The Workers’ Compensation Insurance Rating Bureau (WCIRB) released its “2020 State of the System” report on July 14 showing unprecedented stability leading into challenges of the COVID-19 pandemic which will position profitable insurance companies to weather any potential storm quite well.
For the seventh consecutive year, insurers saw a combined loss and expense ratio below 100 percent, and in 2018 saw their average return on net worth increase to 14.3 percent, up from 9.9 percent in 2017. Meanwhile, employers now have an average charged rate for workers’ compensation insurance lower than in 1973.
While the profits keep rolling in, the WCIRB targets cumulative trauma (CT) claims, permanent disability claims and high rates of representation and litigation on claims as key factors in rising frictional costs.
However, a 2018 report from Lockton Analytics shows that claim denials are a major driving force of increased costs in California with much higher costs associated with denying claims compared to claims that are initially accepted with the provision of immediate benefits and medical treatment.
On average, 67 percent, or two thirds, of initial denials converted to paid claims within about 12 months, according to Lockton Analytics data.
The study also found that there is a substantial increase – about 55 percent – in the cost of a claim initially denied and then paid out. In addition, expenses paid out on denied claims are close to triple the amount of non-denied claim expenses.
When an injured worker is faced with the adversarial position taken by a claims department or defense attorney in denying their claim, their only recourse for help is to seek legal representation.
Complex claims are more likely to be denied because of the costs involved.
Permanent disability claims are more likely to be denied because of the costs involved.
CT claims are more likely to be denied.
In its’ October 2018 report on CT claims, the WCIRB confirmed that over 70 percent of CT claims are initially denied in whole or part.
While the WCIRB continues to blame workers and the valid claims they file, all data seems to correlate with claims behavior in California which is skewed to denying claims rather than paying benefits upfront, making claims significantly more expensive.
Perhaps the WCIRB should focus on the state of denial pervading California’s workers’ compensation system as the real culprit of higher costs instead of targeting workers who continue to get screwed.