Workers’ compensation is a “no fault” system. Every state has laws and regulations mandating the prompt reporting of all injuries and accidents. Most of these laws are in place to protect the rights and benefits of injured workers. What many employers do not realize is that immediate reporting of all injuries can actually be a magic bullet that helps reduce their workers’ compensation costs.
Barriers to reporting
A significant barrier to reporting of claims is the economics of workers’ compensation. Workers’ compensation claims are expensive. In some organizations, the losses can impact the company’s experience rating modification and coverage costs, impact the company’s risk management budget, reduce the profitability of the division or can impact the bonuses of the front-line supervisors and managers. As a result, an unintended message can be sent to workers that they are discouraged from reporting accidents.
Economics of delayed reporting
Employers can face additional fines and penalties for late reporting, but that is not the only economic impact of delays. In a recent study, the National Council on Compensation Insurance (NCCI) showed that delayed reporting can increase workers’ compensation claims costs up to 51%. The study also reported that the longer a claim goes unreported, the more likely it will be to involve litigation, also increasing overall claims costs.
One of the most important benefits of immediate reporting is the ability to determine where there was a safety program failure and what could’ve been done to help prevent the accident. Forensic analysis of all accidents helps employers significantly reduce their claims frequency.
In workers’ compensation, few things are more vexing to employers than believing a claim is not legitimate, yet it is accepted as compensable. Delays in reporting of claims can make it significantly more difficult for the claims administrator to accurately determine if the claim is legitimate. As time goes by, potential witnesses may not be identified, witnesses’ memories become fuzzy, hard evidence can be spoiled. There are differing statutes of limitations in each state. If claims are not reported to the claims administrator immediately and denied within the appropriate timelines, it is possible that some will be considered compensable as an operation of law.
Improved medical control and better medical outcomes
Immediate reporting of claims improves the timeliness and quality of medical care. This helps reduce the number of lost time days, as well as reduce the exposure for permanent disability. In many jurisdictions, it is possible that delays in providing care can void the employer’s control of medical care. Providing quality care at the right time also helps reduce litigation rates.
Prompt and accurate benefit provision
Immediate reporting allows the claims administrator to provide prompt, accurate benefits to injured workers. This signifies to the workers that the employer cares about their health and safety and reduces the potential for litigation.
Immediate reporting allows the claims administrator to identify potential subrogation cases and preserve evidence involving a third party.
OSHA compliance reduced
Immediate reporting of all injuries increases the ability for the company to comply with Occupational Safety and Health Administration (OSHA) reporting requirements and avoid exposure to penalties and fines.
Operations best practices
What should employers do to encourage prompt workers’ compensation claims reporting, speed recovery and avoid increased friction and costs?
- Establish a precedent: Upon hiring, as part of the intake process, educate every employee that they are required to report all injuries immediately.
- Message from the top: The chief executive and management staff should regularly reinforce the importance of prompt reporting of all injuries.
- Revisit financial incentive programs: Look carefully at financial incentives within the organization which might unintentionally cause a delay in the reporting of claims. If there are charge-back programs in place, it might be wise to increase the charges for late reporting and lower the charges for claims which were reported immediately.
- Analyze gaps: Any delayed reporting should be analyzed to determine if there is a gap in the education process. Treat these cases as an opportunity to educate.
William Zachry, Senior Fellow, Sedgwick Institute