by Preston Diamond, Institute of Workers Compensation Professionals

Five steps that can lead to lower Workers’ Comp premiums

While most employers focus on Workers’ Comp close to the renewal date, this is not the opportune time to control costs. The most important day of the year for Workers’ Compensation is the valuation date (aka, unit stat date). This date occurs six months after policy inception, the time when the insurance company sends loss information to the rating bureau to be used in the promulgation of the Experience Mod.

This information includes not only the money that the insurance company has spent on claims, but also what it expects to spend (the reserves). In effect, your insurer takes a snapshot of your loss information and it is absolutely critical that these numbers be correct. With few exceptions, once the bureau has the numbers, they are set in stone.

Don’t assume the numbers are correct. Errors are rampant in the system. The window of opportunity is short and the process of correcting mistakes can take time, so review all open claims at least 90 days prior to the unit stat date.

Pay close attention to reserves. The reserves are the anticipated dollar amount needed to cover all obligations of the insurer arising from the Workers’ Compensation claim. It is not a guess, but it is more of an art than a science. Its accuracy depends on the precision of the adjuster in evaluating the employee’s medical condition, anticipated time away from work, cost of medical care and other relevant costs. If the reserve is set too high, you will pay too much.

Of course all reserves are not too high, but here are five steps to ensure that your reserves are managed effectively:
1.Report injuries within 24-hours
It is well documented that early reporting of injuries leads to lower costs. If the agent isn’t made aware of an injury until 30-45 days after Joe Worker slips and falls on an oil spot on a factory floor, then it’s too late to intervene effectively. By then, it’s like trying to put toothpaste back in the tube.
2.Keep track of the injured employee
Maintaining contact with injured employees, shows employees that the employer is concerned about their recovery, improving the likelihood of cooperation, follow through with medical care and early return to work, and helps employers stay on top of the course of the claim.
3.Get injured employees back to work quickly
In many states, employers get a 70% discount for the injury on their Experience Mod if they return employees to work before lost wage payments begin. Even ignoring that benefit, employees who return to work in a transitional duty job, saves the employer from unnecessary lost wage payments that increase the Mod as well as the “soft costs” that accrue when employees are out of work. Additionally, it’s a bridge back to full duty, keeping employees active and part of the team. The longer employees are off the job, the more isolated they become and the less likely they are to ever return to work. Studies show that recovery at home is faster than staying home, which translates into lower medical costs and lower disability ratings.
4.Know the status of open claims
While monitoring open claims should be an on-going process, make it a priority to look carefully at open claims at least 90-days before the valuation date. In reviewing loss information, a key number to watch is reserves. Adjusters have a difficult job, looking into a crystal ball to determine the final cost of an employee injury. It is rare that the crystal ball gives them a clear picture, which often leads to reserves being higher than need be.

Moreover, insurance companies deal with thousands of clients and adjusters may have well over 100 open files they are tasked with managing. Employers must proactively work with agents to manage claims and when reserves appear to be too high, a cooperative, congenial approach with the adjuster can be effective in reducing the reserve.
5.Communicate with the treating physician
Too often, reserves aren’t lowered due to a lack of communication with the treating physician. Adjusters don’t have the time to hound a doctor to call back. While a physician’s first responsibility is to the patient, the more the physician knows about the job, the return to work possibilities and the employer’s commitment to the injured employee, the more the physician will work with you. Establishing a close relationship with quality medical providers who understand work-related injuries is key to managing costs over the long term.

A concerted focus on all open claims well in advance of the critical valuation date will help identify errors and excessive reserves that lead to higher premiums.

An emerging trend in the insurance industry is that the risk from organized fraud activity is becoming a more and more of a problem.

The National Insurance Crime Bureau (NICB) recently released a report indicating that suspicious claims are up 24 percent over 2008 and medical providers are a growing part of the problem. The Report provides some interesting data:
• Most of the referral reasons reflected on casualty claims have to do with staged accidents or medical provider fraud: including excessive treatment, inflated billing and solicitation. Every casualty claim referral reason saw an increase in volume this year except for a small 1 percent decrease in slip-and-fall claims.
• Suspicious towing and storage charges were up 116 percent. Inflated tow charges are buried in the repair bill and hard to spot.
• Five out of the top six fastest growing miscellaneous referral reasons are connected to staged accident activity: vendor fraud, attorney activities, organized group/ring activity, medical provider, and medical provider/attorney relationship.
• Among workers’ compensation claims, inflated medical billing leads the category with a 38 percent jump suggesting that the focus may be shifting from claimant frauds – which still have the highest volume – to medical provider frauds.
• While medical provider-based frauds lead the way, organized fraud can take other forms. For example, auto glass fraud is up a whopping 450 percent.
• Somewhat surprisingly, arson referrals continue a decline. Despite assumptions that home owners torching their properties for insurance money, arson/fire claims have decreased over the past two years. And in the commercial market, arson/fire claims are down 11 percent this year.

