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What Are Workers Compensation Claim Reserves – Confusing Term


Workers Compensation Claim Reserves Difference Among Carriers and TPAs

Most Workers Compensation Claim Reserves begin when the data input division of a carrier sets the claim up and puts on an automatic reserve.

The automatic reserve sets at usually a nominal amount for a medical only or lost time claim.

picture workers compensation claim reserves quadratic function
Wikimedia – Aiga.Andrijanova

Medical only workers compensation claim reserves usually begin at a level of $250 – $750 depending on the insurance carrier/TPA and the claim jurisdiction.

Lost time workers compensation claims reserves usually commence at a level specific to the carrier/TPA.   A claims supervisor will often input the reserves before assigning the claims to the respective claims adjuster.

The automatic or initial reserves function similarly in lost time or medical-only claims.  The initial reserves allow the claims staff to pay small medical bills and possibly pay the injured employee for their time out of work past the waiting period.

This does not apply to denied claims or claims still under investigation.

The adjuster’s timetable to set reserves on lost time claims is:

  • 14 days – initial reserves,  usually altered at 60 days
  • 60 days – reserves for the lifetime of the claim
  • 6 months- pegs the permanent workers compensation claim reserves

Confusion Caused By Loss Runs or Online Claims Access

The above scenarios seem easy to understand.   At 60 days, the adjusters adjust the reserves for the lifetime of the claim – very straightforward.

I have three loss runs in front of me that I am reviewing – not all at the exact same time.    The loss runs each from different carriers has totally different representations for the term Total Incurred.

The basic formula is Total Incurred = Paid + Outstanding Reserves

Loss Run Carrier A

This loss run is more of a matrices setup:

  • Total Indemnity Incurred
  • Total Medical Incurred
  • Total Incurred
  • Total Indemnity Incurred
  • Paid Indemnity
  • Total Paid
  • Medical Outstanding  Reserves
  • Indemnity Outstanding Reserves
  • Expenses Paid
  • Expenses Outstanding Reserves
  • Total Expenses Incurred

The confusion for an insured was finding out what the outstanding Total Reserves were for that file.   In other words, what does the adjuster think the claim payout will be in the future for the claim?

Of course for the experienced worker’s compensation claim reserves  reviewers, that would be:

  • Total Oustanding Reserves = Medical Outstanding + Indemnity Outstanding + Expenses Outstanding

However, that total number appears nowhere on the loss runs.  The reserve breakdown was excellent.   The Total Outstanding Reserves figure would have been nice.

Carrier B – Actually A TPA

  • Medical Paid
  • Total Claim Paid – should have been labeled indemnity paid
  • Total Payments – should have been labeled  Total Incurred
  • Outstanding Claim- should have been labeled Outstanding Indemnity Reserves
  • Outstanding Medical
  • Total Expenses – not really broken down
  • Total Payments
  • Total Reserves

Streamlining Workers Compensation claim reserves – making a loss run reporting standard

A workers compensation expert would have no problems understanding the workers claim reserves and other figures on the loss runs.

However, a standard way of reporting the medical, indemnity, and expenses paid and outstanding would save a large number of phone calls and emails to the worker’s compensation adjusters who are handling a certain set of files.

Making an employer have to re-input claim figures into their own spreadsheets to figure out a loss run is counterproductive.

Many carriers and TPAs produce loss runs whether online or on paper/PDF which can be read very easily.  Kudos to those carriers/TPAs that provide easily-read workers compensation claim reserves.


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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management 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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