Medical-Only Claims That Become Lost-Time Claims: A Study of Characteristics

Posted Date: July 2005
    

Executive Summary

Workers compensation claims adjusters typically handle two distinct types of claims: claims that include indemnity payments, known as lost-time claims, and claims for which the only payments are for medical costs, known as medical-only claims. Understanding the characteristics of workers compensation claims that are more likely to be converted from medical-only claims to lost-time claims can help industry participants focus resources and minimize total workers compensation costs.

The vast majority of claims are medical-only claims that keep employees out of work only for a short period of time, if at all. Workers need to be away from work longer than three to seven days, depending on state waiting periods, before they qualify for indemnity benefits.

As noted above, medical-only claims make up the majority of workers compensation claims, totaling 77.9% of claim counts1—but account for only 6.0% of loss dollars.2 For that reason, insurance companies often handle lost-time claims quite differently from medical-only claims, focusing the majority of their expertise on the lost-time claims.

For example, many companies have “medical-only” units for fast-track handling of the small medical claims. This works well for the vast majority of medical-only claims. Only 4.6% of claims that are medical-only 90 days after the date of injury become lost-time claims within 30 months of that date.

However, as this study examines, there are certain types of medical-only claim where the likelihood of becoming a late-recognized indemnity claim is much greater, as will be shown below.

Some findings for claims that are medical-only at 3 months and become lost-time by 30 months include:

  • About 80% make the transition within 12 months of the date of injury
  • Medical-only claims that become lost-time claims cost an average of 40 times more than those that remain medical-only
  • Carpal tunnel claims are the most likely claims to transition from medical-only to lost-time, with the probability of such a transition being approximately 34%
  • The larger the incurred value (paid plus case reserves), the greater the probability of the claim becoming a lost-time claim
  • The probability of a claim transitioning increases with claimant age until age 65, and then it declines
1 2004 Annual Statistical Bulletin, Exhibit XII
2 2004 Annual Statistical Bulletin, Exhibit X