Workers Compensation Reserves – Fee Schedule Hidden Benefit

June 27, 2018 By JL Risk Management Consultants

Workers Compensation Reserves More Accurate With Fee Schedules

Workers Compensation reserves (Total Incurred minus Paid) receive an accuracy boost with fee schedules. Why? – Let us go into the mind of an adjuster getting ready to set permanent file reserves at 60 days.

picture of archer workers compensation reserves target

Wikimedia License – Jethrothompson

BTW, this articles stems from an article I wrote last week. I promised in that article to mention how fee schedules help increase reserve accuracy.

Very few adjusting staffs sit down with a medical reserve and read it out of the state fee schedule. Usually, the adjuster has a list of blanks to fill in to come up with the file reserves. Areas such as surgery, hospitalization fees, physical therapy, etc. are listed on the sheet.

The Workers Compensation reserves at the 60 day mark are for the life of the file. An experienced adjuster with 7+ years into their career has a great feel for reserving in a state with fee schedules. The states with Usual & Customary (U&C) are more of a negotiated price. If you have ever received a U&C bill in a health insurance matter, you are shaking your head – yes. It is by zip code and area of specialty and on and on.

With fee schedules, the adjuster can easily say -OK- the price of treatment for a non-compound ulna fracture (after filling in the aforementioned blanks) is $23,545.00. With U&C, the adjuster creates even more of an estimate as the adjuster has to know the price of medical treatment for every specialty in every zip code. Whew! – that is not easy.

man wrapping injured workers compensation reserves woman

by StockUnlimited

I became very experienced in the U&C area after I received two boxes of paper files from a failed captive in a run-off situation. Some of the providers had not been paid for quite some time. All the injured employee bills originated in non-fee schedule states. The ever complicated negotiation was on – by each zip code, and even some of the U&C Zip Codes were split.

In a fee schedule based state, I could have sent the bills for processing through a bill review company. The charges would have been paid – possibly with an applicable late fee. The task turned out to be not that easy.

Workers Compensation reserves with a fee schedule state have one set of numbers to use in the complete state – in most cases. A few fee schedules have a synthetic add-on such as BR (By Report).

A disclaimer – I am not a U&C health insurance expert. I am more versed in Workers Compensation reserves.

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Workers Compensation Reserve Increases – 10 Reasons For Huge Ones

May 24, 2018 By JL Risk Management Consultants

Workers Compensation Reserve Increases

10 Ways To Cause Huge Reserves

Most Workers Compensation reserve increases can be controlled by employers. Let us see how employers cause huge ones below. Some of these come from the Six Keys To Saving On Workers Comp insurance that I wrote in the 1980’s.

The list also applies to large deductibles, captives, self insureds and so forth.

