Workers Comp Reserve Reduction Strategy – Critical Last Step

September 30, 2020 By JL Risk Management Consultants

Workers Comp Reserve Reduction Strategy – Do This Last Critical Step

Many articles in this blog center around formulating and enacting your workers comp reserve reduction strategy. We have heard from many article/blog readers -where the anticipated reserve reductions did not tabulate properly.

picture steps to workers comp reserve reduction

Public Use License – Wikimedia – DanielZanetti

We heard from an agent today with the question – what happened – there was no movement in the workers comp reserves. The time this hits the fan is when the Experience Modification Factor was published by the insureds respective rating bureau.

The insured or their agent then contacts us about what happened after the reserves were negotiated down but the Total Incurred (Paid + Reserves) did not reduce one penny.

Adjuster Relationship = Timely Workers Comp Reserve Reduction

My first out-of-the-box questions cover the article from last week on reserve reductions – click here. The one question that I always add is – did you pull your Workers Comp reserves just before the UNISTAT Date?

Workers Comp adjusters are overloaded at the end of a month. DO NOT expect them to drop everything if you request a reserve reduction two days before the UNIT STAT Date.

The working relationship with the adjuster becomes very important when you request a reserve reduction on a certain file or group of files.

Your Reduction Request is Ranked 13 out of 13 – OMG!

Blue Puzzle Workers Comp reserve reduction on the floor

Wikimedia Commons – Jared Tarbell

The reduction will not occur- trust me. If you want to know what claims adjuster is doing – check out the 13 duties of a workers comp adjuster that I originally wrote in 1994.

Most TPAs and carriers want all the 15-and-60-day reserve increases cleared out by end of the month.

Your reserve reduction or closing request is ranked 13th out of 13. It is similar to ESPN’s Bottom 10 College Football Poll.

So – if you are reading this, go back to the reserve reduction article last week, and then follow all the links from there on getting your reserve reductions through and reported to the rating bureau.

For more info, please use the Search Box at the top right of any webpage – totally worth using it.

Self-Insureds – You Are In On This Too (A Little Secret)

Yes, you are not out of the Mod system, except you have a Loss Development Factor to contend with at comparably the same time as the UNITSTAT Date.

Most of the LDF’s use the same timing as the Rating Bureaus and the UNISTAT Date. You are obtaining an independent LDF – right? (Hope so -if not Use The Contact Us page on the website).

Last Step to Your Workers Comp Reserve Reduction Strategy Is..

You must pull the Workers Comp Loss Run one more time to make sure the reductions you are anticipating are on the books before the UNIT STAT date kicks in. Yes, self-insureds are included – obtain your TPAs loss run.

The reserve increases or decreases must work their way across many desks (now virtual). If you are dealing with large reserves, the request may have hung up somewhere in the process.

As I have said repeatedly, online access to downloading your own loss runs is beyond important at this time in your Workers Comp reserve cycle. Printing our on-demand loss runs helps insureds and self-insureds avoid having to request one and waiting for a response.

The last step should be done approximately a week before the UNISTAT Date.

Red Alert if.. (Star Trek reference)

Big Red Workers Comp reserve reduction Button

Wikimedia Commons – włodi

If the reserves are still at the same levels or the files did not close, you must drop everything and take care of the situation. You have followed the reserves all year – push it over the finish line. Email the adjuster with a follow-up call to see why no anticipated reserve reductions occurred on the files.

Remember that you are dealing with #13 out of 13 adjuster duties – and if it is the end of the month, adjusters are totally overloaded.

Do not wait until the last day of the month or the last day before the UNISTAT date. You are going to be disappointed with the results. Your Workers Comp reserve reduction strategy will be all for naught.

©J&L Risk Management Inc Copyright Notice

How J&L Reduced Workers Comp Reserves $300,000 In One Month

September 24, 2020 By JL Risk Management Consultants

Animal Rescue Loss Run Analysis Reduced Workers Comp Reserves – Short Deadline

We reduced Workers Comp reserves for an Animal Rescue and Veterinary in 30 days by 300,000 was one of our most recent successes. How do we do it? Follow along – maybe you can do it for your company or client.

pic of puppy sleeping reduced workers comp reserves

Wikimedia Commons License – Eugene0126jp

Making available more funds to help save kittens and puppies felt great – using the below semi-secret method. An agent contacted me to help her with a large client where their Experience Mod was going to incur a sky-high spike. Yikes!

Self-insureds can use the same techniques – the timing can be adjusted to whenever you have an LDF calculated for you.

