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Claims Management 03

WC Court Rulings, Legislation, and Advocacy-Driven Claim Outcomes

Christopher Mandel | March 29, 2019

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Florida is a great example of what happens when state legislatures pass bills or the courts rule in cases where the interests of many stakeholders are variously impacted in the aftermath.

In fact, it's more likely that, in both cases, the impact on stakeholders is wide and varied, yet still significant for many.

The Florida Example

Florida's workers compensation (WC) landscape was manageable from 2004 to 2015, though related costs (especially legal fees) were on the rise in recent years. In fact, the 2003 WC "reforms" have been quite successful in lowering costs and improving efficiencies for employers, insurers, and claim professionals (third-party administrators).

In 2008, the Florida Supreme Court ruled in Murray v. Mariner Health, 994 So. 2d 1051 (Fla. 2008), that a claimant is entitled to recover "reasonable attorney fees," thus reinstating hourly fee awards that existed prior to the 2003 reform. The next year, in the 2009 legislative session, a bill was passed that clarified that the awarding of attorneys' fees, with some exceptions, would revert to being limited by fee schedule—a bouncing ball on this narrow issue.

Then, in 2016, the Florida Supreme Court ruled in Castellanos v. Next Door Co., 192 So. 3d 431 (Fla. April 28, 2016), that legal fees would be calculated and paid under significantly more liberal rules. The immediate reaction was that a crisis would ensue in terms of WC insurance costs in general and the cost of claimant attorneys' fees. Many actuaries included factors in their loss forecasts that escalated loss cost budgets, and many employers braced for the worst. The National Council on Compensation Insurance recommended, and Florida passed, a 14.8 percent rate increase in anticipation of the impact.

At the start of this time frame (2003), Florida was the most expensive state for WC costs, according to the annual Oregon Premium Ranking study. By 2016, the state had fallen to 33rd (out of 51) of the most expensive. By 2018, Florida had risen to 21st of the most expensive and rising. A real roller coaster for employers in Florida.

Yet, WC insurance rates in Florida have dropped an astounding 65 percent from 2003 through 2019. You'd think that the system might be viewed as stable and working well for employers, but the reality is quite varied in employers' views. In fact, in some cases, cost impacts from the 2016 Florida Supreme Court ruling are modest, though there is clear concern about the mid- to long-term impact without new reforms.

For other employers, especially those in Southern Florida, the cost impact has been much more significant. Even in Southern Florida, however, these latter impacts are still quite varied, and the higher of them seem to be related more to being concentrated in Miami, Dade County, which is the effect of union environments and other factors affecting the experience.

The Claim Management Landscape

While the rulings and legislation that has produced these impacts can be quite complex, the point is not so much those issues as much as the constantly changing landscape of the legal and legislative landscape that affects how claim professionals of all types get their work done. In fact, these drivers are not typically focused on the claims management world as much as the bouncing ball of impacts of claims activity on claimants (injured workers in the WC world) and/or employers for whom they work. Since they are the main stakeholders in that WC realm, it's only appropriate that their interests are preeminent.

But apart from these realities, in the 15 years of changes and impacts that I've highlighted above in Florida's WC, the real questions should revolve around the processes and systems within which stakeholders, most particularly the injured worker, must operate. Because these systems tend to originate from and be driven by their bureaucratic nature, primarily due to statutorily based rules and regulations, it is no surprise that they can be and often are the source of much angst in their navigation.

Cost impacts have manifested in the form of increases in the averages paid, incurreds, disability durations, permanency, and settlement amounts, among other things. These, of course, all roll up to cost of risk, the key metric for traditional risk management success. But, while the cost impacts are a concern and will always demand attention, these legislative and court-ordered changes ultimately drive the results achieved, which are, namely, the outcomes.

Focus on Outcomes

Outcomes are what should matter most. They are often viewed in the context of injury recovery but manifest in a variety of outcomes of equal or near equal importance. These other outcomes include: optimizing return to work, the right treatments, the right doctors, minimizing litigation frequency, and controlling and reducing WC cost of risk overall. These are all worthy of attention as most have some direct effect on the injured worker, who should be the key focus of the system and its stakeholders.

To achieve the best outcomes, no matter the category, one only need look at the instant case of Florida WC responses over the last 3 years. Those responses among claim professionals have included mandates for the following.

