Statistics from the National Council on Compensation Insurance (NCCI) suggest a workers’ compensation insurance rebound. According to the 2014 State of the Line report, the combined ratio in 2013 was 101, a seven-point drop from 2012 and a 14-point decrease from 2011.
While this improvement is encouraging, workers’ compensation remains a money-losing line for the insurance industry. Digging further into the data reveals that workers’ comp has only been profitable for insurers for two years during the last two decades.
The system is a broken one, but it doesn’t have to be. A fully committed management overhaul can significantly alter the outcome and costs of workers’ comp claims.
In fact, a claims model centered on proactive management and claims control can not only make workers’ comp profitable for insurers, but it will also save clients money and get injured workers back to work sooner.
Developing a workers’ comp claims model that works begins with these four steps.
Step 1: Narrow the PPO.
One of the defining factors in maintaining control over a workers’ comp claim is securing a carefully chosen preferred provider organization (PPO). Because physicians help dictate important elements of a claim, such as when an employee can return to work and the extent of permanent disability, they can be a source of financial benefit or harm for carriers.
Thus, defining your PPO with an umbrella healthcare network, which could include thousands of doctors, limits the extent to which carriers can control the claims process.
It is better to commit to a few doctors for the PPO with whom you can build relationships. Look for physicians who are superior medical care providers (particularly in common workers’ comp related injuries), willing to expedite the healing process and have an aptitude for workers’ compensation laws and best practices. Having relationships with a few outstanding doctors like this will make it easier to collaborate on modified-duty clearances, streamline medical administrative processes and increase the flow of essential communication.
Step 2: Develop and implement a return-to-work program.
The longer an injured employee is out of work, the larger the claim becomes, as the lost time portion of the claim accumulates. In fact, while lost time claims are only 23 percent of all workers’ comp claims, they account for 94 percent of claim costs, reinforcing the need to bring employees back to work, even if they are unable to fulfill their prior duties.
A robust return-to-work program should begin by identifying and formally writing out modified or light-duty job descriptions that can accommodate a wide variety of injuries, such as the inability to use the back, hands or legs.
Not only will getting an injured employee back in the workplace reduce the risk of expensive litigation, but it can also significantly alter an injured worker’s impairment rating by providing proof that an employee continues to have value to a business, despite the injury.
Step 3: Streamline claims management.
A carrier’s in-house claims management system can determine the overall efficiency of a claim. But all too often, carriers embrace a detached claims approach, where the case begins with an intake adjuster and could travel through four to five adjusters before it may ultimately be assigned to an attorney. When claims are handled this way, not only does the carrier relinquish control over the claim, but neither clients nor their injured employees know whom to contact with updates or questions, stripping away the ability to gain powerful insight of the claim.
A claim should have only one claims manager throughout its duration. This way, all parties involved – from the doctor, to the claimant, to the employer — will have a consistent single point-of-contact. This dedicated manager is able to stay on top of all details of the claim and focus on closing it quickly with minimal costs.
For maximum efficiency on closing claims, each manager should only handle 75 cases, as opposed to the industry average of 150 to 200 cases.
Step 4: Enforce workers’ compensation protocols.
Without developing a proactive culture of workers’ compensation management, claims costs will continue to rise, so insurance carriers must set and enforce standards for workers’ compensation best practices.
- Hiring – Make employers aware of the expectations set forth regarding workplace safety and recommend pre-employment physicals so that clients can prevent hiring an obvious workers’ compensation risk.
- Firing – Develop a policy that ensures clients speak with claims managers before firing an employee with an open workers’ comp claim, so that you can ensure a solid defense case first. Few developments in a workers’ comp case can elicit a costly lawsuit as fast as the ill-timed termination of an injured employee.
- Reporting – Expediency is critical for securing an accurate and controllable claim. Set a culture among clients to ensure they are reporting claims to you, and other necessary parties, within 24 hours of learning of the injury.
By cultivating a true partnership with clients to implement these proactive tactics, the workers’ comp system can become a strong profit center for carriers.
Commit to the Tactics
Consider a real client – a trucking company based in Tennessee. Its former insurance carrier placed a heavy emphasis on front-end injury prevention but failed to put significant effort into the back-end of the claim, such as is outlined in the four steps above. Once the employer switched carriers and worked within a model that incorporates these four steps, the company’s losses were reduced by 86 percent the first year, and another 88 percent the following year. These results yielded a lower premium for the trucking company, and a profitable account for its carrier.
If every carrier committed to these tactics, I believe new data would reflect a healthy and sustainable industry, giving carriers, employers and injured employees an improved system with better outcomes for all parties.
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