Posts Tagged ‘claims management’

Triaging Trouble: Predictive Modeling in Claims Management

Tuesday, October 4th, 2011

Predictive modeling has long been used in personal lines, especially auto insurance. It’s only in the last 8 or 9 years that we’ve seen it squeezing through the workers’ compensation front door in the areas of underwriting and claims administration. In this period, the major risk management consultants, TPAs and insurers have been developing sophisticated models to, in consultant-speak, “use advanced statistical techniques (e.g., multivariate analyses, generalized linear models) to simultaneously evaluate numerous potential explanatory risk factors for maximum amounts of knowledge from available data sources” (from a TowersPerrin 2006 paper) (PDF).
To translate, in the claims process, the purpose of predictive modeling is to identify injured workers who are most at-risk of delayed recovery or malingering. The best time to do this, of course, is at the time of the injury. As my friend and colleague Mike Shor, of Best Doctors, puts it, “Think of it as being no different from the triage process that occurs in combat medicine or an emergency room…. the military talks about the golden hour….it’s what happens in that first 60 minutes that drive outcome. In WC we believe there is a golden 24-48 hours where the claim decisions that get made determine the ultimate outcome. It is here where claims that have the potential to run off the rails actually do.”
To a certain degree, predictive modeling systems can suggest which injured workers are most at risk for staying out of work longer than is medically necessary. Predictive models use advanced statistical techniques to perform multivariate analyses that suggest the degree of risk associated with any one underwriting risk or any one injured worker claim. Some predictive models use hundreds, even thousands, of univariates, but, in the claims arena, as you can probably imagine, there are a limited number, perhaps 10 to 15, that are of most value, and many of these are of the common sense variety. For example, co-morbidities such as obesity, diabetes and diseases that affect oxygen intake, all of which hinder healing. Others are demographic, such as age, education, marital status and distance from the worksite. For example, if you have a 55-year old divorced Type-2 diabetic male who lives alone more than 20 miles from the worksite and who suffers a crushing injury to the foot you more than likely have an employee at high risk for extended absence. Of course, any claims adjuster worth his or her salt intuitively knows this, but a predictive modeling system can examine all of the appropriate variables and spit out a ranking with recommendations in a nanosecond or two. Predictive modeling doesn’t come cheap, and it doesn’t replace the experience and judgment of a seasoned claims specialist, but, if used wisely, it offers a significantly sharp, relatively new arrow in the claims quiver.
“Used wisely” is the key phrase, because if that happens the claims adjuster can quickly link the at-risk injured worker with a clinician skilled in dealing with the bio-psychosocial risk factors associated with delayed recovery. In other words, the full-court claims press can be applied very early in the claims cycle.
Add to this mix an educated employer injury coordinator who projects a caring and compassionate approach to injured workers and who offers a well-thought-out modified duty program, and the likelihood of successful return to work is increased substantially. The goal is to remove excuses for staying out of work longer than is medically necessary. This type of approach assures that injured workers, the vast majority of whom are motivated to return to productive lives as fast as possible, do so on the fast track. Even more important, those who are not so motivated, those with other agendas, are identified almost immediately.
We recommend that you ask your insurer or TPA claims executives to explain their firm’s approach to and usage of predictive modeling. Employers should know to what degree and in what way their claims adjusters are using this tool.

Exclusive remedy, “bad faith” claims, and the $12 million lawsuit

Friday, January 23rd, 2004

Exclusive remedy generally protects an employer from a lawsuit. If an employee suffers a work related injury, the employer provides a state-regulated schedule of benefits to cover medical care and lost wages during recovery. In exchange for these benefits, the employee forfeits the right to sue. Workers compensation becomes the sole or exclusive legal remedy. Often, this protection is extended to insurers who are acting as agents for the employer.

However, there are exceptions. One exception is bad faith on the part of the insurer. A successful bad faith suit might be triggered by an insurer’s nonpayment of claims, mass denial of claims, or the like.
This week, a woman in South Dakota just secured a $12 million award for a bad faith claims practice, most of it in punitive damages. The claim involved the denial of about $8,000 in medical bills for a carpal tunnel injury. The original grounds for denial centered around compensability and whether the injury arose out of and in the course of employment.

Her insurer said the denial occurred because “there was a lack of proof that her hand problems were caused by her work” and further suggested that “her hand problems were likely the result of a 1998 home injury, not her work in the kitchen of the nursing home.”

A determination of work-relatedness and compensability are huge issues in many repetitive stress injuries, and if this claim dispute had ended there, the claim might have stayed within the realm of the state workers comp authority to uphold or deny. But in this case, the insurer’s claims handling practice was the smoking gun that gave rise to a charge of bad faith, opening the door to a suit.

” … the case centered around a Travelers Insurance incentive program that offered bonuses to claims workers who lowered payouts on claims. Called the Claim Professional Incentive Program, it offered workers end-of-year bonuses of as much as 20 percent of their pay if they reduced overall payouts from one year to the next.
Abourezk argued that the program created an improper conflict of interest for claims adjusters, who are supposed to be motivated by fairness to claimants, not cost control for insurance companies.”

The judgement will be reviewed by a higher court so the punitive award may or may not stand, but it serves as a cautionary tale to insurers — who are, after all, essentially finance companies — that managing a workers compensation claim is not simply the exercise of processing paper in the most cost efficient way possible, but the response to a human event. In our experience, keeping the focus on the person rather than the dollars generally results in the most favorable outcome by whatever measures you use for success.