The Easiest Way To Monitor Your Claims and Lower Your Workers Comp Premiums

If you have online access to your Work Comp claims notes, reserve history, background, etc, then you are in possession of a very valuable tool in controlling your Workers Compensation costs.

If you do not have online access, ask your Workers Comp insurance carrier or TPA (if you are self-insured) for a username and password. You will need to request full access to all notes, reserves, etc. If you are having to choose among many Workers Comp carriers or TPA's, online access may be worth spending more than the lowest bidder.

Online access allows you to have:

• Up to the minute knowledge of what is occurring in the claim
• Reserve history to explain why reserves were increased
• Will likely result in less contact with the adjuster to find out the claim status, saving you time. If you call/email the adjuster for a status, he/she will be looking at the same claim notes to give you an update.
• Allows you to do an internal audit of all claims w/o the expense of doing an in-office audit.
• Many other advantages to having online access - all save time and $.

We do a large number of online Workers Comp claim audits. It is much less expensive than an in-office audit. In fact, we are doing one for one of the largest employers in North Carolina as of now.

Up Next - Blog Readers' Questions

Contacting Your Work Comp Adjuster

If you have found something questionable about your total incurred or reserves, then you may want to contact your Workers Compensation claims adjuster.

From being an adjuster many years ago and listening to adjusters' comments, there are a few simple rules that will help you in discussing reserves/total incurred when contacting your adjuster:

1. Know who your Workers Comp adjuster is for every one of your claims, even if you have a new carrier. If you do not know who this is - you need to find out.
2. Email your adjuster - calling your adjuster is OK, but they will still have to look at what you are questioning and get back with you. Do not expect immediate answers.
3. Do not say, "My reserves are too high" without specifics. We see agents do this one very often. Make sure you are updated with all the info.
4. Be very specific with your questions. Do not send the adjuster a three page email.
5. Quite often, the adjuster does not know of a claim's development that would make the file worth less $. Updating the adjuster by email on what is happening on the claim is a great idea. It is even better to scan and email or fax any info that you receive on the claim to the adjuster ASAP.
6. Never threaten the adjuster with the Insurance Commissioner. This is only as a last resort. Please remember you may have to work with this person on your claims for many years.
7. Do not immediately ask for the adjuster's supervisor. Give them time to resolve your concerns.
8. KNOW WHEN YOUR TOTAL INCURRED AND RESERVES hit your E-Mod. Calling an adjuster two weeks before your policy expiration is fruitless. See my old posts or email me at info@cutcompcosts.com on when your E-Mod is affected.
9. Self-insureds - the adjuster is spending your $ directly from your budget. Even though there are no E-Mods to be concerned with, your Workers Comp LDF's are calculated from the reserves for budgeting purposes. We sometimes hear self-insureds say that they are glad they are not in the insurance system. Actually, you are even more than the non-self- insureds.
10. If you feel that you would be in over your head, contact a claims professional - shameless plug - that is what we do every day.

Workers Comp is full of buzzwords. Please click on http://www.cutcompcosts.com/ and click on the Definitions tab for a large list of definitions or email us at info@cutcompcosts.com if you have questions on any of the terms used in this or prior posts.

Next Up - The Easiest Way to Monitor Your Claims and Lower Your Premiums

Effective Workers Comp Reserve Reviews

This is the area that seems to be the most misunderstood. We often have employers contact us about a loss run they had just received or about how their E-Mod increased so rapidly in one year.

We often recommend that the employer obtain a copy of their loss run. Your insurance carriers will provide a copy on request. The Work Comp carriers will usually provide a loss run quarterly.

Please remember that only the OPEN claims can be dealt with, as a closed claim or the previous reserves on a closed claim cannot be questioned later on. That is why it is so critical to track the claims as they develop. Discussing a reserve that was opened on a claim three years ago will not do any good. In other words, when a loss run is received, it should be reviewed on receipt.

Things to look for in a Workers Comp loss run are:

• Old claims still open
• Resolved claims still open
• A small amount of indemnity total incurred with a large amount of medical total incurred, or vice-versa.
• A large increase in reserves or total incurred on a claim
• A re-opening of a closed claim
• The total incurred does not match the claim, such as a large amount of reserves on a minor injury
• The injury listed does not match the employee's injury
• An injured employee's name that you do not recognize
• Anything that just looks out of place.
• Many others

UP NEXT- Contacting your adjuster if you find something questionable.

The Fastest Way To Reduce Your Workers Comp Premiums

It is the reserve review. The reserves are the engine of the premium charging process by insurance carriers. I had written a post on this very subject a few weeks ago.

When is the critical date to start a reserve review? 9 months before the next policy date. Why start so many months ahead of time? Actually, you have only 3 months, not nine. Please note - almost all policies lock in their E-Mods 6 months before the policy.

