***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.***
There are many types of claims, but for our purposes we will focus on two broad categories that constitute the vast majority of WC cases. They are Medical Only (MO) and Indemnity.
Medical Only: This type of claim is exactly as it would appear; the only payments made by the insurance company are medical bills and expenses involved in processing the claim or providing the medical treatment for the injured worker (IW). The majority of claims are medical only (MO). Employee gets hurt, claim is reported to the carrier, employee receives treatment and insurance carrier pays 100% of the bills associated with the claim.
This is a good time to introduce a couple vital points: First, it should always be the goal of the employer to obtain the very best medical treatment available for their injured worker. Medical bills are paid at 100% and are unlimited. This is NOT an area where we should attempt in any way to “save” money in the claims process. Second, our ultimate goal is to get our IW back to work as soon as possible, therefore the best medical treatment is what we want in furtherance of that goal.
Indemnity: This is the second broad category of claim and it most commonly encompasses one of three types of payment by the insurance company that result in it being categorized as an indemnity claim. There will, of course be medical bills associated with the claim as well.
Here are the three most common reasons a claim becomes indemnity:
Lost Time- In Florida, if an IW is out of work for more than 7 days, on the 8th day the insurance company will begin compensating them for lost income. They will request a wage statement from the employer showing their income for the 13 weeks prior to the injury, they will take the average for those past 13 weeks (Average Weekly Wage-AWW) and the IW will be paid 66 2/3% of that number for time missed. This is the law and insurance companies are monitored closely to assure that they are paying IW’s fairly and promptly. (There are MANY details and what if’s that surround lost time, but for now, let’s keep it simple). If even $1 of lost time is paid on a claim, it goes from MO to indemnity.
Permanent Impairment- When an injury is serious enough that it causes permanent damage to an IW, they are entitled to receive compensation for that. Frequently, this will be a result of surgery that may limit the IW in some way such as ability to lift, range of motion, etc. These impairments are measured on a percentage basis and can cover virtually any area of the body, internal or external. The percentages are dictated by tables that guide physicians in assigning the appropriate percentage of permanent disability based on the individual injury or injuries. Any payment made as a result of permanent impairment automatically moves a claim from MO to indemnity.
Settlements- The third most common way for a claim to move from MO to indemnity is through a settlement. They fall into two categories: Claims with attorney involvement and those without. If an attorney is engaged by the IW to represent them, the case almost always results in a settlement of some sort. The second category is when the insurance company feels that all has been done to help an IW and, in the interest of closing the case, offers the IW a settlement to cover any future medical or other financial costs arising from the injury. Again, if a settlement of any type is paid to an IW, the claim is moved from MO to indemnity.
This is a very cursory and uncomplicated treatment of medical only vs. indemnity, but it is vital that you understand the distinction. We will deal with each of these in detail as we build upon the knowledge required to properly manage your WC claims. Because in this, as in so many legal/financial/insurance/HR related issues, the devil is indeed in the details.
Now that you have this as a foundation, please move on to the next blog post. That is truly where the rubber meets the road when it comes to saving money on your WC costs. The MATH of this will astound you and prove to you the VALUE of developing a plan and partnering with someone who can make certain you don’t fall victim to a system designed for you to do just that.
TL;DR-Takeaways…There are two main types of WC claims- Medical Only (MO) and Indemnity. MO is when only medical bills are paid, indemnity is when other types of payments are made in addition to medical bills. In the next post you will be shown the huge financial impact the difference between these two types of claims can have on your Experience Mod and WC premiums.
Next blog post:
WC 2.3- How Indemnity Impacts Your Premiums- The Math
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