Workers Comp File Reserves Important
The Workers Comp file reserves are important to not run late. I have posted over the last two weeks on the process of performing a Workers Compensation file reserve review as a way of reducing your E-Mods or X-Mods. I am using January 1 renewal policies as a reference point.
If you have a renewal date other than January 1, then please consult this article on the formula for calculating the due dates for your E-Mod reduction plan.
If I am correct, I left off with you having received your paper loss run or having online access. If you have online access, you have saved yourself at least 20 hours of work.
Now that is April 1, you have 90 days to analyze your loss runs, communicate your concerns, and possibly reducing your reserves. Doing this step incorrectly can have disastrous results on your E-Mod or Ex-Mod. Which files are you going to now contact your claims department on this week?
Some of our clients seems to think that the files that are the oldest or have the highest reserves are the ones to question. That is not necessarily correct. I have written many blog posts on Total Incurred. This is one time that the Total Incurred figure (Paid + Outstanding Reserves) is not as important as the Outstanding Reserves.
The Outstanding Reserves (Total Incurred – Paid) is basically what the Workers Compensation adjuster thinks will be paid out in the future of the claim. If it is a new claim with a serious injury, the Outstanding Reserve figure will be extremely high. Do not waste your time or the adjuster’s if this is the case. Monitor the claim and reserves for future reductions.
If your insurance carrier whether by paper report or online access (and you can run your own reports) can only send you the OPEN files, that will save some time. Negotiating a closed claim is very fruitless unless there were duplicate payments or there was subrogation on the file. That is water under the bridge.
One very obvious question is how much Outstanding Reserves are there on a certain claim or all of your claims? If the figure is low, then it may be best to leave it alone. Usually, approximately one third of the Total Incurred value should be Outstanding Reserves. That is a very, very rough approximation.
I will cover more on this the next time. I try to keep the posts from dragging on too much.
Article provided by James J Moore, AIC, MBA, ChFC, ARM. All articles are original content. Check out the full website at www.cutcompcosts.com.