How to reduce ultimate workers’ compensation spend through settlements and handicaps

Lisa O’Brien, Director of Rates and Underwriting Services, CompManagement, Inc.

Settlement of a claim and a handicap reimbursement award are two cost containment strategies available to employers to manage claim costs and impact annual premiums. A settlement fixes the claim cost, which then allows the premium to reflect the settlement amount and possibly reduce the employer’s premium. If a handicap award is granted, a portion of the costs of the claim will be charged to the Surplus Fund and not to the employer’s experience.

“By removing costs from an employer’s experience, an employer may be able to lower its annual premium rate calculated by the Ohio Bureau of Workers’ Compensation (BWC), thus reducing its annual spend,” says Lisa O’Brien, director of rates and underwriting services for CompManagement, Inc. “Employers should always review these two very effective cost containment strategies when managing their workers’ compensation claims to make an impact to their bottom line.”

Smart Business spoke with O’Brien about these cost containment options available to employers in Ohio.

What is a settlement?

A settlement is an agreement among the employer, the injured worker and the BWC for a specific amount to settle one or more workers’ compensation claims. All three parties must agree to the settlement amount before a claim can be settled either in full, which settles all allowed conditions and benefits, or a partial settlement, which settles only certain conditions and/or benefits, either medical or indemnity (compensation).

What happens when a claim is settled?

When a claim is settled, the injured worker will receive a lump sum payment from the BWC.  Settlement affords injured workers the freedom to manage their treatment priorities, on their timeline and on their schedule.

If the claim is settled for both the indemnity and medical portions, the injured worker will receive no additional compensation or medical benefits in the settled claim. If the claim is settled for either medical only or indemnity only, the injured worker can no longer receive the benefit type that has been settled (either medical or indemnity).

For employers, settlement can help manage costs and bring closure to a claim for their employee. Settling the claim removes reserves (indemnity, medical or both depending on the type of settlement) associated with the claim from all future rate-making. However, costs already paid out, plus the settlement amount, will continue to be charged to and impact the employer’s premium rate.

When will a settlement impact the employer’s premium?

Settlement of a claim will affect an employer’s premium rate only going forward. In order for a settlement to be included in the employer’s upcoming year’s rate, the fully executed settlement application (signed by both the employer and the injured worker) must be filed by May 15 for public employers or by Oct. 15 for private, state-funded employers.

These deadlines do not apply for settlements that occur through the court of common pleas. Common pleas settlement inclusions in the employer’s experience are based on the date the settlement is paid.

For a court of common pleas settlement to be included in an employer’s upcoming rates, the settlement must be paid to the injured worker before the applicable survey date, June 30 for public employers and Dec. 31 for private employers.

 

What is a handicap reimbursement?

The BWC encourages employers to hire and retain employees with handicapped conditions. To help offset the challenges those with handicaps often experience in the job market, the BWC offers the Handicap Reimbursement program as a means for employers to reduce their claim costs. Ohio law defines a handicapped employee as one who has a physical or mental impairment, whether congenital or due to injury or disease, whose impairment jeopardizes the person’s ability to obtain employment or re-employment. Also, the impairment must be due to one of the 25 eligible diseases or conditions that Ohio law recognizes.

The most commonly recognized conditions are arthritis, ankylosis, diabetes, cardiac disease and epilepsy.

When should an employer file an application for handicap reimbursement?

If an injured worker suffers a lost-time claim (eight or more days away from work) and a handicap condition is met, the employer can file a CHP-4 application with the BWC requesting reimbursement of claim costs charged. The employer must show the handicap is a pre-existing condition (prior to the date of injury) and that it either caused the claim or contributed to increased costs or a delay in recovery. Applications are reviewed and awards are granted by the BWC’s Legal Operations Department. Once awarded, the BWC will apply the handicap reimbursement award to chargeable claim costs, thereby reducing costs and possibly premium rates.

Private, state-funded employers must file handicap reimbursement applications by June 30 of the calendar year no more than six years from the year of the date of injury. Public employers must file handicap reimbursement applications by Dec. 31 of the year no more than five years from the year of the date of injury.

Claims with a handicap reimbursement can be settled and settled claims can continue to be considered for handicap reimbursement.

What is the typical range of handicap reimbursements awarded?

Per BWC public information, handicap reimbursements typically range between 5 and 100 percent, depending on the degree to which the handicap condition impacts the claim. On average, current public information shows a handicap award to be approximately 26.17 percent.

Lisa O’Brien is the director of rates and underwriting services for CompManagement, Inc. Reach her at (800) 825-6755, ext. 65441, or [email protected]

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