While a workers’ compensation insurance policy is a necessity for just about any business, the costs associated with it can become a major burden very quickly. One reason for this is the leakage that can occur on each individual claim, driving up their cost, and subsequently the cost of your premiums. Fortunately, there are things you can do to control leakage if you know where to look, and the first step in that process is understanding how leakage occurs.
HARD AND SOFT LEAKAGE
There are two broad categories of leakage that are generally referred to. One is hard leakage, which involves payments that should never have been made, either because the claim did not qualify for compensation or because coverage was not in place. Soft leakage, on the other hand, refers to overpayments for medical bills, time lost, and other forms of compensation. For obvious reasons, soft leakage is both harder to identify and harder to accurately quantify.
Another potential area that can drive up the cost of claims is vendor leakage. This relates to the use of outside vendors by the insurance carrier to perform various tasks related to the claim. These vendors include:
- Nurse Case Managers – NCMs can play a valuable role in tracking complicated medical cases involved in workers’ comp claims, but there’s no reason to involve them in more straightforward situations. When that happens, it results in unnecessary payments to the NCM that could have simply been eliminated altogether.
- Vocational Assessments – These are used to try and find some type of work that an injured worker can perform while they’re operating with restrictions resulting from the original workers’ comp claim. While these can ultimately save money in extreme cases, performing one before all options with the existing employer have been exhausted will unnecessarily drive up the cost of the claim.
- Surveillance – When there is a good reason to suspect fraud on a workers’ compensation, surveillance makes sense. Tracking all workers who file a claim, however, is costly and generally unproductive.
- Independent Medical Examinations – ICMs are an important part of the process of handling a workers’ comp claim, but they need to be performed at the right time to avoid wasteful spending. An ICM performed too early in the healing process will only lead to an incomplete determination and possibly the need to repeat the process, and pay for it again, at a later date.
While many of the areas where leakage occurs are parts of processes you would not normally be involved in as a business owner, there are some things you can do to help keep it under control. One important step to take is to make sure each claim is thoroughly investigated when it occurs, both by your team and by the insurer. This will cut down on the chances that an uncovered or fraudulent claim will be paid, resulting in hard leakage, and it will also help in a more accurate determination of the appropriate medical care and resulting bills that should be compensated.
Having an organized and established program in place to transition injured workers back into modified duty until they can resume their full normal position is another good way to minimize the potential for leakage. This helps to ensure that there are no unnecessary payments for workers missing time when they are actually able to return to work, and it also eliminates the need for the vocational assessments mentioned above in most cases.
Some other sources of leakage, particularly soft leakage, can be harder to nail down, but you can help your adjuster ensure proper payments for time lost from work by providing accurate calculations of the worker’s average weekly wage. Independent claims audits are another way to identify this type of issue, and these should be performed periodically to locate past problems so that you can avoid the same situations in the future.
Avoiding leakage in your workers’ compensation insurance is an essential part of keeping costs under control and maintaining a safe, efficient workplace. If you’d like to learn more about how we can help you save money on your worker’s comp, contact our office today.