  • New mitigation strategies to control litigation frequency and its derivative costs
  • Redesign of frontline claim practices
  • Adding claim staff to account for large volume changes in legal maneuverings
  • Skill upgrades for claim staff to better deal with the increasing complexities of new rules and regulations
  • Customized responses for those affected most by geographic concentrations
  • Allocating more time for petitions for benefits, legal filings, benefit calculations, investigative speed, and handling all to mitigate negative impacts on injured workers and to minimize or ideally avoid regulatory penalties

Interestingly, many larger employers and claim professionals focused on excellence have been ready for these changes long before they occurred. In fact, well-designed, thoroughly vetted claim management practices have incorporated into them aggressive strategies and tactics that keep the injured worker front and center in the system, advocating for their interests from the first report to claim closure. Examples of a few tactics commonly employed in Florida include the following.

  • Not allowing attorney involvement to preclude effective communications
  • Creating litigation partnerships that put the recovery of the injured worker at the center
  • Aligning stakeholders over the response to increasing volumes of litigation-related activities
  • Integrating the acceptance/denial process of WC with that of the benefit-related process
  • Emphasizing the effect of rapid reporting on mitigating litigation (legal representation has been shown to be 3 times more when the claim is reported after 4 weeks)

Rather than treating legislative and court-imposed changes as crises by default, it would be more helpful to recognize that a focus on the injured worker's experience will engender better outcomes of all kinds. It can also address other downside risks including the following.

  • Productivity impacts
  • Efficiency impacts
  • Perceptions of unfairness
  • Perceptions of inequity

Each of these also has the potential to impact costs at every stage of the claim. Productivity alone has a multiplicative impact on cost where some have asserted it can add two to nine times to direct costs; an astronomical impact rarely if ever accounted for in the cost of risk.

Considering the Worker's Experience

If there's a crisis that comes from court rulings and new legislation, it's the crisis of the negative impact on the injured worker's experience. As a result, a key element of process improvement is implementing the many aspects of advocacy; all of which can improve the injured worker's experience and thus potentially improve all outcomes.

So, what is advocacy? Well, it represents a shift in focus from simply delivering care to understanding how the patient consumes care and feels about their care. It has led system providers to focus significant strategic and operational resources on the injured worker's experience. These workers are increasingly referred to as consumers, ascribing to them more of a position of power in the system and processes they involuntarily find themselves entangled by. In this strategy, employers are particularly engaged in the outcomes targeted for their employee. Companies understand employee experience translates to employee engagement and directly reflects in their satisfaction and retention. The interactions with injured workers include demonstrating and emphasizing the following.

  • A caring attitude
  • Compassion
  • Empathy
  • Being customer focused

The success of advocacy is heavily dependent on all key stakeholders fulfilling their role in the WC system and processes. While it will not always work in the same way, given human nature, if done well, it will build trust with injured workers, which can enhance stakeholder reputation and brand image.

Other Components of Advocacy

There are other components of advocacy that include the following.

  • Effective communications: it's not so much what you say as how you say it.
    • Language hurdles: is the language easily understood, and are you accounting for linguistic misunderstandings?
    • Attitude: are you treating injured workers like a claim file or a human being?
  • Disability management
  • Excellence: are you thorough, complete, timely, and accurate in your interactions and transactions with injured workers?
  • Return to work: is it both a priority and one managed with sensitivity?
  • Engagement: is the employer engaged in the injured worker's recovery commensurate with the employee?
  • Claim engagement: do claims professionals act with urgency and integrity on behalf of the employee?
  • Medical advocacy
    • Is the right care being provided, even best practices?
    • Is the doctor an occupational injury specialist, and do they know when to engage other specialists?
    • Is the treatment timely and focused on the right symptoms?
  • Resolution advocacy attributes
    • Are resolutions designed?
    • Is an appropriate amount of creativity employed?
    • Are the consumer needs central to the goal?
    • Is the employer engaged in the resolution strategy?

There are, of course, challenges and even barriers to optimizing advocacy, which include things such as the claim culture within both the employer and its providers, statutory rules that could prevent optimal deployment of the component parts, the stigma associated with being an injured worker, and the issues associated with various aspects of diversity and language barriers not uncommon among injured workers.

Circling back around to our central focus, no matter what courts rule and legislators implement, the way the injured worker is treated throughout the life of the claim can have the bigger effect on the many outcomes sought after by stakeholders. When advocacy is effectively practiced, outcomes often follow that ultimately drive the director of most costs, most especially legal costs.

Advocacy is worth the investment, as validated by a 2001 Liberty Mutual Center for Disability Research study, Early Prognosis for Low Back Disability: Intervention Strategies for Health Care Providers. In this study, it was shown that for WC claims that involved "positive interactions," claim costs drop 40 percent and the average duration drops 58 percent. It also showed that for claim handlers focused on "positive initial communications," average medical costs drop 31 percent. In that these are only two aspects of advocacy, you can imagine what full-on advocacy could possibly achieve. This will likely be a future focus of research at the Sedgwick Institute.

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