Wiring Up Workers' Comp Claims

By Croft, Brian | Personnel Journal, April 1996 | Go to article overview

Wiring Up Workers' Comp Claims


Croft, Brian, Personnel Journal


By using Electronic Data Interchange, your benefits managers can streamline an otherwise cumbersome process. Add speed, accuracy and consistency by utilizing today's technological innovations.

Imagine a football game in which every offensive player must touch the ball before the team is in scoring position, instead of making a strong pass through the air. Imagine passing small buckets of water through a long line of people to quench a raging inferno, instead of hitting the flames head-on with a powerful hose. Now imagine passing important, time-sensitive information on workplace injuries from desk to desk, while the injured employee is away from work, instead of quickly addressing the situation in only a couple of steps. In a modern age, the first two scenarios seem ludicrous. Yet the third situation-until recently-was the standard process for dealing with workers' compensation claims, which cost approximately $70 billion annually in the United States.

The various players in the workers' compensation industry, including government, third-party administrators, employers and employees, all stand to benefit from emerging developments in electronic submission of claims, using Electronic Data Interchange (EDI). In a nutshell, EDI is an exchange of standardized electronic data between two or more organizations, with minimal human intervention. By implementing common standards for compensation claims, the industry can streamline a cumbersome process, adding speed, accuracy and consistency. "Putting it simply, EDI is about better customer service," explains Jeffrey Snow, chair of the IAIABC EDI Development Committee, a group initiated by the International Association of Industrial Accident Boards & Commissions. "Hand processing claims can take a lot of time. EDI improves communication between the state, carriers and medical providers, so claims can be handled more efficiently. All you need is a PC, modem, printer and access to a value added network (VAN). A VAN is a messaging service provider that transmits, receives and stores EDI and other electronic messages for trading partners, as well as providing a wide variety of other messaging related functions. Most major telecommunications and communications companies, such as IBM and AT&T offer VANs to which access can be arranged. So instead of having several workers manage paper flow, we can free up our staffs to deal with the important issues machines can't address."

Stare down the paper tiger. In the recent past, the claims process for workers' compensation was very laborintensive. Each claim required a variety of forms, each of which would pass through several hands before an action was taken. If an error or important omission was made at any stage, the process would be further delayed. Meanwhile, the injured employee would sit at home, becoming increasingly frustrated with the lack of action, and the company would continue to pay for an employee who wasn't working.

As Greg Smith, vice president of finance and treasurer for Dublin, Ohiobased Celerity Technologies, a provider of EDI technology solutions, explains, "While the employee is away from work, he or she sees television ads for labor lawyers and talks to friends who may have sought damages in the past. By the time the employee hears about the status of his or her case, he or she already may be taking legal action."

A study, conducted by the Bureau of National Affairs in 1993 of approximately 70,000 lost-time claims, revealed that if claims are reported within 10 days, the average cost is a bit more than $10,000. However, if the reporting lags beyond 30 days, the cost is nearly $16,000, and there's a better than 45% chance of litigation.

Adds Smith: "People often assume that medical costs are the biggest cost, when in fact our biggest losses are related to time off work. If we can get employees back to work quickly, we control costs; but we can't get them back to work if we don't yet know they're injured. …

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