The New Normal: Post-Pandemic Workers' Comp Claim Challenges and Opportunities

Before the pandemic, the workers' comp (WC) process was relatively streamlined. Employers sent their injured workers to their designated occupational medicine clinics. Medical-legal examinations (used for obtaining opinion about the nature, extent, and likely cause of an illness or injury) and hearings before the WC Commissioner and judge typically were scheduled in a timely fashion. Settlements often were approved quickly.

However, as the nation continues to open up, the insurance industry and businesses are in the midst of adapting to pandemic-related workers' comp claims handling changes. With this article, we'll provide an overview of both positive and negative developments as we emerge from the pandemic world of WC claims, the impact on employers, and new claim strategies.

Data from the National Council on Compensation Insurance (NCCI) shows that total incurred losses dropped 7.5% through the third quarter of 2020 compared with the same time period in 2019. NCCI attributes the decline to fewer workplace slips and falls and fewer work-related motor vehicle accidents occurring during the pandemic. With the transition to work from home for certain occupations being made permanent by some employers, these types of injuries hopefully will continue to decrease.

Work-from-Home and Job Elimination Challenges

On the other hand, the work-from-home movement will bring about its own set of unique challenges. Employers with teleworkers should create new protocols and guidance for these employees to reduce the risk of injury. Your claim consultant or insurance carrier loss control representative is a good starting resource.

Some jobs were eliminated due to the pandemic, making it difficult for injured workers to return to modified or regular duty work. As a result, some injured workers are staying on disability longer. One potential solution is to consider alternative work assignments that may be unrelated to the employee's previous job but are still compatible with their skill set.

Another option is to utilize services like ReEmployAbility, a vendor that can help employers find temporary transitional jobs for their injured workers with non-profit organizations to offset the cost of disability. Returning to work in any capacity helps to improve employee motivation and injury recovery.

Last year, certain types of medical treatment, such as elective/non-essential surgeries, were delayed, as were final treating physician and medical-legal evaluations. These delays postponed maximum medical improvement determinations and, consequently, claim resolutions. The upside here is the growth of telemedicine and, in some cases, video medical-legal evaluations, which help triage, prioritize, and expedite medical care and maximum medical improvement reports.

It is clear that telemedicine is here to stay as a feasible option in WC cases that don't require an in-person visit. When communicating with injured workers about medical care, especially if there are delays, both employers and claims administrators would be wise to explore this convenient option. Fewer visits to the doctor and less waiting time equates to reduced loss time from work.

Another positive WC trend is the opportunity to negotiate early settlements with injured workers without waiting for a final medical report. Some workers may be more interested in settling their case quickly if they have been out of work for many months. Having been in forced isolation during the pandemic while dealing with an injury and frustrating WC delays may have motivated many workers to resolve their claim in an effort to put it behind them. This step can save on costly litigation, medical-legal expenses, and other claim costs.

Video Hearings Help Ease Backlogs

COVID shelter-in-place orders caused state regulating WC Boards to either shut down or operate on a reduced schedule, creating backlogs. Fortunately, technological advances helped most WC Boards hold Zoom hearings, a trend that might continue post-pandemic, lessening delays. Claims administrators should continue to request virtual hearings to facilitate claim resolutions. Reduced travel time also results in decreased legal fees charged to the claim file.

Last year, we saw an increase in both work-related and personal stress and burnout. Workcompcentral indicated that 40% of adults reported some level of anxiety and depression during the pandemic. While healthcare workers appeared to suffer the most––reporting 43% more mental health claims than in 2019––claims for anxiety increased in every economic sector. In response to this need, private health insurers and wellness vendors have improved their platforms. Reducing health care costs is not the only benefit of using wellness programs. Employers may wish to discuss program options with their broker or contract with a wellness vendor to reduce WC stress claims.

In addition, there are human variables to put into the mix. For example, some employees have had difficulty returning to work due to family obligations impacted by childcare or school closures. Injured workers faced with such challenges and those who do not have a job to return to may be more likely to challenge their doctor's work release. Employers might be more open to alternatives such as remote or hybrid work or flexible work schedules, even if they are only temporary.

Finally, because work-related COVID infections continue to be a fluid and evolving situation, claims administrators and employers should be open to offering lump-sum settlements to resolve potential lingering or future effects of COVID, known or unknown.

Changes to the WC Medical-Legal Fee Schedule

While not specifically related to the COVID-19 pandemic, it is worth noting that one significant change in legislation occurring after the pandemic will impact claim costs and claim management. California's Division of Workers' Compensation (DWC) made the following changes to the existing Medical-Legal Fee Schedule earlier this year.

• New reimbursement rates for Evaluation and Management ("E&M") medical services to conform to relevant 2021 changes in the Medicare payment system
• A 20% increase in expected average payments in 2021 versus 2019
• The overall cost impact estimate (net of typical inflation of 2.5% per year) is a 15% increase for office visit fees
• E&M office visit costs are estimated at 15.9% of overall medical costs.
• A 2.4% increase is estimated in overall medical costs with an estimated $170M statewide cost impact.

The new schedule is intended to increase the reimbursement rate for medical-legal reports while eliminating the increased hourly billing provisions. Here are other noteworthy changes:

• The addition of a reimbursement rate for missed appointments
• An increased cost multiplier for Agreed Medical Evaluations ("AME")
• Added modifiers for psychologist/psychiatrist, toxicologist, and oncologist
• Added medical-legal code
• Additional costs for record review and sub-rosa recordings review

The estimated overall impact of these new changes includes a 22% increase in medical-legal fees, a 6.5% increase in overall medical-legal costs, and a 1.4% increase in overall medical costs.

The bottom line is not only will the value of nominal or nuisance settlements increase, but applicant attorneys will now have even more incentive to add as many conditions and specialties as possible. Medical-legal evaluations will also delay MMI so they can bill for multiple exams. Medical management and investigation/discovery are even more critical now in claims because we can't rely on medical-legal examiners to declare injured workers MMI.

Since the charge for record review has increased, claim examiners and defense attorneys should only send relevant medical records that pertain to the claim. Finally, as much as it presents challenges, this new medical-legal fee schedule also provides opportunities to settle claims early in lieu of drawing out the medical-legal process.

As we all look forward to putting the pandemic behind us, employers must be proactive and use new creative strategies to continue to keep their employees safe and healthy on the job.

If you have any questions about this topic or about claims, benefits, and other insurance services Woodruff Sawyer offers, please contact a Woodruff Sawyer representative and let us know how we can help you.