Workers’ compensation insurance claims leakage is nothing new, but it continues to be a costly problem for many employers. Unnecessary medical costs are the most common and costly forms of leakage, but failure to subrogate, inefficient return-to-work programs, late claim reporting, disability duration, fraud, and many other issues can keep your profits slowly dripping away. Here are a few other examples:
- Payment of non-compensable claims or payment of claims occurring outside the policy period
- Incorrect calculation of the employee’s average weekly wage or indemnity benefit
- Failure to properly calculate the impairment rating value
- Failure to thoroughly investigate the claim prior to accepting compensability
- Failure to properly evaluate future medical benefits when settling a claim
- Failure to properly utilize medical triage or medical case management
One often overlooked area is vendor leakage, which involves unnecessary payments to outside vendors used in investigation and claims handling. For example:
- Nurse case management (NCM). Adjusters often assign NCM services to help gather medical records and discuss medical issues with physicians and claimants. But too many adjusters with high claim volumes assign outside NCM on uncomplicated claims to save time and legwork. NCM services should only be used when there’s a complicated surgical case, when congenital medical issues might complicate healing after injury, or when the same claimant has numerous similar complaints/injuries over the years that could indicate a repetitive injury that might eventually lead to a severe injury.
- Independent Medical Examinations. Adjusters use IMEs to establish a medical correlation between the claimant’s objective injuries and the workplace injury. But many inexperienced adjusters send a claimant for an IME too soon or too often, jeopardizing their defense of the claim and wasting money. And IME’s aren’t cheap – anywhere from $575 to $3,000, which doesn’t always include medical records reviews. Using a physician to review the appropriateness of an IME can help eliminate this leakage.
- Surveillance. Surveillance can play a valuable role in certain claims. But in most cases, it doesn’t greatly impact the outcome of the claim. And videotape of a claimant running errands isn’t likely to impact the claim. Surveillance is also costly, so unless you have reason to believe the injured worker has other employment or is breaking medical restrictions, it’s probably a waste of money.
- Vocational assessments. Before hiring an outside vendor, the adjuster should work with the employer to modify the claimant’s position or create another position within the claimant’s restrictions and pay range. Otherwise, you’re paying the vendor to spend countless hours looking for jobs outside your facility. If you use a vendor, pick one that searches for jobs in the open market, sets up interviews, and follows up after the interview to make sure the claimant is making a real effort to get hired.
Since most employers are not integrally involved in this level of claims detail, it’s essential that your claims team is a true partner – involving you in claims decisions at the level you prefer. While these leakage issues can challenge employers nationwide, your claims team should advise you of those that are common in your state. By collaborating with your claims team and establishing standardized triggers and protocols for the added measures listed above, you can reign in vendor leakage and take control of your workers’ compensation insurance costs.