Term Of The Day – ALAE
ALAE is the acronym for Allocated Loss Adjustment Expense . In Workers Compensation, there are three areas of reserves and loss payments. They are indemnity, medical, and Allocated Loss Adjustment Expenses or just expenses.
Indemnity benefits are defined very specifically. The lines between medical and expenses has been blurred over the last few decades. There is really no hard and fast standard for splitting payments between the two categories. Some insurance carriers pay certain expenses under medical while other do not.
For Experience rating purposes, the difference is very critical as Expenses are not part of the Experience Mod calculations.
There has been much discussion about some of the ALAE being added to the medical reserves by the insurance claims staff. Charges such as rehabilitation nurses, medical bill review, PPO network, etc. are not consistently charged to the right area by the carrier or TPA Allocated expenses for Workers Comp usually includes defense attorneys, Private Investigators or any type of outside services that aids in the investigation of or reduction of losses.
At one time, insurance carriers discussed whether or not to charge rehabilitation nurses under this category.
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