During Business Insurance’s recent Workers Comp & Safety Virtual Conference, keynote speaker, William Zachry, vice president of risk management for Safeway, Inc. talked about the top ten cost drivers for workers’ comp claims at Safeway. While it’s important for each company to assess and identify its own top cost drivers, most will find common ground with those identified by Mr. Zachry.
1. Employer hiring (firing) practices and poor employer/employee relationship
A worker’s compensation claim often begins at the point of hire. The employer, employee and the employee’s family all lose when an employee is placed in a job for which he/she is not fit. Injury or re-injury of a pre-existing condition is likely to happen if the employee is not physically capable of doing the job. That’s why a conditional offer of employment and a pre-placement physical and drug testing, in compliance with all applicable laws, is a valuable part of the hiring process.
When there is an injury, the employer/employee relationship affects claim reporting, duration, return to work, and litigation and ultimately the cost of the claim. Delays in reporting claims can occur because employees are not trained or mandated to immediately report the injury or they fear they will be fired or the claim denied. A recent study by the Workers’ Compensation Research Institute (WCRI), an independent, not-for-profit research organization based in Cambridge, Massachusetts, validated that trust in the workplace was one of the most important elements in the duration of a disability and the time to return to work.
2. Lack of injury prevention mitigation
It’s important for employers to understand how much money prevention has saved them. How does claim frequency compare to others in the same industry? How many widgets have to be sold or man-hours worked to pay for one lost time claim?
Today, ample data is available to track injury trends and identify prevention interventions that can reduce injuries and create value for the company and the bottom line. When the financial arm understands the cost of loss and saving opportunities in both hard and soft costs, prevention mitigation is viewed differently.
3. Attorney involvement
Simply put, if a claim is litigated, it is going to cost more. An employee’s attorney is often paid based on how disabled they make the employee appear and has little incentive to return the employee to work. A California study suggests that temporary disability claims are between five and six times higher when an attorney is involved. Time away from work and claim durations are also longer.
The employer/employee relationship plays a key role in the decision to litigate. No or poor communication from employers threatens employees, leading them to fear they will be fired or laid off or their claim denied. Payment delays can also precipitate attorney involvement.
“Calls from the supervisor or owner of the company asking if the injured worker understands his or her benefits, if the benefit notices were confusing or if the medical care is good, and if there is anything that the employer can do for the employee (can have) a massive effect on reducing litigation,” Mr. Zachry said.
4. At-risk employees for delayed recovery
In some cases, workers are unable to cope with their injuries and do their part to return to work. Mr. Zachry notes that identifying those workers at higher risk, such as those with adverse childhood experiences or lack of support at home, can prompt earlier intervention leading to lower claim costs.
Furthermore, the right care at the right time is critical to controlling the life of a claim. Identifying red flags of slow recovery and intervening early can mitigate what he refers to as the “sisterhood of the traveling body parts,” where a relatively minor injury results in multiple surgeries or massive disability for no apparent reason.
5. Retirement claims
There are some claims where employees are within a few years of retirement and consciously or unconsciously are looking for a way to retire. A workers’ comp claim is viewed as a “bridge” to retirement. The best way to identify such claims is to look for claims where the injured worker is older than 55 years old and the claim is not progressing at all. The best solution is to move toward settlement as quickly as possible.
6. Failure to electronically connect utilization review (UR) to bill review
An independent study of fraud and abuse in the California work comp system found that 25% of medical aid was not authorized by the insurance company and was not evidence-based medicine. When the bill-review system is not directly connected to the utilization-review process, many bills are paid even though the procedure was denied or the treating physician did not request authorization. When the matching process is done manually, errors occur. While bill review companies may say that the system is automated, an independent audit of the vendor can reveal that not all payments were authorized.
7. Claim with Opioid or Psychotropic Rx
Claims that involve opioids or psychotropic prescriptions statistically are likely to have total higher claims costs. While there have been efforts to curb the use of such drugs in the workers’ comp system, the use remains frighteningly high. The issue is complex and we addressed it in our June issue.
8. Fraud and abuses
Many employers believe that claimant fraud is rampart in the workers’ comp system; however, the reality is that very few claims are fraudulent. Yet, there is significant medical provider fraud and there are countless ways this can occur. It’s important to educate adjusters and report all suspicions of fraud.
9. Claimant obesity
Comorbidities add significantly to claim costs and in many cases the claims adjuster may not know about them. If an injured employee is obese, has high blood pressure, diabetes or other known comorbidities, it’s critical to let the adjuster know at the inception of the claim so that the appropriate intervention can begin early.
10. Inappropriate incentives
It’s important for employers to understand some of the incentives in the system that conflict with the best possible outcomes. Some examples are:
• Attorney fees usually based on disability of injured worker• Injured worker does not report injury for fear of being fired
• Employer does not report claim to avoid impact on Experience Modifier
• Workers’ comp is one of the last fee-for-service systems, which incentivizes physicians to over treat or dispense pharmacy from their offices
by Tom Greco, CPCU, CIC