Law of Large Numbers Workers Compensation Reserve Increases Graph

Public Use License – Dean P Foster

Top 10 Ways To Cause Jumbo Workers Compensation Reserve Increases

Filing the 1st Report of Injury late – you have introduced your company to the adjuster as a high-risk company. Large lag times make employers look irresponsible. A high-risk company receives high-risk reserves. This is an easy one to correct. Many carriers have online reporting to cut the mailing times to a minimum.
Not having an industrial-minded medical network in place – this one is even worse than late 1st reports. Your workers comp adjuster has to deal with the medical providers very often during a claim. If the medical providers seem high risk, the adjuster sees your company as high-risk. This one takes some effort to establish. Even in states where the employee has full choice of providers, they will likely go to the physician that your company recommends 80% of the time.
A shoddy or no return to work program – this one can turn a regular claim into a permanent total claim very quickly. Many industrial commissions and all adjuster take notice when an injured employee cannot be returned to modified duty. The days of firing the injured employee (in most cases) are long gone. Once again, your organization sticks out as a high-risk employer. The adjuster may set or add in reserves that equate to a high-risk employer.
Employee treated like they are no longer part of the company – this is one area that will almost always result in attorney representation. If the employee feels like everyone is against them, they will find someone that will be glad to represent their interests for a price. This one is very easy to fix. An employer’s internal controls should facilitate how the employee is treated by the company. Remember, as in #2 above, the adjuster has to deal with your choices on the claim. The wrong choices can result in large reserve increases initially.
Not taking #1 – #4 seriously – an employer may write a large manual on controlling Workers Compensation. I have dusted those off many times when consulting with employers. The manual was great but unused in those situations. #1 – #4 above is multiplicative or additive when an adjuster starts to establish the reserves. In fact, many reserve worksheets have checklists for #1 – #4 right on the reserving sheets.
Twilight Zone (c) Phone Calls – this one goes hand-in-hand with #1 above. If the first introduction to a workers compensation claim is a call from an unknown medical provider on an unknown claim, the employer just put the red flag on the file as a high-high risk employer. Check out the link for a better description of those types of those phone calls.
Not Knowing Your Adjuster’s Names – If you do not know who is working on your claims, then that should be an internal red flag that your company is not working with your claims adjusters. Establishing a working relationship (by email) reduces your company’s perceived risk factor with the adjusters. Quite a few employers have us track their claims for them. The first thing I do is send the adjuster a nice – hey let’s work together email.
Not Knowing Your E-Mod, LDF, or Total Claim Payments – this comes from my 5-minute company safety analysis article. All senior management, business owners, safety officers, risk managers, or company claims administrators should know this number cold without having to look it up. If you do not know the number, how can you tell how your company is doing with #1-#7 above? This is similar to your location finder on your smartphone. The maps function will not work if you do not know where you are presently.
Not Having Your Loss Run At Your Fingertips – this one is the same as #8, but on a larger scale. If you do not know your losses, you just shut off the location finder on your smartphone. Online claims access should be viewed as beyond critical, especially near your Unit Statistical Date. How can you talk with your adjuster when you have outdated data? Emailing (not calling) your claims adjusters with old data does not look good.
Like it or not appearances and first impressions count – For instance, I am sitting here now with a large claim on my desk that I have been asked to assess the proper reserves. What do you think I noticed in the file review – yes, these things work the same for workers compensation reserve increases as for an after-the-fact-analyses.

Many more reasons do exist to have a large workers compensation reserve increase or have the initial reserves set very high. Feel free to add more in the comments section.

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Workers Compensation Reserves – How Does Adjuster Set Them?

April 26, 2018 By JL Risk Management Consultants

Workers Compensation Reserves – The Illusive Moving Target

All Workers Compensation reserves have a common element. Very few, if any, employers, actuaries, underwriters, agents, and any other players in this hybrid insurance understand how reserves are set – other than the adjusters themselves.

einstein workers compensation reserves theory

Public Use License Wikimedia

By the way, that is a graphical representation of E=MC(2) Some workers compensation adjusters do document their reserving well. With the sterileness of algorithms, workers compensation reserves machined out by a chip are becoming more common. In fact, sometimes the adjuster CANNOT even override them without supervisory or managerial approval?

What is the basic minimum for an adjuster to have the knowledge to set proper reserves? The mark rests at 5 – 7 years of experience. Why? The adjusters by then have seen enough instances of each type of claim to have a solid background in being able to set the reserves.

Most claims staffs have a spreadsheet type reserving system which allows the adjuster to input the indemnity, medical, and allocated expense reserves that post to the file. Even if the claims staff uses advanced software, a spreadsheet still produces the workers compensation reserves .

One of the conundrums is the reserves for the lifetime of the file are usually set at a 60 day interval – with no adjustment to those for many months or years, or until the file closes.

If you are reading this article and are not the claims adjuster on a file or a certain set of files, you may want to set up a diary that enables you to analyze the reserves every 60 – 90 days. A precious commodity that allows you to access the reserves in real-time (over-used word) becomes critical to following the reserves of the file.

You do not have to email the adjuster every time your diary date comes up. Analyzing the reserves should be the key. If the claims staff does not know who you are, then you should email your adjusters just to establish communications. Many large organizations have such a manual requiring the adjusters to contact the respective insureds.

Medical Doctor Doing Report Workers Compensation Reserves From Injured Woman

Public Domain By Paul D. Honnick

Notice how I bolded establish communications. One of the keys to proper reserves is a line of communication between the insured and their adjuster(s).

