Handling Claims Right, From the Start

By: | May 12, 2014

John D’Alusio has more than 35 years' experience in insurance and claims. He has been the senior claims and operations officer of three national claim departments for carriers and TPAs. John has written extensively on the Medicare Secondary Payer Law and other insurance topics. He can be reached at [email protected].

One of the most important aspects of handling workers’ comp claims correctly is immediately determining the nature of the loss based on the employer’s first report of injury (FROI), and a phone call or two. Does the claim involve no compensable lost time, thus making it a medical only (MO) claim, or is there lost time in excess of the state waiting period, which would render it an indemnity claim?

At times, the FROI indicates there is no lost time. The case is then assigned to a medical only adjuster for cursory investigation, if any, and adjudication. However, even though the FROI may state there was no lost time involved, it is far from uncommon to find out the report was incorrect about the employee’s loss of compensable time from work. Conversely, the opposite also applies where a FROI might indicate lost time, assigned to a lost time adjuster, but the employee does wind up losing authorized time from work as a result of the injury or condition.

Clearly the level of investigation differs with each type of loss. Medical only claims normally have one or two point contact (the employer or the employer and the doctor), while lost time cases usually require three point contact (employer, employee, and medical provider) and involves more detailed fact finding. Or at least that is the way it supposed to work.

The proper determination of the claim type has financial consequences with third party administrator handling. TPAs charge more for handling lost time claims than they do for medical only cases. However, there is a double edged sword here. The overarching objective should be that a case is properly investigated regardless of type.

A typical scenario is that a claim is reported with no compensable lost time but involves an aberrant set of circumstances. This can be anything from occupation exposure, to an accident that takes place off-premises with the employee allegedly conducting the employer’s business. Should the case be classified as an MO and simply given to the medical only adjuster as if the exceptional circumstances of the alleged injury did not matter, or should it be assigned to a lost time adjuster for a full investigation?

The answer should depend on the claim particulars rather than a simple rote procedure strictly predicated on whether lost time is involved. For example, let us postulate that a FROI is received by a TPA. It states there is no compensable lost time involved, but the cause of the injury is inhalation of deleterious fumes. Is this a claim that should be simply assigned to an MO adjuster for one or two point contact and to confirm no lost time before simply processing the medical bills, or to a lost time adjuster for a full investigation on compensability and causal relationship?

The client may complain about being overcharged if an MO case is handled as a lost time claim, It is probably also a good wager that they would complain even more if the claim wasn’t initially properly investigated and then became more serious, eventually involving litigation, and significant exposure.

The obvious answer is to have the claim properly screened with a telephone call to the employer prior to assignment. If the employer believes there is something suspicious about the claim, they will usually impart this belief verbally. This will be the telltale that should influence how the claim will initially be assigned for handling.

Even if the claim is improperly assigned to an MO adjuster, there is still a chance of redemption as long as the MO adjuster performs some type of investigation that will yield information that strongly suggests the claim should be reassigned to a lost time adjuster. The salient point here is that the MO adjuster has to do something with the claim in fairly expeditious fashion. Based on the nature of the position, many MO adjusters are processing oriented and may miss a key issue, or simply not act on a piece of information as they should. The more seasoned individuals will make a few calls and ascertain if the nature of the loss should remain in their futurity, or reassigned by the supervisor to a lost time adjuster. I have even witnessed MO adjusters calling the claimant to find out the nature of the injury and if lost time is involved before making their investigative findings and recommendations, including reserve commentary. These individuals deserve the accolades for their initiative as well as analysis, but regrettably this does not constitute the norm.

Obviously, there is far more exposure if an MO adjuster does not properly alert management that a claim should be reassigned to a lost time adjuster than the opposite if a lost time adjuster doesn’t timely suggest that a case be “stepped down” from a lost time to an MO.  Therefore the MO adjusters are the gatekeepers to some extent, and it is incumbent upon the supervisor to make sure expectations are established in the unit relative to investigative findings that commend a change of the type of claim from MO to lost time or vice versa. This involves training and active communication, both of which appear in short supply these days in many claims facilities.

At first blush, this topic may seem rather bland, but if the a claim is improperly assigned as an MO, and then contact is not made timely to determine the true nature of the issues, and simply placed on diary to await medical bills (that may not even be related to a compensable injury) being received and processed, there is trouble in the offing.  That trouble will often come home to roost at the most inconvenient times.

It is far easier to make the correct assignment determination at the time the case is received. But that often takes work, as well as insight as to proper investigative needs. However, that is what claim professionals are paid to do. Clearly, the employer expectation is that it is done with accuracy and altered based on unique circumstances extant in each claim.  Ultimately, if the MO adjusters are not properly performing their contacts and documenting analysis of their findings, there will be breakdowns of a more frequent nature than necessary. So be careful out there!

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