Workers Compensation Claim Review - Maximize Your Timing
When are the numbers actually crunched to determine an employer's premium? Do employers have to obsess about reserves throughout the policy year or is there an optimum time to review losses?
When it comes to determining the experience rating for your next policy year, there is only one day that really counts. About six months after the end of your policy year, a summary of your losses (the unit stat report) is prepared by your insurance carrier(s) and submitted to your rating bureau, many times automatically and worse still many times with limited or even NO input or dialogue from the most critical party......YOU THE CLIENT. For employers with open claims in prior years, it is essential to make sure that the numbers contained in the unit stat report are accurate and reflect an up-to-date understanding of the status of each open claim.
When Should you Look at Losses
So when should you review open claims? If your company has more than a half dozen open claims, you should review the losses at least quarterly. Request a loss run from your carrier (your broker or risk consultant should be helping you with this, as well as providing insight, stewardship and guidance in the process). Go over each open claim with the claim adjuster, to make sure that you have a clear and effective strategy to achieve closure and that the valuations on the file are fair and reasonable. Ideally, you are working with the adjuster to return the employee to full or modified duty. If, on the other hand, return to work appears unlikely, you should be working toward closure by settling the claim. In the world of insurance, especially workers compensation, "the only good claim is a closed claim." This quarterly review process ensures that you have an appropriate focus on every open claim.
For employers with just a handful of open claims or even no open claims ( well done!!), quarterly audits should still be done, but a full review may not be as necessary. At a minimum, request a loss run three months after the end of your policy year. This gives you plenty of time to review the status of each open claim and take action toward resolution. You have fully three months to impact reserves prior to the submission of that all-important unit stat report.
"Aggravated Inequity" for MA Claims
There may be times when a claim is closed after the unit stat report has already been submitted, but still prior to the beginning of the next policy year. If the claim closes at least 25% below the prior reserved level, you are entitled to a recalculation of your experience rating under the MA "aggravated inequity" rule. This rule, containing a deliciously inexplicable name, applies only if the claim is closed.
NOTE: While MA has a specific variance for this fact not all states have this allowance. Other states have variations, so check with your carrier to ensure proper credit is given. In most states, if the reserves are reduced but the claim remains open, you are not entitled to a recalculation. All of which brings us back to our primary point: make sure you are comfortable with the reserves three months prior to the submission of the unit stat report.
Savvy managers don't have to spend every waking moment worried about reserve levels for open claims. There is that one time of year, however, when a laser-like focus on open claims can be very helpful in controlling losses. Make note of your policy end date, move forward three months, and place a post-in in your calendar to review your loss runs. You will be taking action just ahead of that one crucial moment when reserves really count.
With over 25 years experience I have been working to help clients build and implement highly effective workers' compensation programs that reduce costs to an absolute minimum while providing high-quality care for injured workers. It's all about managing to the intricacies of the rating process itself. There are opportunities for minimizing the impact of your losses. |