If you need to pull the loss runs (without real-time access to reserves or claims then that cycle becomes a delayed system. As I noted over 10 years ago, online access may be worth 20% more on paying premiums or paying a TPA to process the claims. That number remains accurate today.

So, now we know the 60 day time for the claims staff to set reserves. Your claims diary should be clocked at 50 days to contact the adjuster or claims staff to give them any critical updates such as:

Return to work status
Medical notes you may have received
Your contact with the injured employee
Subrogation – Were there any other parties involved in the accident – police reports for auto accidents, etc.
Any complaints or concerns from the injured employee about the claim – a big claim can result from the most minute concerns

The adjuster will usually have 50 – 100 different blanks to fill in on the proverbial reserving spreadsheet. If many positive and communicated developments occur early in the claim, your workers compensation reserves may be lower than a company or organization that does not communicate with their adjusters <<by email.

Workers compensation reserves and adjusting remain a team effort for successful companies.

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Work Comp Reserves And Twilight Zone Phone Call

July 14, 2016 By JL Risk Management Consultants

How To Negatively Affect The Initial Work Comp Reserves

The Work Comp reserves on a file are based on a more complicated formula than just an educated guess. One of the quickest ways to have the claims staff set very high initial reserves is by starting the file with the term I coined a few years ago. The Twilight Zone phone call always has these frustrating characteristics:

graphic of clouds work comp reserves emblem from website

Wikimedia Commons – fir0002

No first report of injury has been filed by the insured
The Twilight Zone phone call is for some type of authorization
The caller cannot figure out why the adjuster cannot provide an authorization on the spot
The adjuster has to drop everything, call the employer and ask for a first report of injury
The First Report of Injury has to be input quickly.
Then the adjuster has to call back whomever was seeking a treatment authorization
The adjuster is left with a conundrum of authorizing something without having fully investigated the file.
This type of situation is usually a trend with some employers, not an isolated occurrence

Within 60 days, the adjuster will be tasked with setting reserves on the files. After the aforementioned occurrence, the natural reaction of the adjuster is to possibly set the reserves higher than normal.

This is a different type of reputational risk. If the adjuster or claims staff recognizes that a certain employer has a trend of providing them with Twilight Zone phone calls, the natural reaction to the reputational risk will be offset by the adjuster setting the reserves at a higher level than normal.

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The 60 day work comp reserves are usually the ones that are on the file at its conclusion unless the injury worsens. The claims staff setting higher work comp reserve levels will result in the employer incurring a higher E-Mod (X-Mod) or LDF. This is just one example of how having a great working relationship with the adjuster will pay off handsomely in the long run.

The timely filing of the first reports of injury is one of my Six Keys To Cutting Work Comp Costs. With the ability to now input claims directly into the claims systems, there is little excuse for an extremely last first report of injury.

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Workers Comp Reserve Reviews And Subrogation – Three Concerns

March 10, 2013 By JL Risk Management Consultants

Workers Comp Reserve Reviews And Subrogation

Our Workers Comp Reserve reviews uncover many concerns on claims handling. Subrogation refers to an insurance company seeking reimbursement from the person or entity legally responsible for an accident after the insurer has paid out money on behalf of its insured. In Workers Compensation, we often see three different areas of subrogation that should be of concern to employers.

Picture Of Hand Workers Comp Reserve Reviews Holding Seedling Plant

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First, we sometimes find in our file reviews for employers that there was likely a third party that was or at least was partially responsible for the Workers Comp accident.

As the file adjusting for Workers Comp claims has become more specialized, insurance carriers and TPA’s have sometimes not trained their claims adjusting staff in the steps to pursuing subrogation.

We do often see that the adjusters have pursued subrogation properly if there was an auto accident involved with the claim.

The second area of concern is that when subrogation funds have been received by an insurance carrier or TPA, there is sometimes no procedure on how to handle these funds inside of the Workers Compensation file. This is an area that may not exist in most claims manuals.

The third area of concern is when subrogation funds have been received and credited to the file. We do see in premium audits for employers that the adjustment of the total incurred was never reported back to the NCCI or State Rating Bureau. This can have a great effect on an employer’s E-Mod/X-Mod if the subrogation recovery was significant. As up to 45 months of data go into the E-Mod, a subrogation recovery must be credited on the day of receipt to the file and the correction reported to the NCCI or State Rating Bureau immediately.

