new study reveals that 67% of workers’ compensation claims originally denied
are converted to paid claims within just one year. Another interesting
take away from this research, is that the amount of money awarded for
a claim that has been converted is on average 55% higher than the initial claim.
According to the research, insurance carriers “found that the average
net incurred value of a claim that is accepted and pays out is $10,153.
However, the average for a claim that is denied, and then pays out, is
The report also found that workers’ compensation denials are usually
associated with low productivity output, as well as decreased employee
loyalty and trust. Despite this, claims are increasingly being denied
by carriers and self-insured employers.
Between the five-year period of 2013 to 2017, Denial rates for workers’
comp claims increased by 20 percent. The top 10 reasons for denying a
- Injury lacks medical evidence
- Injury doesn’t fit the statutory definition
- Reservation of rights
- Pre-existing condition
- Idiopathic condition
- Alcohol or drug related violation
- Stress not related to work
- Failing to report within the designated time-frame
- Person doesn’t meet the statutory definition of an employee
According to Kelly Flannery, a risk analyst for Lockton Companies, LLC,
the company that conducted the study, “We think much of the increase
is occurring because employers and claims adjusters have access to more
data than ever before.” Flannery said, “They are using this
data to drive their decision-making about which claims to accept and which
The study also examines three “buckets” of related costs:
- Overall expense
In two of the three buckets, the associated costs were substantially higher
for claims that have been denied. The overall expense of denying claims
is nearly triple that of accepting a claim, and the indemnity cost for
denying claims had an average of $2,585 more than accepting claims. When
it comes to medical, employers only saw a minimal decrease of $548.
The study also found that denial conversions varied from state to state.
When compared to the national average, California has a highest conversion
rate, while Texas and Florida have the lowest conversion rates. Flannery said:
“There are multiple factors at work in how geography impacts claim
outcomes. For starters, states set their own legislation to determine
benefits for workers’ comp coverage, and these benefits can vary
vastly from state to state. This means that a specific type of injury
in one state may pay out very differently than if that same injury happened
in a different state.”
“Once a claim has been denied, employers lose the right to direct
an employee as to how and where to seek coverage. Since medical costs
vary across the country, if the claim eventually gets paid, then the costs
may be higher in certain areas than if the claim was paid out when originally
filed. States that have higher litigation rates will have higher average
expenses per claim than those where litigation is less likely.”
According to the study, 27.5% of non-denied claims are litigated, while
70.6% of denied claims are litigated.
Get Help With Your Workers’ Comp Case
Have you suffered a work-related injury? Was your workers’ compensation
claim denied by your employer or their insurance carrier? Our attorney
Bill Marder can help protect your rights and fight for the injury benefits you are
entitled to. Let us get started on your case today.
Contact our Hollister employment law attorney
to schedule your free consultation with our legal professionals.