One of the overarching principles of workers’ comp cost control is early reporting and intervention. About fifteen years ago, a groundbreaking study by the Hartford Financial Services Group found that injuries reported between the 4th and 5th week following an injury are 45% more expensive than those reported in the first week. While the details of the findings vary somewhat, a recently released study by the National Council on Compensation Insurance (NCCI) comes to a similar conclusion: “claims with a delay of more than two weeks are more complex to settle, take longer to close, and involve a longer period before the injured worker can return to work.” They also are more likely to involve attorneys.
Some key findings:
- The lowest median cost, $13,210 per claim, was for occupational injuries reported between one to two weeks after the date of an accident. Injuries reported between one day and one week after an accident resulted in the second lowest average cost per claim at $13,844. At three weeks, the median cost rose to $17,785, while those waiting four weeks the median cost was $19,936 per claim, more than 50% higher than the lowest median cost.
- The Hartford study found that injuries reported in Week 2 had a higher median cost than claims reported in Week 1. NCCI found a slightly different relationship, which depends on the nature of injury. For sprains and strains and for contusions, the minimum median cost is for claims reported in Week 1. For fractures and lacerations, the minimum median cost is for claims reported in Week 2.
- Claims reported on the day of the accident are some of the most costly claims. This is expected because serious injuries often require immediate medical care, which triggers notification to the insurer.
- Involvement of attorneys becomes more common as the report lag increases. Claims reported immediately involve an attorney 13% of the time. This increases to 32% for claims reported after Week 4.
- Indemnity cost rises faster than medical cost for claims reported after Week 3. One possible explanation is that it takes longer for a worker to return to work when the claim is reported after Week 3, resulting in a longer period of wage replacement benefits.
- The highest closure ratios are for claims reported in Weeks 1 and 2. Claims reported after Week 2 are less likely to be closed at 18 months than those reported in Weeks 1 and 2. This is another indication that claims reported after Week 2 take longer to resolve than claims reported in Weeks 1 or 2.
The study included workplace injuries with lost work-time other than fatal or permanent total claims and excluded claims for occupational disease or cumulative injury. For these claims, median costs are lowest for claims that are reported after the day of the accident but within two weeks of the accident. This pattern holds for all four of the most common types of injury (sprains and strains, fractures, contusions, and lacerations).
Claims with more than a two-week delay in reporting are characterized by a lower medical share of total cost, greater attorney involvement, more use of lump-sum payments, lower paid to incurred ratio at 18 months, and a lower closure rate at 18 months.
Employer takeaway: Delays in reporting claims will increase your costs and the potential for litigation. Prompt reporting ensures your employee gets the proper medical care in a timely manner, can return to work more quickly, improves morale, and is effective cost management.
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