Money Bags And Coins Workers Comp Reserve Reviews Vector

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I am not saying that this situation exists in all the files that we see. However, it is of a large enough concern that all employers should monitor if the recovered funds did make it to their E-Mod or X-Mod.

Further note – The X-Mod is the same as the E-Mod. The Experience Modification Factor is called the X-Mod in California.

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What Does Stair Step Reserving Mean?

May 11, 2011 By JL Risk Management Consultants

Term Of The Day – Stair Step Reserving

The stair step reserving of Workers Comp reserves is an age-old concern of any party to an insurance or TPA policy. If loss reserves are raised by increments in order to cover the cost of claims expense as they happen, the term stair stepping comes i to use. If the claim reserves were to be charted, the resulting graph would look like stair steps. This can also be known as reserve creep.

Picture of Woman Stair Step reserving Workers Comp Concept

The slang term amongst adjusters is reserving to pay bills or the next TTD payment. Stair stepping reserves is very harmful for many reasons:

Affect insureds E-Mod negatively
Self insureds will not have accurate Loss Development Factor (LDF)
Self insured client will not budget properly for future payments
Will cause actuarial or statistical work to have a built-in error
Use up adjuster’s time by constantly having to take time to increase reserves in system
Not giving reinsurers timely notice

Many years ago, some self insureds actually wanted this practice in place as to keep their Risk Factors low. This blew up in their face eventually as all files were reserved too low and id not reflect the risk of future payouts which is the underpinning for reserves.

Many Risk Management, insurance carrier, and TPA processing systems have a large amount of built-in redundancy to alert claim supervisors and managers to stair

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Workers Comp Claim Reserving – Follow It Closely

October 6, 2010 By JL Risk Management Consultants

Workers Comp Claim Reserving

Workers Comp Claim Reserving should be followed closely as part of your workers compensation premium reduction program.

One of the most mystifying areas of Workers Comp is in the area of reserving. I have written often on reserves, as believe it or not, they are just as mystifying to the claims adjusters and supervisors. I can guarantee that if you set down ten adjusters/supervisors in a room, give them the facts on a Workers Compensation file, you will receive a spectrum of reserve levels. Why?

Picture Of Files Claim Reserving On Table

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One thing to point out early in this post is that setting reserves on any Workers Comp file is an art unto itself. I have seen software packages that will set the reserves for adjusters – SOME OF THEM WITHOUT AN OVERRIDE FUNCTION. You can add the software package to the spectrum of reserve levels in the room of claims adjusters and supervisors.

One caveat is that the expectation of accurate reserves at the start of a Workers Compensation file is not valid. The reserves that are placed on a file in the first 60 days are just not that accurate as the file has not had the time to mature and develop. Please note that in our file reviews we often see the reserves left unchanged throughout the life of the file after the 60 day initial reserve.

The other side of the coin is that if a company keeps reminding the adjuster to check the reserves on a file, the adjuster may analyze the file for an increase. Knowing which files to review with an adjuster and at what is the best time to review the reserves is crucial. As I have posted many times, your file reserves feed directly into your Experience Modification Factor (E-Mod).

I will not leave the self insureds out on this one. For budgeting purposes, your self-insured program should have Loss Development Factors (LDF’s) promulgated every year. If you do not, you are throwing away $$$. The reserves on your self insured Workers Comp files feed directly into the LDF just like the E-Mod. LDF’s can make or break a Risk Manager’s budgeting process.

Bottom Line – What is a Risk Manager or CFO or Company Owner or other person handling the Workers Comp to do about reserving? Check my post next time.

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Over-reserving Workers Comp Claims – How To Tell

August 14, 2009 By JL Risk Management Consultants

Over-reserving on WC Claims

WC claims Over-reserving analyses are difficult.I usually try to post every two days. I have not posted for four days as this area was too complicated to fit into one post.

Graphic Of Bar Graph Over-reserving with Magnifying Glass

StockUnlimited

The bottom line is that it is very difficult if not impossible to identify reserves that are too high without at least 5 – 7 years of Workers Comp adjusting experience.

