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Life Waiver of Premium Part 2: Optimizing Claim Management Operations

This is Part 2 of a two-part series on waiver of premium. Part 1 can be found here.

Recognizing the need to improve claim management processes in waiver of premium claims, life insurers are turning to technology to replace inefficient operations associated with manual claim processing.

“Insurers today have an opportunity to bring automation into the life waiver of premium adjudication process to improve existing business models,” says Eric Lester, vice president of administrative services at Legal & General America. “It’s about operational efficiency, providing a good consumer experience, and integrating forward-looking solutions that fit the profile [that] business models in the industry should emulate. This is why we’re thinking forward—strategizing as how to integrate these efficiencies into everyday processes.”

Insurers can streamline the claim adjudication process by standardizing procedures to substantially reduce manual claim handling and support lowered risk management outcomes.  This next level of technology not only yields greater improvements in life waiver claim management but also enables insurers to focus on the effectiveness of their claim decisions.

Scope of the Problem

For benefit specialists to effectively manage claims and provide highly personalized results requires access to relevant medical data from multiple sources.  Life waiver claim management requires collecting, collating, and communicating the claimant’s medical notes and pre-disability occupation data to evaluate their current capabilities, restrictions and limitations. The information derived during the initial assessment stage builds a critical foundation for ensuring consistency not only in the initial claim interpretation but in the recertification process, as well.

The handling of restrictions  and limitation (R&L) data, occupational identification information, and policy definitions  continue to follow more traditional manual processing procedures, resulting in claims frequently adjudicated without the required data, or against underwritten policy definitions. Here is what’s happening with manual processing:

manual processing

Insurers rely heavily on the Attending Physician Statement (APS) forms to collect medical status data. However, considering the high volume of claims per specialist and the time involved to manually process them, information contained in the APS isn’t always fully translated. Because of this, forms are often lacking the complete information required to fully understand the claim, based on a fair and accurate assessment of the claimant’s physical capabilities, restrictions and limitations. Moreover, this manual process makes it hard to ensure consistency throughout the duration of the claim.

For example, if the physician states that the claimant is unable to work and fails to provide a written medical basis in the APS forms regarding the decision, benefit specialists are unable to accurately assess and match the claim to the appropriate contractual definition of disability as defined in the claimant’s policy. This process makes it difficult to determine if the liability should be accepted or denied.

Managing the risk throughout the duration of the claim can influence claim outcomes by providing the opportunity for better claim management for both the insurer and the claimant.

The Long-Term Disability & Life Waiver Chokehold

It is not uncommon for consumers to have both their long-term disability (LTD) and life insurance with the same insurance carrier. So, when a person goes on disability, there are essentially two claims open and running simultaneously. The problem is the life waiver claims aren’t being treated as disability claims—which is, in reality, what they are.

What typically happens is the LTD claim becomes the driving force while the life waiver claim takes a backseat, often translating into processing delays. Even though these plans usually reflect two very distinct definitions (LTD claims begin as a two-year “own occupation” plan, while life waiver is usually “any occupation” provision from day one), the life waiver claim sits—waiting to see what the LTD claim is going to do first.  The life waiver claim essentially becomes more of a contractual definition of secondary importance, and consequently is managed as such.

Insurance carriers must be diligent in applying adjudication decisions consistent with what is underwritten in the life waiver provisions of an insured’s policy, and not based on what’s happening with the LTD claim. This has become increasingly problematic as caseloads continue to grow and life waiver claims follow the LTD claim by default, increasing the insurer’s reserve liabilities (i.e., disability life reserves, morality life reserves and premium reimbursement liabilities), and risk exposure.

Unfortunately, once a disability has been accepted on a life waiver claim, there tends to be minimal risk management. Improved risk management in life waiver claims should include best practices that focus on understanding the severity, restrictions and limitations of the claimant, then matching claimant capabilities to the occupational policy terms.

