Lockton Companies Report Shows Denied then Accepted Claims Cost 55 Percent More

A recent report from Lockton is receiving attention for some startling statistics regarding claim denial in workers’ comp. The study authors found that 67 percent of initially denied claims convert to accepted claims within 12 months.

Further, Lockton Companies says in the report that claims that are denied and then accepted cost on average 55 percent more than non-denied claims. Although the denial rate in the workers’ comp sector hovers well under 10 percent, Lockton benchmarks in this study show that denial rates shot up 20 percent over its study period – from 5.8 to 6.9 percent. The authors analyzed claims data from 150 companies over a five year period (1/1/13-12/31/17) totaling 273,000 individuals claims.

Kelly Flannery, Risk Analyst for Lockton and lead author on the report, said that the project all began with one client. “We used the Lockton INSIGHT process to help a client understand what was driving their workers’ compensation costs up, and we discovered part of the increase was attributable to differences between denied and non-denied claim costs,” Flannery explained. “That prompted us to look into how denial patterns were playing out across other client’s businesses. This was the first time that this specific analysis was completed, but we’ll likely be looking at the data annually going forward.”

One of the main differences between denied and non-denied claims is, unsurprisingly, the cost of litigation. The report notes that “while non-denied claims have some minor development after 36 months, denied claims still see significant development for at least an additional two years. This is due to “extra effort,” like paying for a defense attorney.

For claimant attorneys, these numbers were not surprising. “An unsupported denial of a claim for workers’ compensation can spawn exponential liability and make an otherwise routine claim very costly,” said Greg Hubachek, attorney with Workers’ Compensation LLC. “The Louisiana Legislature created a path to a ‘safe harbor’ [from penalties and attorney’s fees] where an employer/insurer initially accepts a claim but, later, discovers issues pertaining to compensability of all or some benefits. In this way, the Legislature leads employers/insurers toward thorough investigation and away from unsupported denials.”

Yvonne Rosen, Claims Manager for LCI Workers’ Comp, echoed Hubachek’s perspective on investigation. “I would agree that denied claims always come back,” she said. “It’s probably an even higher percentage. If you’re going to deny a claim for misrepresentation you really need to have all of your ducks in a row – witnesses, medical information, everything. That two years of additional development at 36 months is likely almost entirely legal fees.” The Lockton report shows that for its data set, 90.3 percent of claims denied for misrepresentation convert to paid claims after 12 months.

Lockton provides resources for employers to improve claims handling. Flannery says that, if given similar access to data, “Lockton’s claims consultants and Risk Control Services team are available to provide clients with tailored strategies to improve their bottom line.”

 

Editor’s Note: LCI Workers’ Comp in the sole sponsor of Louisiana Comp Blog.

Image Credit: Lockton

 

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