An ACTUAL guide to Worker’s Compensation Claims Management
Home|An ACTUAL guide to Worker’s Compensation Claims Management
Almost every broker and every insurance carrier will boast about their “Claims Management”. It’s a phrase that’s incredibly overused and means something different to everyone who uses the term. This waters down the meaning, though, and it leaves you forced to wonder – what does anyone actually mean when they use the term?
For us, the Claims Management process starts as soon as we begin working together and does not end, for as long as your company is doing business.
We are not another company using the same term in a vague manner. In fact, we’re redefining exactly what “Claims Management” means. This article takes a deep-dive into the level of thoroughness we believe is necessary for any claims management strategy to be effective.
Claims management is the most direct way to reduce Work Comp costs
Worker’s Compensation insurance claim costs are the number one factor that determines your company’s X Mod Rating.
Your company’s X Mod Rating is the number one factor that determines the cost of your Work Comp premiums.
Once you understand what an X Mod is, you’ll quickly notice that when you reduce the frequency of Work Comp claims and reduce the costs associated with any injuries that do become claims, you can significantly reduce the cost of your Work Comp insurance. With this understanding in mind, our Claims Management process is designed to minimize the number of injuries that must be reported as a Worker’s Compensation claim and to reduce the claims cost of any injuries that do have to be entered into the system.
In order to understand why the process works and what claims costs actually matter, you need to understand exactly how the X Mod is calculated.
To put it simply, the X Mod is calculated through a comparison of Expected Losses vs. Actual Losses. The X Mod starts at the statewide average number of 1.00 and is used as a direct multiplier in the calculation of your premiums. If your company has exactly as many Actual Losses as Expected Losses, you will have an X Mod of 1.00 and it will have no impact on your premiums. If the Actual Losses that you experience are greater than the Expected Losses, your X Mod and premiums will go up. If your Actual Losses are less than Expected Losses, your X Mod and premiums will go down.
Expected losses are the total dollar amount of losses that your company is expected to have within your rating period. These losses are determined by what type of work you do (class codes) and how many employees you have doing the work (payroll). Actual losses, on the other hand, are the total dollar amount of losses that are actually paid out on your company’s Work Comp claims.
The Rating Period for X Mod calculation is the trailing 3 of the last 4 years. For example, when calculating your X Mod for 2022 – the rating period includes your policy years that began in 2018, 2019, and 2020. It’s the trailing 3 years, so 2021 would not be included in the calculation of the X Mod for 2022.
The next two figures to be aware of are the cornerstones to an effective claims management strategy: the Primary Threshold and Primary Impact Ratio. The Primary Threshold is the maximum loss value of each claim that will have an impact on your experience modification and future premiums. It can be thought of as a cap on the dollar amount for which each individual claim can impact your X Mod. Once the cost of a claim goes beyond the Primary Threshold, all the extra spending beyond this value does not factor into your X Mod calculation. To determine how drastically any spending within the primary threshold will truly impact your X-Mod and future premiums, we use the Primary Impact Ratio. The Primary Impact Ratio is a multiplier that demonstrates how much you’ll pay in future premiums for every $1 that the carrier pays out on your Work Comp claims. The Primary Threshold is determined by the WCIRB (Worker’s Compensation Insurance Rating Bureau) and the Primary Impact Ratio is calculated by our data team each year as your X Mod and premiums are updated. To further the example, the graphic below shows how different claims would impact this sample company based on a Primary Threshold of $10,000 and a Primary Impact Ratio of 4.00.
When you look at your Loss Runs or claims data, all insurance companies sort the claim financials into 3 major categories of claims costs. The first category is Medical Costs and these do impact your X Mod. Medical costs are associated with any type of medical treatments and visits. These include doctor’s appointments, MRI’s, stitches, casts, therapy, etc. The second category is Indemnity Costs and these do impact your X Mod as well. These costs consist of any temporary or permanent disability that causes an employee to have lost time or opportunity at work. The last category of claim costs is Expense Costs and these have no impact on your X Mod. Expense costs are for other expenses that go towards the handling of your claims, such as legal fees or investigative costs. As we move forward in this article and describe how we make strategical decisions within our platform, it will be important to understand the difference between each of these.
