For most employers the workers compensation claim process occurs behind the scenes. Many transactions between the injured employee and insurance company are carried out unknown to the employer. However there are many common problems associated with the claim process that ultimately have an impact on the employer’s workers compensation program and pricing. In this post we’ll take a look at some of those problems.
Workers compensation claims effect different employers in different ways. For experience rated policies claims and claim reserves have a direct effect on the calculation of experience rating factors like the EMOD, EMR or XMOD. These factors are in turn applied to an employers premium developing what’s known as the modified premium, what the employer actually pays. For non-experience rated employers, those with premiums below the level of experience rating, claims have more of an indirect effect causing the employer to lose their ability to maintain or secure coverage because of adverse loss ratios. So it’s pretty well established that claims and claim reserves will effect, in some way, all workers compensation policies.
Common claim problems include:
- Invalid Claims – Claims processed when in fact they were not valid claims at all. This is a common problem for employers in states where statute does not require the claim to arise “primarily” from employment. Tennessee is one of those states however they are currently considering legislation to change their statute to read something like, “an injury arises primarily out of and in course and scope of employment only if it has been shown by a preponderance of the evidence that the employment contributed more than 50% in causing the injury.” These legislative changes help a great deal to tie a claim to a work activity and reduce claim frequency from non-work related injuries.
- Improper Claim Reporting – Regardless an employers size, establishing and following some form of claim reporting procedure is helpful in gaining a better understanding of hazards at the root of employee injuries. It’s important for all involved to know how to report a claim, who to report it to and what to do when an employee is injured.
- Late Reporting – Some employers delay reporting a claim to their insurance company, a practice that should never be followed! Late reporting may be caused because of some misguided idea of an employer that maybe the claim was not proper or that if the cost was low maybe they would pay the claim themselves. Regardless the reason late reporting will only lead to inflated claim costs and confusion. When a claim report is delayed it takes the ability to properly investigate a claim out of the hand of the insurance company.
- Lack of Employer Involvement – It can’t be stressed enough the importance of employer involvement. Would you be surprised to know that many employers, when questioned about on-going claims, have no idea of where their injured employee is in matters of recuperation and pending return to work? So many employers take the incorrect attitude that when a claim is turned over to the insurance company that it’s out of their hands. Just the opposite of the actions need to be taken!
- No Return To Work Program – Nothing is as important as getting an injured worker healed and back to work as soon as possible. It benefits the worker and employer. A RTW program will help get get your injured worker back to work by providing them a step down position with your company, keeps them involved and helps reduce your overall claim cost.
- Failure to Monitor Claims – Loss runs provide a glimpse into the health of an employers workers compensation program. They are the place to start when it comes to monitoring an employers workers comp claims. They are also something that most employers never ask for and never look at until they want to change insurance carriers and have an agent request them in order to provide a quote!
- Failure to have Claims Reviewed – Claims should be reviewed by an independent consultant. A claim review should include verification of the validity of a claim and review of open claim reserves. Remember, paid claims + open reserves have an immediate effect on experience modification rates!
Claim problems can be handled. Managing claims really comes down to two things, eliminating claims when possible by providing a safer workplace and reducing the dollars paid for those claims that occur. With discovery, development and implementation of better claim practices an employer can get a handle on their workers compensation claim situation leading to safer work environments for their employees and better control of pricing factors for their policies!
Hope this helps you out! Thanks!