The California State Compensation Insurance Fund offers these ten practical tips to fight fraud. Gary Zeune, gzfraud@gmail, and I have added a few edifications:

1. Show your employees you care about them: Companies that treat workers fairly and with concern have the fewest job injuries and fraudulent claims. Makes common sense doesn’t it, but I will do some research and supplement with data.
2. Maintain a safe work environment: Every employer should have an injury and illness prevention program. In each state you operate you should familiarize with state laws concerning these programs.
3. Educate your employees about Workers’ Compensation: The law requires you to inform your employees about their workers’ compensation rights. Do you have your  employees acknowledge the receipt of this information?
4. Establish procedures for reporting accidents: Familiarize employees and supervisors with Workers’ Compensation reporting procedures and have appropriate report forms on hand. Again familiarize yourself with state laws on what is required.
5. Handle fired workers with care: Disgruntled ex-employees can be more likely to file false claims and can be easy prey for unscrupulous professionals.
6. Publicize your tough stance against fraud: Encourage your carrier to investigate all suspicious claims, fight all improper claims and turn over all evidence of criminal wrongdoing to the district attorney’s office for prosecution.
7. Investigate immediately: Investigate all injuries thoroughly.
8. Pave the way for a smooth return to work: Keep in touch with injured employees and make it clear you’re looking forward to having them back at work as soon as the doctor gives the go-ahead.
9. Don’t be an unwitting part of the fraud problems: There are several ways by which an employer can be accused and found guilty of Workers’ Compensation fraud. Don’t let it happen to you. Be aware that the following actions may be considered fraud:

• Knowingly providing false or misleading information regarding entitlement to benefits to discourage an injured worker from filing or pursuing a claim.
• Knowingly giving false information that causes the carrier to either deny benefits that should be paid or pay benefits that are not due.
• Knowingly giving false information for the purpose of reducing the premium, rate or cost of your Workers’ Compensation insurance.

Protect yourself by acting responsibly: Fraud is a serious accusation that, if not handled correctly, could put you in the middle of a lawsuit for libel or slander.

Workers’ Comp Red Flag Checklist

The Institute of Worker’s Compensation Professionals in its recent advisory has developed a helpful checklist to red flag worker’s compensation fraud in the workplace. See www.workcompprofessionals.com/ebulletin.html.

While most Workers’ Comp claims are legitimate, fraudulent claims occur and drive up costs unnecessarily. Red flags are indicators that the claim requires further investigation to assess legitimacy. The applicability of one or even several of these flags does not necessarily mean the claim is fraudulent, but it warrants further examination:

1. Unexplainable delay in reporting
2. No witnesses to the alleged injury-producing incident
3. Insufficient detail was provided surrounding the injury-producing incident
4. Alleged injury seems inconceivable considering the work which the claimant performs
5. Injury is not visible (e.g., soft tissue injury)
6. Degree of injury is not likely to result from alleged injury-producing incident
7. Allegations or rumors of fraud and/or the claimant has been observed working elsewhere
8. Incident was reported on a Monday morning (or after one or more days off work)
9. Claimant has recently purchased disability insurance
10. Claimant is a new employee
11. Claimant has no health insurance coverage
12. Claimant has used all available sick days and vacation days
13. Claimant is known to have personal financial problems
14. Claimant is physically active outside
15. Claimant has submitted Worker’s Compensation claims in the past
16. Inconsistencies revealed from the claimant’s initial description of the injury-producing incident
17. Claimant is unusually familiar with the Workers’ Compensation system
18. Claimant is uncooperative and/or objects to administrative controls intended to address Workers’ Compensation fraud
19. Claimant does not provide a street address for a residence
20. Employer is frequently unable to contact the claimant while off work due to an alleged injury
21. Claimant obtained legal representation soon after the alleged incident and/or has obtained legal counsel with a questionable reputation
22. Claimant has indemnity checks mailed to his/her residence
23. Subsequent medical evaluations apparently contradict the initial evaluation
24. Employee has missed scheduled physician visits or rehabilitation appointments
25. Treatment being provided seems more extensive than the injury warrants
26. Claimant has changed medical providers more than once after the initial treatment
27. Claimant has been referred to a medical provider close in proximity to the referring medical provider