No matter what policy provisions are in place, if the reserves on the files are wrong, you are paying dearly for Workers Compensation coverage.

Next Up - How do you effectively do a reserve review?

Workers, Comp Audit Bills

The insurance carrier's Workers Comp payroll auditor has been in for an audit. A few days later you receive a bill. What are your options?

• Pay it - which is what we see most of the time. Companies should not just write a check without questioning how the increase occurred. We have seen companies that will at least look through the audit and question the auditor. This may result in a reduction in the bill. What do you do if the auditor says no to your disputes?
• Review it - going through the original policy, any modifications during the policy period by the insurance carrier, and the payroll audit thoroughly may result in savings. Were the savings all you were supposed to receive for your efforts?
• Call your agent - that may be a good tactic, but your agent has already looked over everything previously, or have they?
• Call in a premium expert - that is what we do as part of our services for no fee upfront.
• Write the Insurance Commissioner - this is one area where we see a company irreparably harming their relationship with their agent and insurance carrier. Contacting your respective Insurance Commissioner should only be done as a last resort before taking legal action. Never use the Insurance Commission as a bargaining tactic. We have never seen that work to the benefit of any employer.
• Contact the State Rating Bureau or NCCI - that is sometimes a good idea, but what questions do you ask them? What would you want them to do for your company?

There is a common theme to all the bullets above except the first one. They all involve asking "why?". That is the most powerful way to reduce your Workers Compensation premiums. See our previous post on asking why. One of our clients just received a premium return of $240,000. How? They started asking "why?".

Next Up - I left one area out that is more important than anything mentioned in the last three posts. It is the fastest way to reduce your Work Comp premiums and it starts up just about the time of the audit billing.

The Insurance Premium Auditor - Who Exactly Are They and What is Their Role

The most calls and emails that we receive are just after a company has received their yearly Workers Comp payroll audit and has been charged an additional amount of money beyond the initial funds paid when the original policy was issued.

The Work Comp insurance company auditor usually will come in person within 60 days of the end of the policy period. The payroll auditor reviews all of the documents needed and then either issues a credit or an additional billing. Our statistics show that well over 80% of the payroll audits result in an increased bill. The post-audit premium bill can be substantial. Sometimes there are valid reasons for an increased bill, such as more payroll.

One thing to remember is that the auditor can just about change whatever they want and deviate from the policy. They work for the insurance carrier and they are usually overloaded with companies to audit. Most of the mistakes that we see with a company's workers comp premiums occur at the time of audit.

You have received a bill after the audit that says pay within a certain number of days. What do you do?

We will cover that in our next post. Workers Comp Audit Bills

Payroll (Premium Audits) - The Mother Of All Workers Comp Budget Busters

Payroll (Premium Audits) - the mother of all Workers Comp budget busters. There are three kinds of Premium Audits - also called Payroll Audits. Usually, the audit is conducted within 60 days after the end of a policy period.

There are three types of premium/payroll audits:

1. Self-Reporting - the employer faxes, calls in, or electronically reports the payroll. Danger - how do you know what classification code each of your employees falls under for reporting purposes? You may be overpaying your premiums. Check your Work Comp insurance policy - are the job types in your company described by your Classification Codes? Are you sure there are not certain discounts that apply? Quite often, you may not have an agent. Ask questions now or you will pay more later.
2. Phone Reporting - The Workers Compensation insurance carrier will call you directly, or your accountant, or some other outside financial consultant to obtain your payroll information. See #1 for the dangers of this type of reporting. Has anyone from your insurance carrier seen your operation? Most likely not at all. Are there certain mandated discounts that you are not receiving? Once again, you may not have an agent. Even if you do, only YOU know the business that you are in and the type of work that your employees perform daily. Once again, ask questions now or pay later.
3. This one causes special concerns. I will cover it in the next posting.

#3 and The Insurance Premium Auditor - who exactly are they and what is their role?

The Four Factors That Are Critical

They Are:

1. How was the employee treated by their employer at the time of the claim?


2. Did the employer have a medical network established to send the employee to for treatment? Was that employee sent to an established network medical provider?


3. How quickly was the Work Comp First Report of Injury filed with the insurance carrier or TPA?


4. Did the adjuster talk with the employee, employer, and physician within 24 hours of receiving the first report of injury?

The clock is ticking when an employee reports an injury. I have studied Workers Compensation claim trends for over 20 years. If #1 - #4 above is not completed in 48 hours, the cost of Workers Comp claims jump tremendously.

If the answer to any one of the four above questions is No, your company will be trying to control much higher than normal claims costs and paying at least 1,600% more claims $.

Next Up - Payroll (Premium Audits) - the mother of all Workers Comp budget busters

The Workers Comp Claim is Over in 48 Hours

This is one of the most startling truths about Workers Compensation claims.