The Method To The Madness – 10 Steps (Two Bonus)

Obtaining the correct loss runs – the agent and I could not obtain the correct loss runs for many weeks. Three different versions of the claims loss run existed with different claims on them.
Online Access – I have been harping on having the claims reserves and notes access for over 25 years. The agent and I were able to obtain an online account with the correct info. You can print your own loss runs if you have an online account with the carrier. We received this two weeks before the UNIT STAT date.
Understand Your UNIT STAT Date. You have to know what reserves peg to the Experience Mod and on what date. Follow this link for an explanation of the UNIT STAT date. So many end-of-year or end-of-policy-year reviews can be very worthless.
Understanding What To Leave In – What To Leave Out – many claim loss run review requests from employers and agents say – “Hey, let’s review them all” – the wrong method. As a claims person for many years, reserves increases were sometimes caused after having to review a set of claims for an insured and/or agent. Let some sleeping dogs lie (no pun intended), but which ones to pick and which ones to pass over?
These &^%$& Reserves Are Too High – the bane of many adjusters – the same as #4, but on an individual claims basis. The comment will usually cause an adjuster to dig their heels in the ground and push back hard. Threatening to bring up the reserving with their claims supervisor is not recommended.
Look For The Algorithms- if you have claims notes and reserve access, many claims departments have some type of tracking algorithm (analytics) that may point out over-reserving. You are not going to find this info on just a claims loss run. J&L has its own algorithm – it is called workers comp claims experience.
Relationships, relationships, and relationships – the most important of these ten. The agent had a working relationship of sorts with the claims adjuster. Even though we were running out of time, the agent never challenged the claims adjuster. <<very important point.
Employers and agents, do you know who is working on what files – no, not the name on the loss run – have you spoken with that adjuster – best by email. See #7 – do not come out of the blue and make the request.
Explain Your Goal – adjusters are goal setters and seekers – explain to them what you are doing by having the reserves reduced and the results you are seeking.
Pick The Top Three – a huge insured may want to pick five. Workers Comp claims adjusters are short on time. Make sure that you do not ask for 10 – 15 claims to be reviewed for reserve reductions. That request will go to the bottom of the pile and then the UNISTAT Date will pass and your efforts to have reduced workers comp reserves will all be in vain.
Bonus – Show The Insured The Experience Mod Differences – calculate what the Mod would have looked like without the reduction. This can be complicated – be careful.
Bonus #2 – Try to start the process at least 90 days before the UNISTAT Date. Reserve reductions may have to go through a Claims VP, Manager, and Supervisor to approve reduced workers comp reserves. Start early.

The Results Of The Reduced Workers Comp Reserves

Sea Turtle reduced workers comp reserves under the sea

Wikimedia Commons – Brocken Inaglory

The final results will not be known until the UNIT STAT publish date. The final results of the reduced workers comp reserves should be published in December of this year.

Make sure that you convert the differences in #11 above to premium dollars if possible. Reduced workers comp reserves are great. The final effect on the premiums is even better.

©J&L Risk Management Inc Copyright Notice.

Premium Audit and Reserve Question – How Often Per Policy Year?

August 4, 2011 By JL Risk Management Consultants

Reserve Question And Premium Audit = Not The Same Thing

We received this reserve question earlier this week. I thought I would address it now as there seems to be some confusion on the premium audit and reserving process for Workers Compensation. The emailed question was – How often should we do premium audit and/or reserve reviews on our Workers Compensation claims?

123RF

I thought it would be best if I separated the question in two parts. As an employer, you do not have to do a premium audit with your insurance carrier more than once per year. The premium audit is more of an audit of the mechanisms that result in your Workers Comp earned premium. Your insurance carrier will audit your company’s premium with 30 – 60 days after your policy expires.

The best answer would be immediately after the results of your premium audit are provided to your company by your Workers Comp insurance carrier. Once the premium audit bill is sent to you, the clock starts running on how long your company has to dispute or even question the premium audit.

As I have posted very often in this blog, most states allow your company to have the audits for the last three years reviewed by either you or a company that has an expertise in this area – shameless plug for J&L.

Hand Holding Calculator Reserve Question Icon

StockUnlimited

One of our areas of concern is that we are contacted by most employers just after their policy has expired. That concerns me and our auditors very heavily as that means if an error is found, your company just lost 1/3 or more of your possible premium overcharge recoveries. At the expiration of each policy, the policy from three years ago can no longer be reviewed along with the audit.

I will cover reserve reviews in the next post.

©J&L Risk Management Inc Copyright Notice

Workers Comp Reserve Reduction Review Plan For Dates Other Than January 1st

March 25, 2011 By JL Risk Management Consultants

Reserve Reduction Plan For E-Mods

Workers Comp reserve reduction review plans need to be on schedule. I have devised a formula for calculating when your reserve or E-Mod reduction plan should begin overall.

As I posted last week, you should start three months BEFORE your Unit Stat date. Sound confusing? – Check out the formula.