Better Claim Monitoring, Better Results

What’s missing within life waiver processes is the ability to manage the claim block holistically with information derived from all necessary sources, and integrating it into a unified data platform. By doing this, insurers can quickly identify claimants that have occupational opportunities based on their specific physical capabilities, restrictions and limitations, education, experience, and training. But it doesn’t stop there.

Once an occupational opportunity has been determined, insurers can compare these findings to occupations identified by the department of labor and match the capabilities of the claimant to a specific occupation. In addition, medical details surrounding the claim should be updated continually and combined with historical data, as physical capabilities can change over the duration of the claim. This type of automated vocational support allows adjusters to fully evaluate the claimant’s condition for available occupation opportunities.

Considering the thousands of claims that are processed manually by examiners, it can be difficult to ensure that new claims and the recertification of claims are being completed on time, consistently, and in line with risk management best practices. This becomes an almost unmanageable task for examiners as they struggle to maintain the continuity required to reopen, examine, and research individual claims from day one. It is a continual problem because a claim that is approved today may look completely different a year from now.

“With technology, there is a great opportunity for insurers to make operational changes that will systematically improve their current adjudication processes and minimize the insurer’s reserve liabilities,” explains Thomas Capato, CEO of FastTrack RTW Services & Solutions, whose Life Waiver Tool is the first commercially available technology to automate the waiver of premium process. “This next-generation best practice will not only help improve internal productivity for life insurers but allow waiver reserves to be managed properly and improve future actuarial assumptions.”

An automated claim process allows for continual claim management and tracking that’s set to the claimant’s policy terms, ensuring that all follow-ups are done in a timely and consistent manner — without the need for manual intervention.

Summary

Every claim has unique situations, and insurers need to apply the right risk management principles to that particular claim. This can mean the addition of a single automated application, or perhaps a combination of many, internalizing processes to determine the best solution for enhancing risk management outcomes.

“Technology enhances the ability to fully capture specific information surrounding the nature of a claimant’s disability for better risk management within the life waiver block, providing insurers with an accurate profile of the person, the job, and occupational capabilities,” says Lester, at Legal & General America.

It’s time for life waiver processes to utilize technology to manage claims in a more efficient, effective, and standardized manner. By replacing manual claim tasks with the rigor of automated monitoring, insurers have the opportunity to optimize existing processes and improve overall operational efficiencies within their life waiver claim block. Moreover, it is this technology that can make consistent, supportable and repeatable real-time decisions, bringing value to both the insurer and the claimant.

Game-Changing Strategies to Transform Workers' Compensation

The workers' compensation system continues to face three major challenges: reducing the spiral of rising costs for claims, improving outcomes for medical care, and streamlining efficiencies which impacts both care and costs.

Each year, workers' compensation medical costs continue to escalate — they now constitute 60% of total claims costs according to the National Council on Compensation Insurance. The average medical cost of lost-time claims has more than tripled during the last 20 years. The Workers Compensation Research Institute recently reported that outpatient hospital average payments per claim were up 31% from 2006 to 2010, while inpatient hospital payments per episode jumped 36% during the same time.

Unfortunately, the inter-related nature of components in workers' compensation makes it difficult to achieve long-term, consistent progress in cost containment. While medical expenses are recognized as an increasingly powerful cost driver, the total cost picture is impacted by more than just charges for and volume of medical services. Quality medical care is behind the speed and ability of the injured worker's ability to return to work, which influences indemnity and lost time costs. Litigation by dissatisfied claimants adds to the expense picture. However, the fact is that medical costs and care are the 800-pound gorillas that are the real challenge to better management and superior outcomes. A new approach that can break through this log jam will be a truly game-changing solution.

