***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.***
Hopefully, you have read the first three blogs; if not, please go back and do so. This will be much more meaningful.
In blog 2.2, we gave a brief overview of the two major claim categories- Medical Only (MO) and Indemnity. In blog 2.3, we showed how much an indemnity claim can cost you, compared to a MO claim. Logic dictates that we should do everything in our power, within the bounds of the Work Comp law, to minimize indemnity claims. Luckily, there are tools and strategies that can do this, if you know how and when to implement them. That said, there are losses that we cannot keep from indemnity classification. The next two blog posts will make it clear what we can and can’t do.
WHAT WE CAN DO: This will revisit the three types of indemnity claims explained in blog 2.2 and explain what our system does with each.
LOST TIME- On the 8th day out of work the carrier will begin paying the injured worker (IW). They will pay 66 2/3% of their Average Weekly Wage (AWW) for as long as they are unable to work. If they are out of work for over 21 days, they will be compensated for the first 7 days as well. If ONE DOLLAR of lost time is paid, the claim becomes an indemnity claim and consequently 100% of the medical costs will be used in calculating your Experience Mod and hence, your WC premiums.
These lost time claims fall into two main categories- large claims, known as shock claims and smaller claims that last for anywhere from a few days to a couple months. The simple truth is there is nothing we can do about shock claims. If a person falls from a roof and breaks their back, they are going to be unable to work for a very long time and that is why WC insurance exists; to pay their medical bills and help them with ongoing income while they are unable to work. It is why you as an employer have insurance, as no business is prepared for a large, long term loss without the help of an insurance company. Shock claim- turn it over to the insurance carrier and be thankful they are there.
Most lost time claims, however, are NOT shock claims. They are short term out of work situations. This we frequently CAN do something about and the math is very compelling. Companies that generate $40,000+ in WC premium, it is almost always worth making an attempt at keeping a claim from going to indemnity because of lost time.
There are two ways an employer can prevent a claim from paying lost time. The best and most common way is to bring the worker back to work within those seven days. This is commonly referred to as Return to Work (RTW); I prefer the term Recover at Work and will explain why in a future post. There are many good reasons for making a serious effort as a business to make a RTW policy the default approach to any WC claim that appears to have the possibility of lasting more than 7 days, i.e., going to lost time.
The most obvious reason to embrace RTW is that it has the potential to save you a ton on money on WC premiums. But it is also a great thing for employee morale, for both the IW and other employees. Actions speak louder than words and going out of your way to take care of your employees when they are injured speaks volumes to your entire workforce. Frequently, RTW may require a part time job posting in another position or involve some physical limitation or mechanical accommodation. Large companies will do almost ANYTHING to avoid lost time claims and there are entire industries created around assisting IW’s in whatever ways necessary to continue employment during their period of recovery. Small to mid-size companies may not have those types of resources to devote to a RTW program, but they absolutely can develop intelligent, effective policies that will not only help their IW, but save them huge premium dollars over time.
The second strategy for avoiding lost time claims involves something called wage continuation. This is actually the most powerful weapon in the arsenal, but it is one that has some controversy surrounding it. Basically, Florida law allows for an employer to continue paying an injured employee in lieu of having the employee be paid by the insurance company in the formula described above. The math is clear: most times it is substantially less expensive to continue paying an employee, rather than suffer the increase in your Mod and premiums that result from an indemnity claim.
There are issues involved in this, however, and I highly recommend that anyone considering this course of action contact me directly before doing so. There are minimum amounts you must pay, different ways of handling wage continuation depending on which insurance company you are using, understanding NCCI’s stance on this and much, much more. It is a very powerful option and I am strongly in favor of using it when appropriate, but please do not utilize it without complete knowledge of the issue.
In a future blog post I will go into detail about something we call Actionable Intelligence. That is a service where we utilize the WC software programs we have to give employers a real time estimate of what a given claim could potentially cost them, based on the type of injury, the amounts reserved by the carrier and the employer’s specific premium level and loss history. This not only shows the potential cost of the claim as reserved but we do a calculation of the cost if even $1 of indemnity is paid! You will be amazed at these calculations. Furthermore, it allows owners and managers to make business decisions based on REAL NUMBERS; hence the name Actionable Intelligence.
In the next blog post we will review the other two primary causes of indemnity claims- Permanent Impairment and Settlements. The picture is not as rosy with these two types, but it is still something you need to know.
TL;DR- Takeaways- Lost Time claims are the most common type of indemnity claims. Large claims (shock claims) cannot be avoided; that is why you have insurance. Smaller claims, however, can be managed to avoid indemnity and keep them classified as Medical Only. EVERY employer who generates a Mod and significant premiums should be aware of the tools available to them to manage these claims and partner with an agency that provides this service.
Next blog post:
WC 2.5- What We Can and Can’t Do- Part Two
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