Albert Einstein said it best: “Insanity: doing the same thing over and over again and expecting different results.” This holds true in workers’ compensation, since U.S. employers have followed the same process for managing claims for the past 40 years. And yet in today’s environment, claim costs continue to rise and employers have been left shouldering the burden of an outdated process.
In the past, managing workers’ compensation claims focused on creating a process to manage information rather than manage desirable results – such as reducing the cost of claims. Employers find themselves captive to systems created by the administrative agencies in the individual states that are responsible for the overall policy issues that impact the workers’ compensation system. In response to the rules and regulations, insurance companies and/or third-party administrators have developed rote processes that, for the most part, follow the same set of guidelines. Ultimately, the system and its underlying process limit employers by managing their programs just like every other employer and operating under the theory that “a claim is a claim is a claim.”
The real insanity begins for those employers that have one or two medium to large claims that are managed by the inertia of the system rather than the desired outcome of cost control. Once the large claim(s) passes through the employer’s experience, the vast majority of these companies are lured back into the same system of service and management that resulted in higher rates in the first place.
While the goal of every program is to prevent losses from occurring, most employers simply cannot prevent all accidents. Employers that are the most successful in controlling the cost of claims when losses do occur have one thing in common – PREPARATION.
We begin first with “pre-loss” preparation, and what an organization can do before a loss occurs in order to focus on cost control. Often the person responsible for workers’ compensation has many demanding responsibilities. Most organizations do not have the internal expertise to understand and manage the process. Workers’ compensation is a complex area combining the financial, legal and medical disciplines.
The financial aspects of workers’ compensation claims are controlled by insurance carriers, or in the case of self-insurance, the claims management function, which is usually a third-party administrator. Legal issues are controlled by the legislature, the administrative agency in each state, the courts, and ultimately the attorneys who represent employers and employees in claims. Medical issues are controlled by the physicians who treat injured employees. These three disciplines are often vertical towers that have exclusive functions and often do not communicate well, since they are focused on their individual roles within the system. Employers that are the most successful at managing claims have learned to manage all three of these disciplines and coordinate communication and cooperation among all three sets of professionals.
STEPS TO TAKE DURING PRE-LOSS PREPARATION
On a pre-loss basis there are four critical steps an employer must take to create the groundwork to best manage claims. First, create an organizational interdisciplinary management team. Too often workers’ compensation is “fit” into the human resources, finance, safety or risk management function. The truth is that each of these disciplines within a company needs to participate in pre-loss management. It is preferable that each of these functions have either direct or indirect input into how to manage the process. The direct management function should have working knowledge of the insurance contract or the service agreement with the third-party administrator (TPA). If you do not have an organization where such a team is possible, make sure to thoroughly outline responsibilities and to-dos if a claim were to arise. This list should include:
Familiarity – Designate who is the primary contact with the insurance carrier, and make sure that person talks directly to the intake people at the carrier to understand what information is needed in the event of a claim. Too often claims get sidetracked by a lack of information. Delays in claims management cause increases in the cost of claims.
Compliance – Designate who is responsible for tracking regulatory issues such as reporting of workers’ compensation claims. It is important to know and understand the deadlines you have regarding information gathering in response to an accident.
Communication – Provide online access to the claims information system to the adjuster, medical/disability manager, utilization review provider and bill review provider.
Second, you should insist on establishing protocols with each of the vertical towers. Within the financial tower, you should focus on creating management triggers such as adjuster caseloads, reporting protocols, reserving authority, fraud trigger, and the sources used for treatment and duration guidelines. Within the legal tower, insist on meeting and knowing the attorneys who will represent your company. Know their experience levels and know their case loads. Don’t hire a law firm; hire an attorney with the expertise and time necessary to navigate your state’s workers’ compensation system. Medical pre-loss issues are similar to legal pre-loss qualification. In workers’ compensation, it is absolutely true that he who controls and manages primary care controls the cost of a workers’ compensation claim.
Third, make sure you have information access on all issues related to your claims. Information is power, and it ultimately allows you to review the work of your providers and measure their successes. You need to look at access to the claims information systems used by your carrier or TPA.
Fourth, establish measurement criteria in advance of a claim. It’s easy to say we require accident reports that must be submitted within 24 hours or that three-point contact must occur within 48 hours. Those are part of the rote process. You need to think long term and use outcomes-based measurements such as average cost per claim, average medical cost per type of injury and average duration of disability for a lost-time claim.
The key to managing this exposure is to focus on reducing the cost of claims instead of the process behind managing information. Workers’ compensation cost control is a matter of desire and planning, and those employers that plan for a loss before it occurs will significantly lower the cost of claims. APC
Dan O’Brien is a partner in the Cleveland office of Fisher & Phillips. He can be reached at email@example.com.