Such a solution must be able to remedy the primary drivers of increasing costs and sub-par medical outcomes in workers compensation, which include:

  • The growing epidemic of opioids for the treatment of pain, which can — when used inappropriately — lead to long-term disability, negative health outcomes, and fraud and abuse. A study by Accident Fund Holdings and Johns Hopkins University found that the presence of long-acting opioids resulted in claims almost 3.9 times more likely to cost more than $100,000 than a claim without any prescriptions; claims with short-acting opioids were 1.76 times more likely to have an ultimate claims costs of more than $100,000.
  • Co-morbidities and obesity that raise the cost and complexity of care. The October 2012 National Council on Compensation Insurance Research Brief, “Co-morbidities in Workers' Compensation” found that claims with a co-morbidity diagnosis have about twice the medical costs of other comparable claims.
  • An older workforce is another cost driver. According to the National Council on Compensation Insurance's Research Brief, “Workers' Compensation and the Aging Workforce,” claim severity and costs for older workers (45 – 64) is more than 50% higher than for younger employees for both indemnity and medical.
  • Significant variations in care by provider and by state negatively impact outcomes. For example, the Workers Compensation Research Institute's “Prescription Benchmarks, 2nd Edition: Trends and Interstate Comparisons,” July 2011, reports that the average prescription payment in Louisiana was $1,182 for claims that had more than seven days of lost time and at least one prescription, as compared to $330 – $350 in states with the lowest prescription costs.
  • The fragmentation of care management creates waste and poor outcomes. It takes a multitude of different types of medical and service providers to successfully treat an injured worker. Within this maze, the traffic cop is the busy claims adjuster who today may manage an average of 150 claims. This heavy workload makes it hard for the beleaguered adjuster to find the right providers, manage all the connections, and to give claims — especially complex ones — the constant, in-depth oversight needed.
  • The impact of providers can vary widely. Many providers are not experienced in workers' compensation cases — they do not understand the assertive “sports medicine” type of approach that deploys and manages treatment from the inception of the case in order to help achieve a rapid recovery and return to work.

Within this scenario, it's easy for a case to become unnecessarily complicated, dragging on for months and years, ratcheting up not only medical but also indemnity costs.

The Solution
Leaders in workers' compensation recognize that finding and using superior practitioners is the key to getting the best care for injured workers and reducing overall costs. Results in outcomes-based networks have indicated that superior providers can reduce total claims costs by 20%-40%.

If an injured worker sees an experienced and high-performing physician from the beginning, and their treatment plan moves rapidly through an integrated network of outstanding providers who understand workers' compensation objectives, there is a much better chance of an efficient and fast resolution of the injury, return to work, and closure of the claim.

Rapid interventions with the right therapies from the beginning of the case means the injured worker is more likely to recover faster and have a better overall outcome. For example, a recent study published in the medical journal “Spine” found that early physical therapy treatment for low back pain was associated with reduced likelihood of subsequent surgery injections, physician visits, opioid use, and advanced imaging along with a corresponding reduction in related medical costs.

Yet, until now, there has been no solution that enables claims professionals to know which providers deliver the best care, and to consistently connect these providers to injured workers for timely, efficient delivery of superior care for best outcomes.

Now, due to three developments in the industry, that solution is becoming a reality. When this model is deployed throughout a claims management enterprise, payers can experience unparalleled improvements in medical outcomes, reduced overall costs, and increased efficiency.

The three capabilities present in today's marketplace that enable this change are:

  • The ability to develop strong networks of specialty “best-in-class” providers who contribute to all elements of care in workers' compensation, and who receive scrupulous credentialing and consistent quality oversight to ensure an aggressive focus on evidenced-based medicine and fast return-to-work.
  • Advanced analytics of claims data that can now determine which providers generate the best outcomes.
  • Easy-to-use technology that connects this broad range of providers with claims professionals, expediting fast referrals and treatment, overall care coordination and prompt reporting of test and care results. This technology connects these once fragmented players into a virtually integrated care team focused on the injured worker and a common set of objectives.