The final item to be aware of before we get into our process is called Reserves. Reserves are claims costs that are set aside for future expenses on a claim. For Example, let’s say one of your employees cuts their hand and goes to the doctor. The doctor might clean the wound and apply a bandage, then schedule a follow up visit to make sure it’s healing properly. For this visit, your insurance carrier pays out $500. Then, your insurance carrier can reserve $20,000 for the rare chance that when the follow up visit takes place, the wound has become infected, and the hand has to be amputated. Though not exactly likely, this could result in multiple surgeries and a lengthy post-op recovery. The problem with claim reserves is that they’re almost always set aside with a worst-case scenario in mind. This is a problem for employers because when your X Mod is calculated, reserves impact your Experience Mod as if they were actually spent! If your company was in the same situation, like this example provided above, this claim would show up as a $20,500 claim even though only $500 had actually been spent to date. A large part of our process involves the reduction of claims reserves – now you’ll know why this is so important to maximize results.
For those of you who are following along so far, let’s get into the good stuff. How do we take all of this information and put it together – in order to provide the most effective claims management platform available?
Step 1: Onboarding, Training, and our Proactive Approach
Once we’ve partnered up with a new client, our team will coordinate with your team for an Onboarding meeting as soon as your leadership team is available. During Onboarding, we provide access to all the resources that Whiteboard offers, answer any questions that you might have, and make sure that we customize our process to fit the needs of your company’s specific operations.
During this meeting, the claims management process truly begins. We provide the information needed to contact our Triage Response team (we’ll get into the details on this later) and we’ll also provide access to our Whiteboard Document Library. This is a file of documents that were crafted with our partnered Work Comp defense counsel, to make sure your company is prepared to effectively document anything that might be needed for the most effective result on your claims. We’ll go through some of these documents further along in this article, but the one we need to address up front is called the Workplace Injury Acknowledgement.
We ensure, during Onboarding, that your team has a way to roll all this new information out to your employees. We provide in-person trainings with your staff, training videos made by our team, and we can help prepare your supervisors/managers to train employees on the new procedures as well. An important require that Whiteboard implements with your staff is that injuries, no matter how small, must be reported immediately. It’s important that employees are trained on these procedures as soon as possible so that they can be held accountable to their commitment to the process as well. After your employees are trained, we suggest that they sign an updated version of your employee handbook or sign their first signature on a Workplace Injury Acknowledgement.
Once they’ve signed their understanding of the new procedures, we’ve laid the groundwork. To follow this up, we recommend that you have employees re-sign the Workplace Injury Acknowledgement on a monthly basis (or any regular basis that fits your company’s operations). This form takes away all the loopholes that employees (and their attorneys) can use in court when filing a questionable work comp claim.
The only way to be successful, especially in a state that is as employee-friendly as California, is to have a pro-active approach and to start this documentation before any injury occurs. We use our Onboarding meeting with your team to make sure the plan here is understood and to make sure that you have a way to accomplish these regular signatures with your employees.
The Workplace Injury Acknowledgement has proven incredibly valuable for stopping a variety of questionable claims – Post Termination, Cumulative Trauma, Repetitive Motion, Late Reports, etc. A proactive approach is the only way to achieve a positive outcome, so we build a defense before any questionable claims are made. If any of your employees report a claim late – or otherwise fail to follow the expectations set out in our protocols – we will notify you in our notice of injury report and we will provide documentation to make sure that the failure to follow procedure is documented.
Step 2: Triage and Self Care
So, you’ve been through Onboarding and your employees are regularly documenting their understanding of our process. What happens when an actual injury takes place? Glad you asked.
Whiteboard provides your company access to a 24/7 Triage Hotline. Our technicians can speak English and Spanish – and if another language is needed, we use the same translation service that’s used by 911. Long story short, any employee can call at any time and get the help they need.
Once the injury is called into our hotline, we can provide care for your employees under the OSHA guidelines for 1st Aid. Your employees have access to a Certified Nurse that can provide telephonic assistance, and for injuries that would benefit from in-person assistance, we can also dispatch an Injury Technician who goes out to your jobsite and provides care at the place of injury. Using the combination of telephonic and in-person care, we can keep 87% of all workplace injuries from having to be referred to a clinic.