Picture of Calculating Reserve Reduction E-Mod

Date that your reserve hit your NEXT YEAR’s E-Mod = Your renewal date + six months. For example, if 3/1/11 is your renewal date, your reserves tab to your E-Mod on 9/1/11.
Preferable Date to start your E-Mod reduction plan – Your renewal date + 2 months Preferably, you would want to start your reduction plan by 5/1/11. Why? You cannot just call up your claims adjuster and say reduce these reserves today. It just does not work that way.
Latest time to start your E-Mod reduction plan – Your renewal date + 3 months You would need to start your E-Mod reduction plan on 6/1/11 at the latest.

If your company is past the three month barrier, you may need to bring in outside non-agent expert help to get your E-Mods reduced. We have been able to reduce reserves with only two weeks before the Unit Stat date.

©J&L Risk Management Inc Copyright Notice

Workers Comp Reserve Reduction Plan – Is Yours In Place?

March 25, 2011 By JL Risk Management Consultants

Reserve Reduction Plan And The Unistat Date

I wrote last week on the timing and deadline for having your Workers Compensation reserve reduction plan in place. If your company has not begun with the plan, you are throwing away Workers Compensation Dollars.

If your renewal date is January 1, you should by now have obtained your company’s or agency’s Workers Compensation loss runs. If you do not have them, you are already running behind.

Remember, you have until 6/30/11 at 11:59 PM, to reduce your Workers Comp reserves which in turn will reduce your E-Mod. That is your goal – to reduce NEXT YEAR’S E-MOD.

StockUnlimited

You should have a list of claims that you wish to discuss with your adjuster on the reserve levels. A caveat – KNOWING WHICH CLAIMS to discuss is critical. Discussing the wrong claims may cost your company more $. Please do not ask an adjuster to reduce all your reserves by 15%. That will never happen and ruin the working relationship you have with your adjuster.

If you do not know who your Workers Comp adjuster is, then you are falling way behind. Your loss run should indicate the person that is handling each claim.

As I have said many times in this blog, if you have online access you are way ahead of the game. Having FULL online access to your claims will save you hours and hours of work on your reserve reduction plan as you can see the status and the reserve levels any time you wish to access them.

The last time I posted on this subject, I received a few questions concerning renewal dates other than 1/1 and the corresponding reserve reduction plan timing. Check out my next post.

If you ever feel you are in over your head or that your carrier is not responding to your request, please contact us. Reserve reductions are part of what we do as a company.

When To Start Your Workers Comp Reserve Reduction Program

November 17, 2010 By JL Risk Management Consultants

Workers Comp Reserve Reduction Program

I was going to construct a chart on when your company’s Workers Comp reserve reduction program would need to begin overall. I think that a formula would be easier. For a quick date calculator, try this one.

Picture Of Man Holding Calculator With Reserve Reduction Program Icon

StockUnlimited

There are two assumptions that have to be made for the formula to work.

Your company pays a premium and is not self insured
You have a normal Workers Comp policy

Policy Renewal Date + 3 months = Latest time that a Workers Comp reserve reduction program should be undertaken.

Policy Renewal Date + 6 months = Unit Stat date

The Unit Stat date is the date that usually no matter what happens, your Workers Comp reserves are pegged to calculate your NEXT year’s policy. I am giving you three months to do a complete Workers Comp reserve reduction program. You may wish to start slightly earlier.

You may want to start even earlier if you do not have online and immediate access to your Workers Comp files and reserves. That is why I consider online access to be golden. It saves an enormous amount of time. I have written about it in the past.

The claims staff is just not going to lower your reserves because you call. The largest mistake made when it comes time for a reserve reduction is to just simply call up the adjuster and say my reserves are too high, take them down ASAP.

Now You Have Loss Run Online Access-What Do You Do Now

December 20, 2007 By JL Risk Management Consultants

Loss Run Online Access Is Just The Beginning

You have online access or you have all of the loss runs – what do you do now?

You will mainly be concerned with just the reserving part of the claim for now.

Woman Teaching Online Access in computer laboratory

Sage Ross Author Wikipedia

One of the important points to remember is that with a Workers Comp loss run review, you usually cannot really question what has happened in the past, especially on closed claims.

The Total Incurred for a closed claim is the amount paid. There is not much you can do once a bill or settlement has been paid. That is why it is important that Loss Run Reviews are performed quarterly or monthly.

Do you have an email sent to you if reserves reach a certain level or if a massive bill/settlement is being considered? If not, you are leaving an open checkbook against your E-Mod.

Most insurance carrier or Third Party Administrator computer systems will automatically send you a notice by email when a reserve reaches a certain level. However, the level has to be set for your company at the beginning of the policy or agreement.

Without a claims technical background, common sense is the rule for doing loss run reviews. Take a look at the open claims.

Does the amount for reserves (Total Incurred minus Paid) look right?
Has the claim that was once a more serious claim now resolved itself?
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Is the employee back to work?
Do you have an employee on your loss run that is not one of your employees?
The list goes on and on for areas to possibly find mistakes in a Workers Comp claims reserve/loss run review.