Magazine article Occupational Hazards

An Effective Approach to Claims Management; an Active Approach to Managing Workers' Compensation Claims Pays Handsome Dividends for Employer and Employee Alike

Magazine article Occupational Hazards

An Effective Approach to Claims Management; an Active Approach to Managing Workers' Compensation Claims Pays Handsome Dividends for Employer and Employee Alike

Article excerpt

Two very similar back injuries are covered by the same insurer, in similar companies, in the same state. In both cases, the companies worked hard to control costs. The final direct cost of one case was $12,000, while the other was $5,400. What caused the difference?

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The difference was that one employer used a traditional approach, and the other employer had recently implemented a system for managing claims. The more successful employer's newly adopted philosophy was that actively managing claims through taking control of the process was the best approach to reducing the cost of accidents. It made sense and helped cut costs that would have affected the employer's bottom line.

The process we are describing changed the employer's attitude towards workers' compensation, improved service to employees and made positive contributions to morale. Every dollar saved on the claim meant real savings for the employer. The money saved on the direct costs lowered the insurance reserves; helped the loss ratio that would help determine next year's marketability in the insurance market; and favorably impacted the next year's premium and the National Council on Compensation Insurance experience modifier for the next 3 years. The employer's methods provided results quickly that would show up on the bottom line.

Conventional Claims

Before we can discuss it, we should talk about the "conventional" way claims are handled. In the usual model, when an employee is injured, the employee reports it to the supervisor and is asked to fill out an accident report. The supervisor reads and signs it, adds notes and passes it to the administrative person in charge of claims who passes it to the insurer. The insurer then takes over the handling chores. To stay up to date, the employer's claims person gets occasional calls and claims reviews.

The employee over the next weeks will visit various physicians, specialists and therapists. The supervisor might or might not accommodate the employee's restrictions with a light-duty job.

The employee, especially one who is at home on temporary disability, might decide to retain an attorney to resolve the claim. Once the insurer receives notice of the attorney's representation, payment of claims might be stopped. Sometimes the financial squeeze of not working and not getting a disability check means the employee's bills go unpaid for months at a time. The attorney pushes to expand the extent of the injury rating and ultimately asks for a large settlement. Eventually, the employee either gets better and returns to full duty, or quits the company.

This process, although executed by well-meaning people, results in unreliable outcomes.

The vast majority of claims start out as legitimate injuries. Some will result in minimal medical bills and a quick return to work. Some will "go bad." These latter cases turn into comp nightmares, treating a person who will get well eventually but entailing extended medical care, prolonged time off and often no return to work, at least not for the company paying all the bills. The employee will leave with hard feelings about the company's perceived skepticism and the difficulties encountered in getting compensated. The company's executives will bemoan the low quality of the local labor pool and tell the insurer to work harder to combat fraud.

Fran Flowers, senior vice president at Lockton Companies Inc. and manager of its Claims Cost Control Department, believes that a better way exists. Her mantra is: "Taking control of the process is the best way to control comp costs." Flowers' job is to help Lockton's clients develop their own programs to accomplish this control. She starts by explaining to new clients that they should not be content with their claims handling if they don't have an effective system to control costs. It is sometimes a surprise to find that the process is not already under control, especially for those whose job is controlling the process! …

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