Top Four Self Insured Workers Compensation Success Measurements

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Top Four WC Success Measurements Easily Acquired 

The Top Four success measurements for self insureds are easy to find in your Workers Comp materials.

Graphic of Green Apple With Tape Measure Success Measurements Concept
123RF

In my last two posts, I covered how to measure the success (or failure) of a Workers Compensation program. I want to be fair to self insureds as I am often reminded to include the self insurance angle on my posts. The measurements for self insureds are:

  1. Loss Development Factors (LDF’s)
  2. Current reserve levels (including all claims)
  3. TPA Statistics
  4. Bottom line – payments made over the life of the claim
Loss Development Factor (LDF)

The LDF, in my opinion, is one of the least understood of all variables in the Workers Compensation process. The LDF is analogous to the E-Mod. The LDF will usually cover a 10 year time frame. There are many software packages that will calculate LDF’s.

 

One inherent risk with LDF software is knowing which variables need to be adjusted before inputting the loss data. I have seen LDF’s vary greatly even though the same software was used for the calculations. Incurred But Not Reported (IBNR) is one of the main parts of the LDF statistic. IBNR is an estimation of any claims that have occurred but have not been reported.

 

Current Reserve Levels (For All Current Claims)

 

Stethoscope Success Measurements on the table
Wikimedia Commons – Pkd2016

The current reserve levels for a self insured employer is just as important for one that pays a premium for their Workers Compensation coverage. If the reserve levels are inadequate, the LDF will be inaccurate and the self insured will not set aside a large enough budget to pay future Workers Compensation claims and payments. If the reserves are too high, there may be too large of an amount of funds appropriated for Workers Compensation payments that could have been used elsewhere in the organization’s budget.

 

Statistics Provided By The TPA

 

I had already mentioned this subject in my last note. I did want to again bring up the fact that the person or persons that are setting your reserves – the adjusters – have many ranking statistics for how their clients are performing in such areas as delayed first reports of injury, return to work, etc. Most TPA’s will provide you with the information if you request it free of charge.

 

Bottom Line – payments made over the life of the claim

 

The huge difference between a Workers Compensation program with an insurance carrier and a TPA is that certain claims are not counted into the E-Mod system. Open claims are ALL counted when calculating a LDF. All payments made on any claim at any time are counted into your Workers Comp budget.

 

 

Money And Calculator Success Measurements Budget Concept
StockUnlimited

A different tact has to be used when reviewing TPA loss runs versus an insurance carrier’s loss run. One thing to watch is an old claim that is reopened for payment and then closed again. I have seen many of our clients concentrate on only the open claims or getting the claims closed. One piece of advice that we give is that payments made are just as important as the reserves.

 

The TPA and the self insured have a direct fiduciary relationship. I always tell our self insured clients the TPA is spending directly out of your budgeted account. Loss reduction strategies can make or break a self insured program. There are hundreds of posts in this blog on loss reduction strategies.

 

As I have posted often, self insureds have told me that they are out of the Workers Compensation system. Actually, self insureds are more in the system than insured paying premiums to an insurance carrier. Self insureds have no buffer for a huge claim or for a large number of claims.

©J&L Risk Management Inc Copyright Notice

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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