This is why immediate notice of the claim being filed with your Work Comp carrier is so important. The three point contact by the adjuster must be made very quickly. The injured employee should be contacted within 48 hours after reporting the accident if lost time from work is indicated.

The employee already has filed their claim and has sought medical treatment in the first 48 hours. There is already a treating physician on the file. Until the adjuster has investigated the claim, the control of the claim is with the employee. The current and future cost of the claim has been set. There is nothing that can be done to lessen the major cost factors of a claim after 48 hours.

How this all occurs will heavily influence the amount of reserves/total incurred (see previous post on the Total Incurred) that the adjuster establishes on the file.

Next Up - The Four Factors that are Critical at the Time of the Initial Workers Comp Claim

Our main website is http://www.cutcompcosts.com/

Some Misconceptions About Workers Comp E-Mods and Loss Runs

The main misconceptions that we have seen are:

• Only the open claims make a difference on the E-Mod - any claims opened within certain policy periods affect the E-Mod no matter whether they are closed or open on your Workers Comp loss runs. (See the previous post on Experience Periods)
• The claims for last year will affect the E-Mod - Your Experience Period does not include the claims from the last year. For example, if your policy is renewing on 1/1/08, then the claims for 1/1/04 - 12/31/06 will be counted, BUT NOT THE TOTAL INCURRED FIGURE FOR 12/31/06 or 12/31/07. See our previous posting on Total Incurred. The Unistat Date is critical.
• I only need a loss run yearly - For better control of your Workers Comp Costs, you should have online access to your reserves and the ability to run a loss run on demand. Your insurance carrier should be supplying loss runs at least quarterly. Online access is the best way to look at loss runs. Check with your Work Comp insurance carrier's IT department to see if you are allowed online access. Most carriers have the service available for free.
• Worst of ALL - I cannot control what reserves are on a claim - Communication with the Workers Comp adjuster will always help keep reserves at a reasonable amount. See our previous blog on the Five Ways to Cut Workers Comp Costs. Doing those five things and letting your adjuster know you are doing them will help greatly.
• I cannot tell if the total incurred or reserves are out of line - If you feel you are in over your head, then consult with a reserving expert. We negotiate reserves with insurance companies and third party administrators daily.

Next Up - The Claim is Over in the First 48 Hours

A Workers' Comp Question From One of Our Blog Readers

This is a question that we are asked quite often at presentations and at client meetings.

What is the difference between paid, total incurred, and reserves on our Work Comp loss runs? The way that most carriers and TPA's define the terms are as follows:

• Paid - what was paid on the Workers Compensation file to the date of the loss run. If any large bill or payment was in a pending status, Paid does not include the bill until a check has been cut. THIS IS ONLY PART OF WHAT YOUR EMOD IS CALCULATED FROM ON YOUR UNISTAT DATE.
• Total Incurred - This is what was paid + the Work Comp reserves on the file. THIS IS WHAT YOUR EMOD IS CALCULATED FROM ON YOUR UNISTAT DATE. The Total Incurred on the file includes the reserves.
• Reserves - This is the estimated amount the Workers Comp adjuster thinks will be spent on the claim OVER AND ABOVE WHAT HAS BEEN PAID ON THE CLAIM.
• PAID + RESERVES = TOTAL INCURRED

If you have not heard of some of the terms in this blog, check out http://www.cutcompcosts.com/ and click on the Definitions Tab.

Check out our next installment - Some misconceptions about Emods and Loss Runs

PEO's - Professional Employer Organizations

A new "old trend" in Workers Compensation. PEO's are another area we are questioned on when we talk or consult with employers. The main question we receive on them is about the recent investigations and convictions of some of the larger PEO's owners.

PEO's are really a twist on a temporary agency. Most employers seem to think that PEO's only provide Workers Comp services. The PEO's provide almost all and sometimes more benefits than their original employer. The employees of a company that uses a PEO are really no longer employees of that employer. They are employees of the PEO. What PEO's give is a "buying power" as they consolidate all the employees of their client companies into one large company.

With Workers Comp insurance, the PEO is able to negotiate better rates than individual employers. They pass along some of the savings to their client employers. It is a win-win if all goes well.

The states' Insurance Commissioners are starting to monitor PEO's more closely. There are two states that used to have less than two pages of regulations on PEO's, but now each have more than 24 pages of regulations.

The one area where employers need to look over their WC policies very closely is when and if the company ever decides to leave a PEO arrangement and go back to regular Workers Comp insurance. We have seen this often.

Should a company use a PEO? PEO's have been under a dark cloud as of late. A PEO may be good for a company with a high E-Mod or a quickly increasing E-Mod. I look at them the same as Captive arrangements. Are they really a true type of Workers Comp insurance? Time will tell, but do not ignore this option. Make sure you have someone look over the PEO arrangement very closely before signing on, and MONITOR the PEO and the claims services you are receiving.

Next Up- Answering more Work Comp questions from our blog readers.