As I have said numerous times in presentations and in this blog, online claims access is the key to controlling the reserving on your files. If you are not up-to-date on your claims, questioning the reserves on any claim may end up with an unanticipated reserve increase.

Calling attention to the wrong claims may harm your claim reserve levels. Do not inquire about reserves on a set of claims without having some updated reason that would result in a claims reserve reduction. A positive medical status update may be a good reason for a reserve reduction inquiry to the adjuster.

I have 24+ years of experience in claims adjusting, underwriting, and statistical analyses, particularly in Workers Compensation. I find it difficult myself to just look at a loss run and decide whether or not the reserving is not in line with acceptable standards.

If I just have a loss run, I or someone on our staff has to email the adjuster for a status. If you have the availability of customizing your loss runs, ask for the status field to be added. At least then you will know where the claims stand that are affecting your E-Mod or Loss Development Factor if you are self-insured.

I tried to cover Workers Comp reserving over the last two weeks in detail. I hope it was helpful. If you have any questions, please drop us an email.

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Automated Workers Compensation Reserves Concerns

August 9, 2009 By JL Risk Management Consultants

Automated Workers Compensation Reserves Area Of Concern

The Automated Workers Compensation reserves by carriers and TPA’s cause me much concern. Automated reserving is an area of Workers Compensation reserving with certain insurance carriers or TPA that causes me great concern.

Icons of Insurance Automated Workers Compensation Reserves

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I have actually been told more than once by a Workers Comp adjuster that the reserves (no matter how inaccurate) could not be changed as their computer system had set the reserves and they are 99% accurate. I have never seen anything involving insurance that was 99% accurate.

Automated reserving is basically fill-in-the-blanks adjusting. As everyone’s healing period varies greatly, there is no “one-size-fits-all” estimation of the files reserves. As each injured worker is very unique, so should be the reserves on the file. For instance, say that an employee fractures their arm and will be off work for quite some time. The only way that the reserves can properly be set is with the experience of the adjuster at how much it will cost during the lifetime of the file.

However, there are some reserving systems that do not even allow changes to the preset reserves unless a very important development occurs on the file. There are even some automated reserving systems that only allow for a supervisor to make changes after the adjuster has set the initial reserves – usually at 60 days into the file.

Picture Accountant and Client Automated Workers Compensation Reserves Area

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Automated reserves are not the same as an online adjuster’s reserve worksheet. The adjuster can input anything needed to properly estimate the file reserves with an online worksheet. Automated reserves ask very unspecific questions and then semi-magically come up with the reserves. If your company has online access to the claims files, you may be able to see the documentation on the reserving. If you have this type of access, the adjuster worksheets may answer quite a few questions.

I am not saying that all automated reserving programs are inaccurate. Unfortunately, I have not seen one that can forecast a person’s genetics. It may be a good idea to ask your adjuster if they use automated reserving software. If so, these reserves should be followed very closely.

There are two different software packages that will automatically set the reserves. Due to legal concerns, I will not mention them here. There is one monopolistic state that still uses this type of software to set reserves.

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How and When Are Reserves Set For Each Claim?

July 22, 2009 By JL Risk Management Consultants

Workers Comp Claims Reserves Set At 60 Days

When are indemnity,medical expense reserves set on your claims? This subject is one of the most confusing and frustrating budget areas for insureds. Workers Comp reserves are very important to companies with a regular commercial insurance policy or self-insureds. Quite often, I hear self-insureds say that reserves are not as important as they are “out of the Workers Compensation system.” Nothing could further from the truth. I will cover this subject in a post later this week.

Insurance benefits Icons Claims Reserves Set In Blue Color

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How do insurance company adjusters set reserves on a Workers Compensation file? It is actually an educated guess at best. Trying to estimate the lifetime payouts on a claim is very difficult, if not impossible. The healing period from an injury varies from person to person greatly.

The reserving is broken down into indemnity, medical, and expenses. The claims adjuster will almost always have online access to a reserving sheet. These sheets are usually not shared with the employers. In fact, in the next post I will go over what the major variables in the indemnity, medical, and expense reserves. Going over that now will make too long of a post to read.