I’m sure you know that you can give your employee a band-aid and you’re not required to report that as a Work Comp claim, right? All we’ve done is figured out exactly where that line is drawn in the sand – and we provide all the resources that an employer is allowed to use, as stated by the labor code. Since we can keep 87% of incidents from going to a medical facility, they do not have to be reported as a Work Comp claim, period.
If an employee calls into our hotline and it’s determined that they do not need to enter a medical facility: we provide care for the employee at the time of injury, then we provide aftercare instructions (so they know what to expect as they recover), and then we follow up 24 & 72 hours after the incident to make sure that everything is healing as expected and the employee is comfortable with the treatment they received.
You’d be surprised at the large variety of injuries that we can be successful with – even within the guidelines established by OSHA for 1st aid. We can treat lacerations, contusions, soft tissue injuries (such as sore back, knees, shoulders), debris in the eye, and more!
During our training process that takes place after Onboarding, we make sure that all of your employees know exactly how the process works, what to expect, and how to take full advantage of this resource. It’s a benefit to the employees, too. This means that they don’t have to get rides to a clinic, wait in a waiting room for ours, and deal with it all again during any follow-ups. This is an advantage to employees because their injury treatment is significantly more personal and efficient – and an advantage for your company because there are no claim costs involved that would otherwise impact your X Mod.
Here’s an idea of what this process would look like:
We require all injuries – except those that threaten life or limb – to be called into our hotline. This allows us to take a recorded statement at the time of injury, which will also help us combat potential fraud in the future. We’ll quickly confirm that emergency services are not necessary, and then we’ll set the injured employee up with their telephonic care or in-person care as needed.
If this process is successful, and we’re currently operating at an 87% success rate, then no Work Comp claim would need to be filed. If we do have to refer your employee to a clinic, then our claims process begins.
Step 3: We drive the direction of any real claims to ensure they’re closed as quickly as possible and with the fewest amount of dollars spent.
Once your employee must be referred to a clinic, a Workers Compensation claim must be filed. We’ll send you a notice of injury and provide the claim forms that need to be submitted to your carrier. At this point, this incident is passed on to our claims managers who will follow the claim through to closure, ensuring it closes as quickly as possible, with the least amount of impact on your X Mod.
As you can see in the flow chart above, there is a lot going on between the referral to a clinic and the closure of the claim.
MPN Referral & RTW Directives
During Onboarding, we will pull your insurance carrier’s MPN. This is the Medical Provider Network of doctors that are authorized to treat Work Comp injuries for your carrier. Once we have the insurance carrier’s MPN list, we map our own list of preferred clinics on top of the carrier’s MPN. Whenever your employees call in an injury that needs to go to a clinic, we make sure they’re sent to a conservative and trustworthy clinic on the list that your carrier has pre-approved.
Since we know how your employee was injured and what clinic they’re going to, we call the facility while your employee is on route. On this call, we place a notice of authorization on file so that your employee will get more efficient treatment and we provide the doctor with our Return to Work directives. The RTW directives are a crucial step in the process, because they inform the doctor that we can provide modified duty up to the point of bed rest. Our goal here is keep the doctors from doing what they do all too often – make the employee “Off work” – as soon as they know they’re treating a Work Comp patient. We want to avoid this, because if the doctors do give physical work restrictions, we have the ability to accommodate these. We want to accommodate work restrictions (in most cases) because of your Primary Impact Ratio. It’s much more cost-effective to accommodate modified duty (in most cases) because if you do not, your insurance company will pay the employee for their lost time from work, and you’ll pay that money back to the insurance carrier on an average of $3 for every $1 they spent (remember the Primary Impact Ratio). It’s significantly more advantageous, from a financial standpoint, for employers to accommodate modified duty than to let the employees incur any time off work. There are rare instances where this is not the case, but we’ll cover that shortly in the ODG section of this article. Our team is going to be there to guide you through the most effective strategy for each case-by-case basis.
