Legacy Closures: What to Expect From Outside Experts
Managers already using outside attorneys and consultants to help with workers’ comp legacy claim closures and those considering retaining such assistance should understand what these experts bring to the table and how to use them effectively.
Even if your internal team has deep knowledge of your current claims, the objective and non-emotional assessment of an outside expert often can help move even the most difficult cases toward closure. In addition, their base knowledge on how to structure the overall process can help avoid obstacles or delays and achieve optimal results.
Workers’ comp claims closure initiatives typically begin with a review of your claims inventory. Open claims should be sorted based on such factors as:
• age of claim;
• past and projected claim cost;
• complexity, including the existence of comorbidities, such as obesity and diabetes, as well as use of opioids in treatment; and
Work with your internal team or engage consultants to review your inventory (stratified by incurred), and evaluate past and current closure results. Based on experience, outside experts can provide insights to help you to establish clear objectives for reducing open claims and overall costs within defined time periods.
In working with outside consultants and attorneys, consider the following practices that have helped drive performance:
Share financial details
Claims consultants and attorneys can develop and implement strategies to meet your objectives. However, by sharing financial information – albeit discretely – you help them establish priorities that are better aligned with those of your team. For example, you may want to share such information with the lead attorney contact at each law firm you engage so they can assign specific cases to achieve optimal results.
Be strategic in your selection process
Organizations with claims in multiple jurisdictions may be drawn to use a network of attorneys and consultants who offer local expertise. While this approach may have advantages in certain difficult jurisdictions, it generally poses management challenges. Many organizations with claims in multiple jurisdictions have reduced costs, improved and accelerated results by consolidating external resources and selecting law firms and other providers whose geographic footprint best matches their overall needs.
In cases where the performance of consultants and law firms on closure projects was underwhelming, the shortcomings often are traceable to consistent failures in the hiring process to fully vet the firms. So, taking the time to get references is well worth the effort.
Start with a pilot
Some organizations have been able to identify best practices and establish protocols for working effectively with outside providers by beginning any closure initiative with a pilot involving a few jurisdictions or a select number of complex claims.
Many consultants bring technology and advanced claims-tracking capabilities that capture all relevant information and provide scheduled and actionable reporting. This gives you the ability to constantly monitor results against objectives and make critical decisions along the way to maintain momentum and drive performance.
Maintain communication flow
Top-performing organizations have regular conference calls and phone discussions with all their providers.
As you track performance, share results with all members of your team — including both internal and external resources. Stay on top of progress and obstacles on difficult claims and understand what strategies are being used to address them.Be specific in your instructions or inquiries and hold providers and attorneys accountable for responding promptly and keeping you fully informed of all significant developments.
Don’t overlook other advantages of outside help
While not always anticipated at the outset of an engagement, other benefits from outside resources can include identification of opportunities to improve claim-legal processes, as well as to provide better legal panel guidance and enhance existing partnerships, all of which can translate to effective cost management and improved outcomes.
Outside consultants and attorneys offer extensive experience and specialized expertise that can help managers achieve and exceed their claim closure objectives. By selecting providers that best meet their needs, communicating effectively, tracking progress and sharing results, managers can receive the optimum benefits from these valuable relationships.
Transition Costs to ICD-10 Lower Than Expected
There’s some good news about the upcoming conversion to ICD-10. A new survey suggests the costs for small physician practices to transition to the new coding system may be less than anticipated.
As of Oct. 1, medical providers and payers will be required to use the 10th revision of the International Classification of Diseases for diagnosis coding of all transactions covered by the Health Insurance Portability and Accountability Act. Although workers’ comp is excluded from HIPAA, many organizations have urged practitioners to convert to the new coding system.
“While the transition to ICD-10-CM may not have a direct impact on workers’ compensation reporting requirements, it will affect how insurers process medical bills and claims,” noted the International Association of Industrial Accident Boards and Commissions in a previous statement. “All medical providers and most healthcare payers will be exchanging paper forms or electronic messages that contain ICD-10 codes. ICD-10-CM contains 56,000 more codes than ICD-9-CM and most medical providers will not have the administrative support to code in both systems.”