An adjuster’s experience level will usually aid them with making accurate reserve estimates. The adjuster’s caseload will determine if they have enough time to calculate exact reserves. Always ask your adjuster for their background and caseload the first time that you talk to them. Adjusters have an authority level to reserve files as they see fit. If the file reserves exceeds the authority level, the supervisor must approve the reserves.

Picture Of Medical Reserves Set Stethoscope

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The most inaccurate reserving that I have seen is when an automated reserve is set by some type of software. As I said before, each individual heals differently, so an automated reserve is never accurate unless the adjuster can override the system reserves.

I will cover the variables in each reserve in the next post.

WC Loss Run Claim Reserve Analysis – Steps to Cut Comp Costs

June 3, 2009 By JL Risk Management Consultants

Loss Run Claim Reserve Analysis

A loss run claim reserve analysis is one of the most important steps in reducing your workers compensation budget.

Are the Workers Compensation reserves correct on the file you are examining? I have posted on this subject previously. As it is a very popular question that we receive, I will cover the subject again.

The steps to finding out are:

Obtaining online access or Workers Compensation loss runs, online access is much more preferable as a major timesaver
Understanding which claims will affect your NCCI or State Rating Bureau Experience Mod (E-Mod/X-Mod)
Understanding which claims will be examined when an insurance company provides a quote
Understanding how your claims affect your insurance premiums
Examining and understanding what the three factors of a reserve are and which ones can be analyzed
Understanding the difference between a Workers Comp claim review, reserve review, and premium audit

I covered each of the six steps below.

Graphic Of Flying Money loss run claim reserve analysis Color Green

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Obtaining online access or Workers Compensation loss runs.

This area has been covered very often by me in previous posts. Please use the Search box in the right margin. Searching for online access or loss runs will give you the best results.

Understanding which claims will affect your NCCI or State Rating Bureau Experience Mod (E-Mod/X-Mod).

Any very old claims (more than 5 years old) will not affect your E-Mod or X-Mod in most cases. However, if you are in a hybrid insurance arrangement or a long-tail Retro policy, the old claims can still affect your insurance premiums.

Update – claims analytics are being used very often now when assessing an employer. Analytics may go back 10+ years. This new development makes all claims count to a certain extent.

Your company’s most recent claims will likely not affect your next E-Mod/X-Mod. However, the very new claims will affect your Mod eventually, so they should be examined along with the rest of the claims on the loss run.

Understanding which claims will be examined when an insurance company provides a quote

Woman Loss Run Claim Reserve Analysis Calculating

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This may be a little confusing as the insurance companies that do a good job of underwriting will examine the older claims that will not affect your E-Mod. The underwriter will still look at the old claims to make sure that your company did not have a very bad claims year that may not appear in the E-Mod calculations.

We recently consulted with a trucking company that was trying to negotiate a switch from a regular commercial policy to a large deductible program. Their E-Mod looked great. The insurance carriers that were willing to write them did not provide a great deal as was anticipated due to their low E-Mod. The underwriting departments were concerned the company had two very serious claim years 7 & 8 years ago. The bottom line is that for the E-Mod the newest claims should be examined. If your company is going to shop their Workers Comp insurance in the market or going to try to switch to an alternative insurance plan, all claims on the loss runs are then highly important.

The Workers Compensation reserves system is a delayed system.

Understanding how your claims affect your insurance premiums.

Graphic Of Umbrella Workers Compensation Reserves With Dollar Sign

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The adjusters actually have an additional six months after a policy ends to adjust the reserves to their proper level . Reviewing your claim reserves with the insurance company at the end of a policy year is an exercise in futility. Approximately 90 days after your policy expires is the best time to review the loss runs and the reserve values. These Total Incurred values will show up in your company’s Workers Comp insurance policy for the next year.

Examining and understanding what the three factors of workers compensation reserves are and which ones can be analyzed.

