays. Depending on the type of retro plan in place, the employer must reimburse the insurance company for claims paid by them. Starting to get the picture? Each and every claim that the insurance company pays will be presented, at some time, to the policyholder for reimbursement! So it’s kind of like giving your grandchildren your debit card and letting them roam free in the candy store!
Without proper checks and balances in place the employer is at the mercy of the insurance company. Placing their trust in the insurance company claims department and that they will do the best job, with the employer policyholders best interest in mind.
Retro plans are great, when claims are managed properly. Retro plans are not so great when claims are improperly handled. Very large court cases and many many thousands of dollars in decisions have come out of the mismanagement claims and their effect on retro plan premiums. It’s estimated that 60% of claims settled by insurance companies are done so incorrectly and contain mistakes and errors that contribute to additional premiums paid by employers.
What about the smaller employer, those not large enough for a retro plan? Claims play just as important part on the premiums a smaller employer pays. Experience rated policies take into account each dollar paid for a workers comp claim and factor that into the experience modification rate calculation. The EMR, a factor that is applied to all experience rated employers premium. Most employers are aware of their EMR. But most have little idea at how it’s calculated, what individual factors are involved in the calculation and the large role claims play in the development. The three year experience period means that claims will play a role for not just one year but three!
So what’s the take away from all this? That workers compensation claims must be reviewed! Don’t take it for granted that a claim is correct or that it has been handled properly. The cost of doing so it way to great!
Contact our office for help with an independent claim review.
Hope this helps you out!
Thanks!