Implementation of ICD-10 has been delayed twice from the original October 2013 date and the subsequent April 2014 deadline. The cost to transition, especially for smaller physician practices, has been a concern. But responses from 276 physician practice managers to a survey by the Professional Association of Health Care Office Management and published in the Journal of American Health Information Management Association indicate that may not be as big a concern as previously thought.
“This survey found that the average ICD-10-related expenditures for a physician practice with six or fewer providers is $8,167 with average expenditures per provider of $3,430,” the report said. “Based on this survey and the two other recent studies, the financial barriers to ICD-10 are significantly less than originally projected.”
The PAHCOM, an association for managers of physician practices, noted a 2014 study by the American Medical Association that estimated costs for a small practice to convert to ICD-10 could range from $22,560 to $105,506. It said the lower costs reflected in the latest study and two other recent ones could be the result of no- or low-cost resources that are now available.
“Practice specialty-specific superbills can be downloaded at no cost from the internet,” the PAHCOM report said. “Many software system vendors are providing ICD-10 system updates at no additional cost. The adoption of electronic health records by physician practices has further facilitated the transition to ICD-10.”
Meanwhile, the issue has been a topic for members of Congress in two recent meetings. A Capitol Hill briefing on Feb. 10 was followed the next day by a hearing before the House Energy & Commerce Subcommittee on Health.
The committee has been working with the Centers for Medicare and Medicaid Services for several months to ensure this deadline is successfully met, according to panel Chairman Rep. Joseph R. Pitts, R-Pa. “Many providers and payers, including CMS, have already made considerable investments in the ICD-10 transition, and any further delay will entail additional costs to keep ICD-9 systems current, to retrain employees, and to prepare, again, for the transition.”
2015 General Liability Renewal Outlook
There was a time, not too long ago, when prices for general liability (GL) insurance would fluctuate significantly.
Prices would decrease as new markets offered additional capacity and wanted to gain a foothold by winning business with attractive rates. Conversely, prices could be driven higher by decreases in capacity — caused by either significant losses or departing markets.
This “insurance cycle” was driven mostly by market forces of supply and demand instead of the underlying cost of the risk. The result was unstable markets — challenging buyers, brokers and carriers.
However, as risk managers and their brokers work on 2015 renewals, they’ll undoubtedly recognize that prices are relatively stable. In fact, prices have been stable for the last several years in spite of many events and developments that might have caused fluctuations in the past.
Mark Moitoso discusses general liability pricing and the flattening of the insurance cycle.
Flattening the GL insurance cycle
Any discussion of today’s stable GL market has to start with data and analytics.
These powerful new capabilities offer deeper insight into trends and uncover new information about risks. As a result, buyers, brokers and insurers are increasingly mining data, monitoring trends and building in-house analytical staff.
“The increased focus on analytics is what’s kept pricing fairly stable in the casualty world,” said Mark Moitoso, executive vice president and general manager, National Accounts Casualty at Liberty Mutual Insurance.
With the increased use of analytics, all parties have a better understanding of trends and cost drivers. It’s made buyers, brokers and carriers much more sophisticated and helped pricing reflect actual risk and costs, rather than market cycle.
The stability of the GL market also reflects many new sources of capital that have entered the market over the past few years. In fact, today, there are roughly three times as many insurers competing for a GL risk than three years ago.
Unlike past fluctuations in capacity, this appears to be a fundamental shift in the competitive landscape.
“The current risk environment underscores the value of the insurer, broker and buyer getting together to figure out the exposures they have, and the best ways to manage them, through risk control, claims management and a strategic risk management program.”
— David Perez, executive vice president and general manager, Commercial Insurance Specialty, Liberty Mutual
Dynamic risks lurking
The proliferation of new insurance companies has not been matched by an influx of new underwriting talent.
