Sarasota, FL (WorkersCompensation.com) – High dollar workers’ compensation claims have been garnering much attention these days. Claims of $1 million or higher are being seen more often, for a variety of reasons. Experts say it’s not that the number of catastrophic injuries is necessarily increasing, it’s that the dollars associated with them are rising exponentially.
Advances in medical science have been such that many critically injured workers who would previously have had limited abilities if they were even able to survive, are now able to be functioning members of society and live much longer life spans.
Planning and reserving for these claims can be challenging. But medical professionals say the right providers applying appropriate treatment from the very beginning can mitigate some of the expenses of these claims and allow affected workers to achieve recoveries once thought impossible.
There is no exact threshold for what constitutes a large — or mega — claim. A recent report from NCCI put the bar at $10 million. A study by the New York State Compensation Insurance Rating Bureau set the limit at $250,000. Other stakeholders have varying caps for the amount at which lost time claims cross into mega claim territory.
“We specialize in these big claims. Our average self-insured retention is in the $900,000 area,” said John John Csik, EVP and chief Financial Officer for Safety National, a leading provider of high deductible, excess self-insurance and reinsurance coverage. “Any claim we look at would be considered a really big claim.”
The most expensive claim Safety National has seen was approximately $15 million and involved multiple workers. Reinsurers, including Lloyds of London have seen even larger claims.
But claims of this magnitude are still rare. Their frequency has not changed much year over year.
“As we’ve watched those claims over the years, the average value has continued to creep up,” Csik said. “It’s not ‘what’s your biggest claim today vs. 5 years ago;’ it’s looking at this pool of claims. … It clearly has been going up.”
The NYCIRB study noted that large claims in that state account for only 4 percent of claims, but incur more than 50 percent of ultimate claim losses. It also said that many of these claims don’t necessarily begin as high dollar cases.
“Due to the emergence of large claims over time, an examination of recent, less mature years may provide an incomplete picture of claim frequency,” it said. “The average large claim severity remains relatively stable between $400,000 and $450,000 at latest report. However, the average severity of the same set of claims was significantly lower at earlier reports as smaller claims develop upward to become large claims over time. … most of the change to the large claims cohort occurs over the first four or five years.”
Mega Cost Drivers
While it may be obvious from the onset that an injury will be expensive, projecting the specific costs typically takes several years. A variety of issues can change throughout the life of a catastrophic claim, especially if the injury is less severe, such as a milder traumatic brain injury or burns.
“For these larger claims, you may not know early on who’s going to be expensive,” said Steven Moskowitz M.D., senior Medical Director of Paradigm. “They usually come to the table with premorbid conditions. They have maybe one or two body parts [affected]. In workers’ compensation there’s often litigation and the need for maximum medical improvement, which makes caring for these people more complex.”
Because of the long-tail nature of workers’ compensation claims, things can change dramatically.
“The biggest claims typically have attendant care, so the person goes into a facility 24/7 and [the cost] can be $300,000 per year or more. So that adds up to many millions of dollars,” Csik said. “That’s not always apparent in the early stages of the claim.”
The other major cost drivers of mega claims relate to new medical treatments and issues associated with them. Trauma management has evolved to a point where physicians can prevent death among patients with uncontrolled hemorrhagic shock. Resuscitative endovascular balloon occlusion of the aorta, or REBOA is an example and it is increasingly being used.
“In the past, person goes to the ER with major injury to their vascular [system] enough to bleed out; they died, or physicians did what they could to manage it, but they usually couldn’t. Now we have REBOA to stop the bleeding and do procedures because of the time we gain,” said Michael Choo, chief Medical Officer and SVP of Paradigm. “It’s a good example of how things have changed.”
While this and other medical advancements are literally life-changing for many injured workers, other care issues come into play because of them. For example, a REBOA procedure done incorrectly can lead to complications that can result in amputations of lower limbs and even a total gut transplant, thereby increasing the cost of the claim. Also, these procedures keep the catastrophically injured workers alive and prolong their need for acute inpatient hospital care, increasing the expense.
“These [procedures] do come with an expense that we didn’t have in the past,” Choo said. “Now we do and people are surviving longer.”
Providing the best care for injured workers while holding costs in check may seem like conflicting goals. But they don’t necessarily need to be.
“Two things; making sure the right care is provided at the beginning so you minimize the complications or setbacks,” Choo said. “And looking at what is appropriate, whether the treatment considered is a high or low value from the eyes of the expert.”
As Choo explained, a provider may want to pursue treatments that may not be appropriate in a given situation or circumstances. “We’ve encountered situations where the physician wants to continue with multiple incremental surgeries when our experts feel it would be futile and without any ultimate outcome benefit,” he said. “Sometimes it might be best to do something more definitive that can move the injured worker toward a faster and more realistic recovery with optimal function rather than delaying and prolonging the inevitable.”
Setting the case on the right trajectory from the beginning also means identifying all potential injury conditions as early as possible to avoid or mitigate upcoming complications. An example is a subtle brain injury that can complicate a more obvious orthopedic injury.
“They focus on the complex fracture, but may miss the injured worker’s brain injury with subtle sensory damages involving the vestibular system where if not properly identified early after the initial injury period, it can negatively impact recovery over time with complications from balance issues and walking,” Choo said. “One must have the expertise to make sure that these illusive conditions are identified early enough to ensure the best outcome.”