***This article is part of a series. If you haven’t read from the beginning please start here: WC 2.0- The Work Comp Claims Managment Program.***
In the previous post, we explained the nuts and bolts of lost time claims. There is a great deal more to discuss and understand regarding lost time, but for now the general overview will suffice.
This post will deal with the other two most common ways claims go from Medical Only (MO) to Indemnity- Permanent Impairment and Settlements.
Permanent Impairment- The correct term for this is Permanent Partial Disability. This is a situation where an injured worker (IW) incurs some sort of permanent change in their physical status that will hinder them in some way forever. An example may be a shoulder surgery that results in reduced mobility in the arm. Another might be an injury to the eye that affects their vision irreparably. These injuries are rated by making very specific measurements and assigning a percentage of impairment compared to the “whole body” concept. In the example above, a shoulder surgery may result in a 3% diminishment of the whole body, due to the reduced range of motion. There is a chart and formula for virtually every body part that could result in a permanent impairment and the specific measurements that must be made to determine the correct percentage. For more information on the specifics of this rule book, please check out the 1996 FLORIDA UNIFORM PERMANENT IMPAIRMENT RATING SCHEDULE: http://cdn2.hubspot.net/hub/171716/file-18449401-pdf/docs/1996_fl_impairment_rating_schedule.pdf
After the percentage of disability is assigned, the insurance company then makes a lump sum payment to the IW, to allow them to close the claim (otherwise they would be paying a very small amount on the claim as long as the IW lived; hardly practical). The formula is 2 weeks of Average Weekly Wage for every 1% of impairment up to 10%, 3 weeks AWW for every 1% impairment from 11%-15%, 4 weeks AWW for 16%-20% and 6 weeks for 21% or higher.
For our purposes, what you need to know is that Permanent Impairment payments are made out of the indemnity “bucket” and any amount paid results in the claim going from MO to indemnity. As a general rule, these are out of our control. They are assigned by doctors based on the rating schedule above. If we feel a claim has a high degree of probability of going to surgery, we usually recommend the owner turn the claim over to the insurance carrier fully. There are some exceptions to this, but that is very claim specific.
This is a good time to mention something that is VITALLY IMPORTANT: Every claim is different; every injury, every worker, every company, every insurance carrier, every doctor. This is why partnering with someone with experience is so vital. Every claim must be managed individually to achieve the best outcome for the IW and the employer. The goal for the IW is always the same: get them the best medical treatment available, treat them with respect and care, get them back to work as soon as possible and see that they are paid for their time out of work. The goal for the employer is to accomplish this at the lowest possible cost. That is where our program and understanding how the Experience Mod really works helps the employer achieve that goal.
Ok, back to the final common type of indemnity.
The final, common form of indemnity claim is one that is closed through settlement. The majority of these are a result of the IW hiring an attorney. These almost always result in a settlement of some sort and those dollars are always, at least partially, paid out of the indemnity “bucket”. (Note: On 4/28/16 the Florida Supreme Court ruled that the attorney fee schedule in the FL WC law is unconstitutional. This will require the legislature to address it quickly. It is unknown at this time the impact this will have on WC rates, but it is assumed that this will result in more litigation and higher rates. I will address this in detail in the next post.)
Claims can also be settled at the request of the insurance company without attorney involvement. This occurs when an IW has received treatment for the injury, but has not reached Maximum Medical Improvement and the insurance company does not feel that continued medical care will produce a positive result in a reasonable period of time. They feel it makes more sense to offer the IW a lump sum to cover expected future medical costs and allows the carrier to close the case. These are often contentious situations between the IW and the employer, so it is vital that the employer obtain legal counsel to navigate this type settlement. Much more on this topic in future posts.
If a case settles, it will be an indemnity claim and cost you substantially more than a MO case. The good news is; the vast majority of these can be avoided by utilizing our system. Clients who follow our program have an extremely low incidence of settlements; far below the norm. There are good reasons for that and I will get into it in detail in future posts.
This is not a perfect science, however. It is a program that educates you on the proper ways to structure your business and manage your WC claims to minimize your WC costs. Lost time is something we can affect in many cases, permanent impairment we can’t, settlement we can reduce to a very small number. Combining these techniques will result in the lowest Experience Mod your company can achieve, given the losses that occur. Not utilizing them will insure that you will end up with the highest Experience Mod possible given your losses. Which one would you prefer?
Next blog post:
WC 2.6- Supreme Court Cases That Affect YOU (Coming soon!)
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