Simple Concepts for a Complex System – Top Cost Drivers in Workers' Compensation

The top cost drivers in the system are*:

1. Litigation
2. Lost time
3. The “at-risk employee”
4. Employer /  Employee relationship
5. Opioids
6. Comorbidities
7. Age of the injured worker
8. Injuries with multiple body parts
9. Application first notice claims from workers’ compensation mills primarily in Southern California 

 *Some of these cost drivers overlap and or experience the same basic causations   

To manage and reduce these costs requires the engagement of the employer and treating physician to work in partnership with the claims adjuster. The claims administrator can not truly manage these claims or reduce system costs in a vacuum.

51 % of workers’ compensation claims account for 1 % of the benefits paid.  There should be an efficient way for these claims to go through the system with minimal administrative effort and expense.  Efficiencies should include quickly and accurately identifying this cohort of claims.  Prompt reporting of the claims and even faster determination of compensability. An automated authorization of evidence-based medical treatment, automated payment of treatment which had been approved (elimination of bill review).  

3 % of the workers' compensation claims account for 60 % of the expense and benefits in workers’ Compensation.  Some of these claims are considered “Catastrophic” claims (quadriplegics, paraplegics, amputations, severe burns, total loss of vision, head injuries“) The rest are “sisterhood of the traveling body parts injuries” (also known as Jumper Claims).  If we can identify the Jumper claims within four weeks of the injury and close them within one year of the date of injury it could cut off up to 50 % of those claims costs. Which is also equal to a 20 % savings for the whole system.  To do this will require a focus on finding the “at-risk” employee and intervening with appropriate settlement authority to get these claims settled.

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William M "Bill" Zachry is a Board member of the California State Compensation Insurance Fund, Appointed by Governors Arnold Schwarzenegger and Jerry Brown. He served 3 years as a Senior Fellow at the Sedgwick Institute. His term ended in January 2020. Zachry was awarded the Summa CompLaude award in November of 2020, the RIMS Risk Manager of the Year 2014, the CCWC Workers Compensation Professional of the Year 2016, Co-Chair AMICUS Committee California Chamber of Commerce. He is the former GVP Risk management Safeway /Albertson's Former Board Member California Self Insurers' Security Fund, former Co-Chair California Chamber of Commerce AMICUS committee Chair California Fraud Assessment Commission Zenith Insurance Company VP Claims HIH (C.E.Heath) (Care America) S.V.P. Claims. References

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