That settles IT! Delays in reporting claims are the source of many workers' comp costs and a little help from Web-based technology can cut reporting times from days to minutes, according to a proponent of Internet-based claims processing

Risk & Insurance, April 1, 2004 by Rodney Griffin

Just about every claims manager alive holds this truth to be self-evident: fast, accurate reporting of first report of injury translates into benefits for both claimant and carrier. Yet the speed with which workers' compensation claims are processed remains in a deep malaise in too many states.

With costs continuing to rise--medical, indemnity, legal--workers' comp claims processing remains painfully slow. And one needn't look any further than California to know that the rate of increase in workers' compensation costs has reached a crisis.

"Workers' compensation medical costs are growing at three times the rate of general health care inflation," writes California's Insurance Commissioner, John Garamendi, in a May 2003 report. "Litigation and administrative expenses are also increasing at an alarming rate, and fraud has picked up as the economy has turned down."

Unfortunately, the condition of California's workers' compensation system is becoming the norm, rather than the exception, in many states.

Culprit No. 1: Delays

Delays in reporting claims are the culprit of many workers' comp cost issues. In addition, the inability to efficiently and effectively manage medical treatment, delays in returning employees to work and more frequent litigation and associated legal costs are contributing factors to out-of-control increases in workers' comp costs.

For companies not utilizing the Internet or 24-hour call centers, the industry average to gather initial claim information for FROI is hovering around 30 days. As a result, the industry is suffering from the impact of this time gap and its inability to react quickly.

A recent study by Glen-Roberts Pitruzzello of The Hartford Financial Services Group noted, "Claims reported two weeks after an occurrence had average settlement values 18 percent higher than those reported in the first week. Claims reported in the third and fourth week after the occurrence had average settlement values approximately 30 percent greater than those reported in the first week. Claims reported after one month of occurrence had 45 percent higher average settlement values." The results were published in an NCCI issues report.

What's an Insurer To Do?

Few will argue that reducing the lag in the reporting phase of claims handling is critical to controlling costs and improving the bottom line. Yet, given the awareness of the problem, why are costs continuing to increase at a staggering rate? Shouldn't the promises of technology and collaborative business processes finally come to fruition to address the issues?

While some attempts have been made to speed up FROI processing via fax-in claim services and 24-hour-a-day call center FROI units, the former is wrought with inaccuracies inherent in paper-based processes. The latter is costly to maintain.

The answer may be found in leveraging the communications power of the Internet and associated Web technologies for easy reporting and transmission from anywhere and at any time.

The preferred route for reporting should be via the Internet or the employer's electronic transmission capability. For those carriers who have been aggressive in promoting this approach, the increase of FROI through Web submission has proven to deliver the time and savings insurers are striving for.

Commenting on his organization's initiatives, John Strang, the recently retired chief information officer at the Workers' Compensation Fund (of Utah), notes, "Over 60 percent of our FROIs are being transmitted via the Web, reducing the previous average 29 days lag for a complete FROI to under 15 minutes."

Web-based reporting is less expensive to implement and maintain than 24-hour call centers, and vastly superior to fax-in services in terms of accuracy. Unlike paper-based forms, Web-based reporting allows for real-time error detection, cross-editing, eligibility verification and automatic capture and setup in the back-office claims system. The increasing acceptance of electronic signatures will eventually allow for the complete eradication of paper, the ultimate goal of most carriers that want to reduce costs and improve efficiencies.

Behind the Web capability, carriers can maintain call centers to deal with the work off-loaded through the adoption of Web-based, self-service platforms. However, Web sites should be designed for easy hand-off to the call center in the event the user requests person-to-person support. Fax-in capabilities may be maintained as a third option for reporting, but integrated into workflow systems with optical character recognition for automatic claims input capture.

In other words, the process for FROI should support any combination of reporting that might be employed by the user. The process should work to fit the user needs, not force the user to adhere to a strict set of reporting guidelines. The easier it is, the more likely the system will be used.

Next Step: Integration

When the FROI process is taken one step further and integrated with claims systems, a high percentage of workers' comp claims, such as simple medical-only claims, can be triaged and automatically routed. Bypassing the manual claims intake will further speed up the process, improving service to the claimant. Easily configurable business rules can be used to select cases requiring human scrutiny, allowing a pragmatic approach to controlling the nature and volume of "sight unseen" automatic straight-through processing.