Allocated Expenses-Workers Comp Term of The Day
Allocated Expenses (also known as ALAE) are expenses charged to a Workers Comp term file that are not indemnity or medical benefits. They are associated with the adjusting of the file. Expenses for defending claims such as attorney fees, private investigators, independent medical exams, and many others are considered as Allocated.
There is a great deal of confusion on where to classify certain charges to the file such as rehabilitation nurses hired by the carrier and medical bill review charges. As there is no concrete standard, some allocated expenses are charged under medical expenses and vice-versa.
Allocated Expenses ARE NOT usually reported to the insurance Rating Bureaus as they are seen as the costs incurred by the carrier to adjust the claim. Experience Modification Factors are not affected by this figure.
If the loss run ALAE figure seems large when compared to the Paid or Reserved figures, this should be questioned. The individual charges should be reviewed.
2020 Update – California worker’s comp claims usually include a large amount of ALAE. Some claims total to almost 90% of the medical or indemnity payouts.
The rehabilitation nurse charges were debated for years as a medical or ALAE. The carrier’s claims manual addresses where to include the rehab nurse charges.
When I have attended the NCCI data conferences in West Palm Beach, the determination was made ALAE was any type of funds that were not incurred to assist the injured employee medically.
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