The three factors are the Spent amounts; Amounts in Reserve, and Total Incurred. The Spent amounts can be examined to make sure that the correct amounts were paid. The Spent amounts have little to do with the reserve figures. The Spent amount analysis is best performed in a claim review, not a reserve review.
The Reserved amounts are the most important part of a reserve review. They are the unspent figures that the adjuster estimates will be paid out over the life of the Workers Comp claim. The Reserve amounts are the negotiable parts of the loss runs. Over-reserving can cost an employer dearly as the E-Mods/X-Mods are calculated directly from these figures. Over-reserving will cause an employer to pay premiums for funds that will never be used to pay the claim.
The Total Incurred amounts are the Spent amounts added to the Reserve amounts. The Total Incurred amounts will appear on the Experience Modification Worksheets that are published on your company by the NCCI or State Rating Bureau.

Understanding the difference between a Workers Comp claim review, reserve review, and premium audit.

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Claims Review – analyzing how well the claims department handled the claims. This is usually accomplished with a review sheet that scores the effectiveness of the claims adjusters.
Reserve Review – a financial analysis to make sure the monies forecasted for the life of the claim is as accurate as possible. Negotiating down the reserves will result in a large amount of savings in your Workers Comp premiums.
Premium Audit – performed by the insurance company’s premium auditor to make sure that all the correct classification codes and payroll figures were used during the policy period that just expired.

Which Loss Run Claim Reserves To Analyze?

The ones that you want to target are the ones that have an Open or Reopen status. You will likely only want to examine the Lost Time files and not the Medical Benefits only file. You would want to examine any medical-only claims that have more than $2,000 in outstanding reserves.

Now that you have a list of those claims, how do you tell which ones are over-reserved or should be closed? Well, I have been able to answer hundreds of questions in this blog. This is the first time that I have no sure answer. Contrary to the belief of some people, reserving Workers Comp files is an art that is very difficult. I could write a book just on how to analyze loss runs.

Woman Workers Compensation Reserves Holding Up Cut Out Light Bulb

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You can call the adjuster to see if they will reduce the Workers Compensation reserves, but on which files would that be appropriate? You can call your agent, but I have only known a very few agents that understand the process of reserving a Workers Comp file. That is no slight to agents as they are very necessary to the Workers Comp insurance process.

I want to avoid sounding like an infomercial for our services. I will not “toot our own horns.” The best thing I can say to do is have a working relationship with your adjuster. That will help somewhat.

I have posted a large number of posts on loss runs, file reserving and contacting your Workers Comp adjuster. Feel free to look through the posts on this page and on the archived pages. The Search Box may be a good shortcut.

Next Post – A Statistic That Floored Me From The American Medical Association

Automated Reserving Programs Work Better Than Claims Adjusters?

August 28, 2007 By JL Risk Management Consultants

Automated Reserving Programs For Workers Comp – Better Than An Adjuster?

I received this question on automated reserving in response to yesterday’s post.

Graphic of Ohio Automated Reserving Written In White Tiles

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You had said there are no guidelines for a Workers Compensation Adjuster to set the Workers Comp reserves on a file – How about the automated reserving programs that are available? Do they work, and are they accurate?

Answer – I have seen some of them, and audited files, where automated reserves are set. They are no more accurate than the adjuster setting file reserves on their own. A great example is when we audited files for an Ohio client. Ohio is monopolistic. At the time, they were using an automated reserve system.

The reserves/Total Incurred for the files were not that accurate.One of the reasons is the adjuster needs to update what is going on in the claim just as if the carrier was non-automated on reserves. The bottom line is the employer was still paying the same premium regardless.The reason? – There are over 130 variables that go into a Workers Compensation reserve.

Software Automated Reserving Laptop And Cellphone Graphic

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The software is only taking what it is given, so the reserves are only as accurate as what the adjuster inputs into them. BTW, the BWC of Ohio (Government-ran monopolistic Workers Comp Carrier) is and has been under investigation. What was one of the complaints? -inaccurate file reserves.

Update 6/24/2017 Believe it or not, I wrote this article almost 10 years ago. Today, still no automated reserving programs exist that predict the reserves of a Workers Compensation file. My take on it – the human body heals differently for each individual person. Thousands of variables must be taken into account when the human body heals. I will update this article when I observe any accurate automated reserving programs.

07/25/2018 – Reserving analytics have still not yet arrived on the workers compensation scene. I have sampled two and the reserving algorithms have improved, but still cannot outperform an adjuster at workers comp reserving.