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Workers Comp Reserves

Workers Comp reserves remain the engine of the Workers Comp claims process.

If your company has a voluntary market policy, then these numbers become the basis for your Experience Modification Factor also known as the E-Mod or X-Mod 

For self-insurance, the budgeting process must center around the workers comp reserves.

One needs to think of the reserves as the workers comp adjuster’s forecast of the future payouts over the life of the claim.

Reserving takes many years to learn.  Setting these very important numbers can be thought of as an art more than just adding up relevant numbers.

Workers Comp technology has given us predictive analytics for reserving.  I am not a fan of predictive analytics as the human body heals differently for each person.

The reserves are divided into three main categories:

  • Indemnity – payment for the injured worker’s reduction in wages.   Indemnity also covers an injured employee for loss of function in a body part
  • Medical – payment to any medical providers to treat the injured worker and return them to gainful employment.   The medical payments are often subject to fee schedules or any network agreements with the providers.
  • Expense – payments to any party such as attorneys, rehabilitation nurses, private investigators or other providers to reduce payouts on the file.   The expense reserves are not part of the E-Mod calculation.

Do not expect any state’s department of insurance to intervene if a file contain excessive reserves.

One needs to remember that almost no rules exist for the setting of workers comp reserves for a certain file.



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