Does lag time impact claim costs or is it a symptom of a broken system?
Lag time has been a hot topic in the workers’ compensation debate for years. Several scientific studies have found that claims filed later tend to have higher costs. The thinking is that managing a claim earlier allows injured workers to get proper medical care, which results in faster return to work.
But a recent report by Lockton Companies brings a new spin on the lag time debate, arguing that delays are not the cause of high claim costs, but rather a symptom of poor safety and claim practices.
So, how does lag time truly impact claim costs, and what can companies be doing to improve their workers’ comp protocols?
What you need to know
Reporting lag time is defined as the time between the onset of a work injury and the point at which a claim is filed with the insurer. In 2000, The Hartford Insurance Company found the average medical and indemnity costs of their permanent, partial and temporary lost-time claims gradually rose from 18% when reported on the second week to 45% when reported on the fifth week after the day of the injury.
A later study by NCCI published in 2015 verified the findings and added that median costs were lowest when sprains, strains and contusions were reported during Week One, and fractures and lacerations during Week Two (excluding the day of the injury). They also found that claims reported after Week Two tend to involve complex injuries, attorneys and lump-sum payments, and are less likely to be resolved within 18 months.
Lag time mirrors systemic problems
A new report from Lockton Companies published in June 2018 takes a different look at lag time. After analyzing five years of lost-time claims, the new report argues that medical and indemnity costs are not affected by lag time when an injury is reported within the first 12 days. Claims reported after 12 days are more expensive only for soft-tissue injuries or reports delayed by employers.
Lockton also found that most reporting delays lead to higher legal, handling and investigation fees, or allocated loss adjustment expenses (ALAE). Their report, “Report lag: Truths and myths” contends that lag time is a good indicator of claim management practices and suggests that to bring down claim costs, companies need to look closer at the root cause of injuries and implement better safety and post-injury management programs.
The real world
Statistics are useful to explain some parts of reality, but often fail to capture wider issues with deeper impact like culture and communications. A company that values employees will create safety and injury management programs that promote open communications, care coordination and optimal claim handling to facilitate return to work. Feeling valued, injured workers will be engaged in their recovery and they will be less inclined to hire attorneys.
Consider the following examples:
Scenario No. 1: Mr. Jones works for XYZ Corp., a fictitious citrus farming company in Florida. After falling from a ladder, Mr. Jones is told by his supervisor to go home to recover. Since the pain does not go away, Mr. Jones attends the nearest emergency room and an examination reveals a minor ankle sprain that requires over-the-counter medication and three days of rest. As he leaves the clinic, he learns his health insurance will not pay the bill because this was a work accident, and no one from XYZ Corp. is returning his calls. Concerned about his work and medical costs, and angry since no one is communicating, Mr. Jones consults with an attorney who promises a large settlement.
Scenario No. 2: Consider now ABC Corp., a competitor who takes great care in hiring experienced farm workers with good references. Mr. Smith has the same accident and reports to his supervisor, who in turn calls the company’s injury management team. To rule out a severe strain or fracture, Mr. Smith is driven to the nearest clinic and prescribed the same treatment as Mr. Jones. ABC Corp. agrees to cover medical expenses, calls Mr. Smith to learn he will be resting for the next three days and hires a temporary worker until he returns to work on the fourth day.
Finding the root of the problem
Both cases represent soft-tissue injuries reported within 12 days, but XYZ Corp. is more likely to incur litigation expenses due to lack of communication. Industry reports found a correlation between lag time and claim costs under certain conditions, but did not examine the impact of communication and injury management protocols. So, lag time may be a lagging indicator of an underlying problem, without leading us to the underlying factors that drive claim costs in a particular company.
Today’s workforce uses modern technology to seek guidance and simplify communications, but Google does not separate good from bad medical advice and Facebook can’t isolate injured workers from attorneys paying to advertise their services. Employers who care for their workforce must find ways to have a voice and leverage technology to better manage injuries and communicate with injured workers in order to fill the void that exists between the time of the injury and the claim.