A 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 $15,694.”
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 claim include:
- 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 to deny.”
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.