When these three capabilities are integrated, for the first time in workers' compensation there is a system that brings together the best providers in both primary treatment and ancillary services who are delivering care with aligned goals and shared information to bring about better outcomes with streamlined efficiencies and reduced frictional cost in the system.

The value of this integrated approach to care delivery has been recognized in healthcare for 10 years. At The Cleveland Clinic and the Mayo Clinic, care for Medicare patients cost less than the national median, indicating that this approach is successful in not only delivering better outcomes but lower overall costs.

The 2011 Health International McKinsey report, “What It Takes to Make Integrated Care Work,” found that an integrated care model can be implemented in virtually any health system, provided the three elements of multidisciplinary care, a focus on patient segments most likely to have high health care spending, and the ability to create strong virtual partnerships, are present.

How The Integrated Model Works In Workers' Compensation
The following examples illustrate how the integrated model workers within workers' compensation:

  1. A worker with a complex injury to his right leg is immediately referred to an occupational health physician who is experienced in workers' compensation and connected to networks of specialty providers. Based on the nature of the injury, the physician's office is instantly connected to a resource for crutches, transportation for getting back and forth to appointments, and a best-in-class diagnostics provider to provide fast, accurate diagnostic tests. Instead of having to figure out what is needed and arrange for each piece individually, all the components are in place from the beginning of the treatment plan.
  2. As the injured worker receives treatment from an integrated network of specialty providers, not only is the care provided by best-in-class providers but cost savings are maximized by consistently taking advantage of network discounts and preventing leakage.
  3. A patient who has an injury that may be associated with chronic pain is managed aggressively from the beginning of the case, to alleviate pain and optimize recovery with physical therapy and other pain-reducing modalities. Pharmacy management is also aggressive — if an opioid is prescribed it is for a finite period of time and constantly reviewed to ensure that it is still required and that addiction or misuse is not developing. Consequently, the slippery slope to long-term addiction and disability is avoided.
  4. When cases are complex and the injury is serious, all the treatment components that the patient may need are linked together and available when needed. The adjuster no longer wastes time trying to find specialists who are not in the network and who understand workers' compensation objectives, waiting for equipment that doesn't show up or work, or finding experienced clinicians who can coordinate care for challenges, ranging from infusion medical management to home modifications. The injured worker is managed for the duration of the injury, ensuring that their health is protected and that costs do not creep up through benign neglect or lack of oversight.

The best-in-class clinical team does far more than just deliver services — it takes on the role of care coordinator for the entire case: working with the hospital team before the injured workers is discharged to put in place a continuous care plan, ensuring that the right equipment is actually ordered and working and that it's there when needed and removed when it's no longer useful, and keeping continuous oversight of complex and long-term claims years after the injury so that these long-tail claims stay on track.

Interconnectivity between the physician, the specialty providers, and ancillary services like equipment, transportation, and translation keeps the team informed and linked so that reporting, communication and referrals are seamless, smooth and timely. For example, if a patient needs a knee brace to return to work that can only be fitted in the doctor's office, the transportation to the physician's office is arranged through the home care provider and the correct brace is waiting in the doctor's office when he arrives.

Enterprise-Wide Deployment Delivers Highest Value
The greatest value of the integrated medical model will be in its applications throughout a claims management enterprise when:

  • High performing physicians drive each case.
  • Best-in-class specialists are immediately available at the onset of each case, and with every development in the injured worker's condition.
  • Aggressive and appropriate care moves the injured worker toward recovery, avoiding pitfalls such as prescription drug dependence, long-term disability, and unnecessary treatments and costs that result in no improvement.
  • Providers are linked and connected with technology to know exactly what the injured worker needs and to make sure that all connections are met and made.

When this scenario is multiplied for every claimant that a payer has, the results in improved outcomes, reduced overall costs, and improved efficiencies are truly transformational. The integrated care management model in workers' compensation will be a game-changing phenomenon that will exponentially improve results throughout the entire system.