Focus on Workers Comp: Are your MA insureds still paying medical-only claims?
Insured payment of medical-only claims developed in the 1990s as an informal “under the radar” practice between insureds and insurers. It began when the rates in Massachusetts were 65 percent higher than they are today. This experience modification reduction technique required – and would still require – the tacit participation of insurers. However, most insurers in MA are no longer willing to support this practice. As a result, agents need to make sure that their insureds are no longer handling small claims in this manner.
A Little Background
The first $5,000 of each claim, called primary loss, is valued at 100% in the experience mod calculation; once a claim goes above $5,000, the losses are discounted substantially. (Access the MA experience rating plan) Given that most medical-only claims are comprised entirely of primary losses, it used to make sense to keep these small claims out of the experience mod calculation. Insureds would pay the medical bills and notify the insurer of the injury as a “report only” claim; some carriers were even willing assist by rating the medical bills against the state’s stringent fee schedule, enabling insureds to reduce payments by 60 percent.
NOTE: In order to encourage insureds to report all workers comp claims, NCCI implemented a 70 percent discount on medical-only claims; this discount is available throughout New England, but not in MA. In addition, the primary split point in NCCI states has risen to $16,000.)
As rates in MA have declined dramatically, most carriers have raised serious concerns about this premium-reduction strategy. They have noted that by statute, the carrier is required first, to determine compensability of a claim and second, to pay for any and all medical bills and indemnity related to the claim. By making the initial payments, insureds pre-empt the statutory role of the carriers. As a result, carriers have raised the specter of the insured assuming full, open-ended liability for any claim handled in this manner. For example, if a simple cut turns into a serious infection, the insured may be on the hook for all subsequent payments. What was once a “best practice” for reducing premiums has devolved into unacceptable risk.
Accessing the Fee Schedule
In addition to the open-ended liability for insureds, the cost savings have also diminished. Many hospitals are refusing to allow insureds to access the MA fee schedule. They assert that only carriers are entitled to pay fee schedule amounts: technically, they are correct. On the other hand, when insureds report all claims to the carrier for payment, the fee schedule kicks in and primary losses are reduced by as much as two thirds. Thus, reporting every claim for payment by the carrier actually makes financial sense.
The MA Bargain
The good news is that WC rates in MA are substantially lower than those in every other New England state; MA is ranked 48th for cost in the country. For most MA insureds, even those with debit mods, the cost of workers comp is still less than it would be in other states. In other words, even with medical-only claims valued at 100 percent in the experience mod calculation, most Massachusetts employers still pay far less for insurance than similar businesses in neighboring states.
Senior Workers Compensation Consultant