The result is the potential dilution of existing talent, creating an opportunity for insurers and brokers with talent and expertise to add even greater value to buyers by helping them understand the new and continuing risks impacting GL.
And today’s business environment presents many of these risks:
- Mass torts and class-action lawsuits: Understanding complex cases, exhausting subrogation opportunities, and wrangling with multiple plaintiffs to settle a case requires significant expertise and skill.
- Medical cost inflation: A 2014 PricewaterhouseCoopers report predicts a medical cost inflation rate of 6.8 percent. That’s had an immediate impact in increasing loss costs per commercial auto claim and it will eventually extend to longer-tail casualty businesses like GL.
- Legal costs: Hourly rates as well as award and settlement costs are all increasing.
- Industry and geographic factors: A few examples include the energy sector struggling with growing auto losses and construction companies working in New York state contending with the antiquated New York Labor Law
David Perez outlines the risks general liability buyers and brokers currently face.
Managing GL costs in a flat market
While the flattening of the GL insurance cycle removes a key source of expense volatility for risk managers, emerging risks present many challenges.
With the stable market creating general price parity among insurers, it’s more important than ever to select underwriting partners based on their expertise, experience and claims handling record – in short, their ability to help better manage the total cost of GL.
And the key word is indeed “partners.”
“The current risk environment underscores the value of the insurer, broker and buyer getting together to figure out the exposures they have, and the best ways to manage them — through risk control, claims management and a strategic risk management program,” said David Perez, executive vice president and general manager, Commercial Insurance Specialty at Liberty Mutual.
While analytics and data are key drivers to the underwriting process, the complete picture of a company’s risk profile is never fully painted by numbers alone. This perspective is not universally understood and is a key differentiator between an experienced underwriter and a simple analyst.
“We have the ability to influence underwriting decisions based on experience with the customer, knowledge of that customer, and knowledge of how they handle their own risks — things that aren’t necessarily captured in the analytical environment,” said Moitoso.
Mark Moitoso suggests looking at GL spend like one would look at total cost of risk.
Several other factors are critical in choosing an insurance partner that can help manage the total cost of your GL program:
Clear, concise contracts: The policy contract language often determines the outcome of a GL case. Investing time up-front to strategically address risk transfer through contractual language can control GL claim costs.
“A lot of the efficacy we find in claims is driven by the clear intent that’s delivered by the policy,” said Perez.
Legal cost management: Two other key drivers of GL claim outcomes are settlement and trial. The best GL programs include sophisticated legal management approaches that aggressively contain legal costs while also maximizing success factors.
“Buyers and brokers must understand the value an insurer can provide in managing legal outcomes and spending,” noted Perez. “Explore if and how the insurer evaluates potential providers in light of the specific jurisdiction and injury; reviews legal bills; and offers data-driven tools that help negotiations by tracking the range of settlements for similar cases.”
David Perez on managing legal costs.
Specialized claims approach: Resolving claims quickly and fairly is best accomplished by knowledgeable professionals. Working with an insurer whose claims organization is comprised of professionals with deep expertise in specific industries or risk categories is vital.
“We have the ability to influence underwriting decisions based on experience with the customer, knowledge of that customer, and knowledge of how they handle their own risks, things that aren’t necessarily captured in the analytical environment.”
— Mark Moitoso, executive vice president and general manager, National Accounts Casualty, Liberty Mutual
“When a claim comes in the door, we assess the situation and determine whether it can be handled as a general claim, or whether it’s a complex case,” said Moitoso. “If it’s a complex case, we make sure it goes to the right professional who understands the industry segment and territory. Having that depth and ability to access so many points of expertise and institutional knowledge is a big differentiator for us.”
While the GL insurance market cycle appears to be flattening, basic risk management continues to be essential in managing total GL costs. Close partnership between buyer, broker and insurer is critical to identifying all the GL risks faced by a company and developing a strategic risk management program to effectively mitigate and manage them.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.