Tag Archives: claims cost

uncompensated

Time to Focus on Injured Workers

When WorkCompCentral released a report, The Uncompensated Worker, I wrote about how a work injury affects family finances. I applied several realistic work injury scenarios to each state. In 31 states, workers receive a reduction in take-home pay of 15% or more when they’re injured on the job. In half the states, households with two median wage earners—one on work disability and the other working full time—cannot afford to sustain their basic budget.

These findings confirmed what workers’ comp claims adjusters, attorneys and case managers already know: Many injured workers live on the edge of financial collapse.

But the findings are by no means conclusive.  The research done for “The Uncompensated Worker” was too limited. I know, because I did it. To really understand the financial experience of being on workers’ comp benefits, one should run not a handful but thousands of scenarios through a statistical analyzer and then compare the data results with actual cases researched through interviews.

The research agendas of the workers’ comp industry rarely involve looking at the worker her or himself.

Instead, the industry has funded research mainly to understand the drivers of claims costs, specifically medical care. This focus can be explained. Over the past 25 or so years, the workers’ comp industry has absorbed a huge rise in medical costs, more and more layers of regulation relating to medical treatment and even more specialties needed to deliver or oversee medical care.

To illustrate the extent of this industrial-medical complex: Nationwide spending on “loss adjustment expense,” a proxy for specialist oversight of claims, has grown annually on average by 9.4%  since 1990, while total claims costs have risen on average by 2.5%.

The quality of industry-funded research has improved, because of better data and strong talent pools in places like the Workers’ Compensation Research Institute (WCRI), the California Workers’ Compensation Institute and the National Council for Compensation Insurance. Their research focuses on cost containment and service delivery. These two themes often intertwine in studies about medications, surgeries or medical provider selection.

It’s time to pay more attention to the worker. Close to a million workers a year lost at least one day from work because of injury.  We hardly know them. Bob Wilson of Workerscompensation.com predicts that, in 2016, “The injured worker will be removed from the system entirely. … Culminating a move started some 20 years ago, this final step will bring true efficiency and cost savings to the workers’ comp industry.” Industry research, one might say, has left the worker out the system.

An example of how the worker is removed can be seen in how the WCRI did an analysis of weekly benefit indemnity caps. These caps set a maximum benefit typically related to the state’s average weekly wage. (The methodology has probably not been critiqued by states for generations, despite better wage data and analytical methods.) The WCRI modeled different caps to estimate the number of workers affected. But it did not report on what this meant to workers and their families; for example, by how much their take-home benefits would change.

As it happens, Indiana is one of the worst states for being injured at work; it has close to the stingiest benefits for a brief disability. You are not paid for the first seven calendar days of disability. Benefits for that waiting period are restored only if you remain on disability for 22 calendar days. Take-home pay for someone who is out for two weeks or less will likely be 83% less than what it would have been without injury. An Indianapolis couple, both at the state’s median wage, cannot afford a basic month’s budget for a family of three when one is on extended work disability. These poor results are partly because of Indiana’s benefit cap, which is one of the lowest in the country. The weekly benefit cap used in the report, a 2014 figure, was $650.

Les Boden, a professor at Boston University’s School of Public Health, read a draft of “The Uncompensated Worker.” For years, he has studied the income of injured workers and the adequacy of workers’ compensation benefits. He told me, “Studies have shown that many people with work-related injuries and illnesses don’t receive any workers’ comp benefits. I don’t think that the problem is too little research. It’s political. Unfortunately, workers are invisible in the political process, and businesses threatening to leave the state are not.”

I am not sure how the politics of this issue can change until the strongest research centers in the industry begin to pay attention to the worker.

This article first appeared at workcompcentral.com.

Solution to High-Cost Indemnity Payments?

We’ve all experienced it – the jigsaw puzzle scattered across the kitchen table. Each time we walk by, we’re tempted by the loose pieces. The family rivalry of who will solve the puzzle continues, as weeks go by trying to complete the 1,000-piece brain buster.

For payers, solving the indemnity payment puzzle in the quickly changing landscape of workers’ compensation has become the ultimate brain buster.

Today, indemnity payments represent a significant portion of workers’ compensation spending – anywhere from 40% to 60% of claim costs. While they don’t receive much attention, increasing administrative burdens and processing fees associated with traditional payment methods are thwarting payers’ abilities to manage total claim costs.

So, what are these changing pieces? How can payers find the most appropriate payment solution to solve the indemnity payment puzzle and reduce their total costs per claim?

New Workforce Dynamics Means Added Complexity to Payment Processing

While most of us still head to the office, factory or job site daily, this number continues to decline, as an increasing number of employees opt to work from their homes, on the road or in a remote location.

In fact, the Census Bureau states from 2005 to 2012, the number of remote workers increased by 79%. Further, 25 million Americans are currently unbanked or underbanked, according to the FDIC.

Should these individuals become injured on the job and eligible to receive indemnity payments, sending a check may prove to be a challenge. No convenient or stable access to a bank or lack of a permanent address could result in escheatment issues or lost and stolen payments.

Claim Severity and Duration Equals Harder-to-Manage Payments

Claim severity is on the rise. Thus, the more severe the injury, the more likely that an injured worker will receive indemnity and for a longer duration. For example, an Aon study found that in the healthcare industry alone, indemnity payments average more than $18,000 per worker each year.

This increase in total indemnity payments results in a greater threat of missed, duplicate or incorrect payments.

Changing Business Climate Drives Additional Look at Revenue Cycle Processes

Traditionally, indemnity payments have been issued via checks. However, as the cost of writing and managing checks continues to rise in tandem with data breaches and corporate fraud making daily headlines, it’s imperative to place more stringent controls on workers’ compensation payments. As businesses look to streamline costs, it’s safe to say these traditional processes are no longer our answer.

While EFT is increasing in popularity as a viable option, streamlining difficulties still occur as this error-prone solution requires a bank account number and can create delays in reaching bank accounts in a timely manner.

So how does the payer solve the indemnity payment puzzle?

Just as workers’ compensation claims have increased in complexity since the first lost wages legislation was passed in 1911, transaction methods have also changed. According to a Federal Reserve study, card payments increased by $17.8 billion while non-card payments decreased by as much as $3.1 billion between 2009 and 2012.

Consumers are increasingly more comfortable using a card-based solution, thanks to its bank neutrality, no need for a permanent address and convenience in receiving faster and more efficient payments.

In addition, card-based solutions help payers navigate today’s complex landscape by lowering operational expenses, reducing errors, decreasing escheatment, ensuring accurate and timely payments for all workers, mitigating internal and external fraud, letting adjusters focus on critical priorities and protecting the payer from payment liabilities.

As you explore a card-based solution look for a bank neutral partner that will manage injured worker calls about lost or stolen payments, offers protection through a card issuer like MasterCard and maintains its technology and processes in-house.

Outsourcing indemnity payments will enable you to focus on more important priorities, such as helping the injured workers get the care they need while reducing total claim costs. After all, there’s no better feeling than putting the final piece of the puzzle into place.