Employee Concierge Introduced to Employee
After your employee is seen by the doctor, our bi-lingual Employee Concierge (also called Employee Liaison) will reach out to the injured employee to see how the first visit went. At this time, our Employee Liaison will introduce themselves and explain to the employee that their only job is to help the employee throughout the life of the claim. We explain that if they have any questions at all, we are here to be a helpful resource to them. We can assist with anything having to do with their Worker’s Compensation claim: transferring to a new doctor or clinic, rescheduling appointments, helping to get their prescriptions authorized, helping to understand Work Comp letters (often containing a lot of technical jargon), helping to fill out forms, explaining where their paychecks will come from during the life of their claim, and much more.
The reason that we do this is twofold. One, it provides a significantly higher level of care to the employee. Although we often talk about saving money for employers and combatting excessive claims cost – this is not at the expense of honest care to the employee. We strive to take care of our client’s employees and make the process as easy and straightforward for them as possible. A direct result of this higher level of care means that there are significantly fewer obstacles that they must hurdle during the life of their claim. This reduces the duration of claims and the overall headache on employers and employees alike.
The second reason we’ve incorporated an employee liaison is that this higher level of care for your employees significantly reduces litigation. In such a litigious state as California, there will always be employees who are simply looking to take advantage of the system. Outside of those who are out litigate from the start, the most common reason a Work Comp claim becomes litigated is because the employees simply feel out of their depth and don’t know how to deal with the forms, the MPNs, and all the bureaucracy that comes along with a claim. By assisting the employees with any questions or concerns, they no longer feel the need to involve an attorney. The involvement of an attorney would significantly increase the cost and duration of a claim – so reduction in litigation is a major win.
Our Employee Liaison follows up with the employee after each visit to make sure that everything is moving forward smoothly. The Liaison will relay information to our claims team, as necessary, to make sure that we’re all operating with the most up to date information – allowing to be as effective as possible.
Strategy Call, ODG Outlooks & Offers of Work
While our Triage team is placing our Return to Work Directives on file with the physician and our Liaison is introducing themselves as a helpful resource to the employee, our Claims team is also receiving the notice of this new injury and preparing for a strategy call with your team. When an injury is called into our hotline and referred to a clinic, our Claims Manager assigned to your account will prepare a strategy for early-handling on the claim and this will always be provided to you in the first 24 hours.
In order to determine strategy, we run a Medical Cost Forecast using ODG Outlooks on the given injury. ODG by MCG is a nationally renowned organization whose guidelines serve the workers’ compensation and disability markets. They use a combination of evidence-based medical literature (“evidence-based medicine”) with claims data analytics (“data-driven medicine”) to work in concert to optimize outcomes with the right levels of intervention. This allows our team to get highly specific in determining the expected costs of the claim based on your employee’s injury, age, job requirements, and much more.
To understand why we run an ODG, we need to go back to the all-important Primary Threshold concept. Remember, this is a cap-value that determines the maximum amount that a claim can impact your X Mod and premiums. When an injured employee is recommended treatment that may be extreme or unnecessary, there is a Utilization Review process for each carrier that will make sure only necessary treatments are authorized. Within the realm of necessary treatments, there is little that we can do to control Medical costs. If your employee has a broken bone and needs a cast, there is little we can do to change that, and there’s a schedule that determines the price of a cast for a Work Comp claim. So, the point here is that for all intents and purposes, Medical Costs are pretty much set in stone.
Indemnity costs (remember, these come from employees’ lost time from work) are not set in stone. These are completely under the control of an employer with a pro-active plan. In our ODG report, we run an expected Medical Cost for your employee’s injury and we compare this expected cost against your Primary Threshold. If the expected medical costs are over your Primary Threshold, this is the rare occasion in which we will recommend that you do not need to offer modified duty. Since medical costs are just about set in stone, and the expected medical cost is over your Primary Threshold, this claim will impact you for the max amount no matter what indemnity costs are involved.
When the medical costs are expected to be under the primary threshold (and this is often the case), then we recommend that you do bring the employee back to work. Since there will be claims costs left over, under your primary threshold, we will ensure that the carrier pays out no indemnity costs by making sure your employees don’t lose any time from work.
If your employee goes to the doctor and does not provide work restrictions, then we make them an Offer of Full Duty. If the employee does have work restrictions, we make them an Offer of Modified Duty. Once again, this is why it’s critical that we provide RTW directives so that the doctor gives tangible work restrictions instead of simply taking the employee off work outright.
