Articles | Cases

Seven ways to prevent medical-only claims from morphing into lost-time claims

Recent reports from NCCI suggest that the protracted recession may be triggering a change in claims behavior that is a troubling sign for employers. In 2010 there was an influx of small lost-time claims into the system that in previous years were likely medical-only claims. Although NCCI has not been able to quantify the reasons for claims moving from a medical-only to lost-time status, according to the report, "it appears that the reasons are related to increasing durations, a shift in industry group mix, and a firming labor market."

While employers may shrug this off thinking the additional costs are non-existent or minimal, such is often not the case. It's important to understand the two types of claims: claims that include indemnity payments, known as loss-time claims, and claims for payments of medical treatment, but no time lost from work beyond the state mandated waiting period, that do not include any permanent injury, known as medical-only claims.

While the vast majority of claims are medical-only, they represent a small percentage of the cost. According to an Integrated Benefits Institute (IBI) study, the proportion of total costs for lost-time claims under Workers' Compensation rose from 68% to 71% from 2008 to 2010. In addition, closed claims as a percentage of all claims declined nearly 25%, indicating claims are staying open longer.

In a majority of states that have adopted the experience rating adjustment (known as ERA states), the importance of medical-only claims is obvious since the claims are reduced by 70% for the purpose of the mod calculation. But even in non-ERA states, the value of keeping claims in the medical-only status should not be overlooked. Medical-only claims that become lost-time claims will adversely affect an employer's Workers Comp costs.

A Pandora's box opens when a medical-only claim needlessly morphs into a lost-time claim. The cost of the claim increases - claims that are medical-only at three months and become lost-time claims by 30 months cost an average of 40 times more than those that remain medical-only.

Employees concerned about job security may look to Workers' Compensation as a way to ensure that their income is sustained in the face of a layoff. Others, away from the routine and discipline of work, may develop a "disability" attitude, leading to a disability duration way out of proportion to the severity of the injury. Some may choose litigation, while others may consider Workers' Comp a bridge to retirement. In all cases, the time and effort required to manage the case increases exponentially.

Here are seven ways to help prevent the unnecessary cost:

  1. Prompt reporting. Late claim reporting leads to delays in appropriate medical treatment, which can impact the cost of medical care, recovery time, wage replacement and return-to-work opportunities.
  2. Optimal medical management, especially in the first 24 hours after an injury. Don't assume that the employee and/or the supervisor can properly assess the need for medical attention. The severity of injuries and length of recovery can increase significantly when employees decide to "tough it out" rather than seek medical care. A nurse triage system can provide support for the injured employee and an excellent communication channel for all involved. Furthermore, having relationships with medical providers that understand occupational injuries is key to quality care and effective return-to-work efforts.
  3. Keep the paperwork flowing. Having an injured employee information packet that includes a letter to the physician, a recovery-at-work authorization form, job requirements, work restrictions form, description of light duty alternatives and so forth will avert the need for return visits with the forms and expedite the return to work.
  4. Monitor medical only claims. Understandably, medical-only claims get less attention than lost-time claims, but ignoring them can prove costly. Monitor the claims, stay in touch with the employee and know the warning signs of a late blooming indemnity claim. A study by NCCI identified the characteristics of claims that are more likely to take this path:
    • The larger the incurred value (paid plus case reserves), the greater the probability of the claim becoming a lost-time claim
    • Carpal tunnel claims are the most likely claims to transition from medical-only to lost-time, with the probability of such a transition being approximately 34%
    • The probability of a claim transitioning increases with claimant age until age 65, and then it declines
    • About 80% make the transition within 12 months of the date of injury
  5. Maintain and articulate a return-to-work program and expectations. While there is some evidence that the recession has meant fewer return-to-work opportunities as companies eliminate or consolidate jobs, such programs remain the cornerstone of effective cost control. Employers should be very clear about the opportunities with health providers, employees and the insurance carrier.
  6. Recognize that psychological and social factors affect the life of a claim. Don't let employees sit at home and focus on what is causing pain but provide support and encouragement to the injured employee, focusing on functional capabilities. Let them know that they are valued and can contribute to the company.
  7. Be wary of aggressive or prolonged treatment for benign conditions such as chronic pain. Avoid early or prolonged use of narcotic medications.