If there are no Modified Duties available within your operations, we can set your employee up with work through a non-profit placement program. This requires the employee to work a job for a non-profit company, with minimal physical requirements, until they’re healthy enough to work back into your operations. Since they won’t be out of work for any amount of time, the carrier does not have to pay them any short-term disability. This creates a reduced claims cost and a lower X Mod for the three years that each claim is on your rating period.
This is a lot of information. We’re still in the first 24 hours of a new claim and there is already multiple varieties as to how different situations could be most effectively handled. Just to be clear, you don’t have to memorize all of these and make these decisions yourself. All of the information that we just described will be relayed to you on a case-by-case basis in your 24-hour strategy call with your claims manager. We will develop a specific strategy for each incident – and the strategy will evolve and adapt if there are any changes throughout the life of the claim. Our team will make sure that your team understands and can facilitate the strategy – then we take it from there.
Our Claims Managers drive your claims to efficient closure.
Once we’re through the first 24-48 hours on the claim, our team will have done all of the steps above to prepare you and your employee for the most efficient resolution of their injury. Your claims manager will then follow up with the adjuster after each doctor’s visit to confirm the claim is progressing as expected. We will also monitor medical improvement to ensure that the adjuster is updating their reserves on the claim, as appropriate.
Six months after your policy renews each year, you have something called your Unit Statistical Reporting date. On this date, each year, all of your past insurance carriers submit claims data for your company. This data is sent to the WCIRB, for the purposes of calculating your next X Mod. Since this snapshot of claims data is going to include reserves as actual dollars spent, we review the open reserves with your carrier in the 90 day window prior to your Unit Stat Date (USD). Your claims manager will request a “reserve rationale” from the carrier and make sure that every single dollar set aside in reserves is justified. This process, combined with our follow ups after each medical visit, will result in significantly reduced claims costs as the claims are no longer able to be inflated with outdated reserves.
We would then continue this process until your claims are closed. In most cases, a successful closure for the insurance company is the same thing as a successful closure for your company. You don’t want the costs to go up and neither do they. However – because of your Primary Threshold, there does come a point in the claim handling where your interests and the carrier’s interests may diverge. In these instances, we monitor any suggested settlements on your open claims to make sure that each settlement is offered with the best interest of your company in mind (and not the best interest of the carrier alone).
This section is left until last because Fraud Prevention is not one step but many, all built into the various elements that make up our platform.
Our process is very beneficial to your employees. If they get hurt at work, they can receive care on the spot – without having to get a ride (or drive) to a clinic, waiting in a waiting room, driving elsewhere to pick up prescriptions, etc. If they need a follow up after we provide treatment, we can send someone right out again to help them, wherever they are. If they do experience an injury that needs to see a specialist and has to become a work comp claim, we reduce the headaches of dealing with all the red tape that accompanies a claim by providing the help of our employee liaison. In making this process significantly more amenable to the employees, we reduce their behavior that would otherwise drive up the cost of your claims.
The Workplace Injury Acknowledgement form is one of many documents that we have prepared to make sure that we record anything that may be needed in writing, prior to any litigation or questionable claims. When your employees call into our Triage hotline, we take a recorded statement at the time of injury. This is the time when employees are most honest and are least likely to have already spoken to an attorney – so we can get a useful statement to defend against any added body parts or exaggerated injuries down the road. By following up with the employee (via our Liaison) and the doctor (via our Claims Managers and the adjuster) after each subsequent visit – we can guarantee that no unnecessary treatment is being provided and that the treatment plan is reserved to injuries sustained from work. We’ll also contest the carrier on any settlement offers that don’t have your company’s interest as the top priority.
Nearly five thousand words later, this is a good overview of our process that is already demonstrating a revolution in Worker’s Compensation claims management. Believe it or not, we could elaborate on most of these details even further – for anyone that would like to schedule a call and learn more! In addition to this process for claims, our company also offers a variety of ancillary resources to make sure that we’re leaving no stone unturned for our clients. We provide claims reviews, an interactive claims portal, Human Resources support, safety and training services, and more. We’ll save those for the next article. Until then, when you hear someone refer to Worker’s Compensation “claims management” – don’t settle for anything less.