A recent NCCI study found that COVID-19 claims that require hospitalization cost an average of $38,500 each. (Photo: Mongkolchon Akesin/Shutterstock.com)
Two years since the onset of the pandemic, nationwide COVID-19 cases persist and, as of this writing, are entering yet another wave. Carriers have been challenged to quickly become adept at segmenting COVID-19 and non-COVID-19 claims while also managing COVID-19 claims from an operations perspective.
Proper triaging and categorization of COVID-19 claims from non-COVID-19 claims is as important as ever to accurately inform business decisions. For example, by immediately understanding the relative complexity of both COVID-19 and non-COVID-19 claims, a claims team can get the right resources (i.e., senior claims handlers, clinical intervention, etc.) applied to claims as quickly as possible, thereby increasing the probability of an optimal outcome. This includes low complexity COVID-19 cases where prompt attention to minor indemnity and medical payments can help facilitate the rapid closure of pending files.
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While some carriers may have the resources to segment claims in-house, others may benefit from partnering with a third-party administrator. Either way, setting up a COVID-19 Task Force can bring together teams from client services, claims operations, quality and analytics to handle potentially massive spikes in claim volume due to COVID-19. Additionally, creating a database available to all claims handlers to support COVID-19-related decisions across the business ensures when questions arise regarding the compensability of a given case, they are reviewed by a quality team for accuracy and consistency.
Separation of claims
The COVID-19 environment in which carriers operate has significantly altered the claims landscape, especially regarding workers' compensation. As such, it is essential for carriers to separate and measure claims data in two distinct sets: Claims related to COVID-19 and claims unrelated to COVID-19.
The overwhelming majority of COVID-19 claims are relatively low in complexity and severity. According to the National Council on Compensation Insurance (NCCI), indemnity claims have accounted for approximately 75% of COVID-19 claims. However, the majority of COVID-19 indemnity claims incur only a small portion of the indemnity cost related to isolation, recovery periods and lost workdays associated with COVID-19.
These claims are more likely to close faster with shorter durations, have minimal or no medical costs and are less likely to involve litigation. NCCI recently estimated that the average cost of a COVID-19 claim is $6,000. Our experience at Gallagher Bassett with COVID-19 claims shows an average of approximately $4,000 per case across all industries. Contrast this information with the average cost of a non-COVID-19 indemnity claim with seven or more days of lost time, which the Workers' Compensation Research Institute (WCRI) estimates to be approximately $42,000 across all industries at 36-month maturity across its 18-state median.
Carriers who are not yet aware of how COVID-19 has changed outcomes in their workers' compensation programs may already have significant blind spots regarding their book performance.
The outcomes of COVID-19 claims and non-COVID-19 claims differ significantly, and for the past two years, COVID-19 claims have comprised a sizeable portion of the overall volume of workers' compensation claims (5–10%). Therefore, it is critical to separate the reporting of claim outcomes for each set.
If both sets of claims are pooled together, the outcomes will look very different from historical norms, because traditional apples-to-apples trend comparisons would be inaccurate. For example, pooling COVID-19 claims with non-COVID-19 claims would deceptively lower overall average costs, increase closure rates and lower durations relative to historical experience.
Carriers can leverage the following three strategies for cataloging, measuring and analyzing COVID-19 and non-COVID-19 claims to help improve data-driven insights, increase cost savings and achieve better outcomes.
An integrated reporting platform
While the majority of COVID-19 claims are largely of low complexity, there are, of course, outliers. A recent NCCI study found that COVID-19 claims that require hospitalization cost an average of $38,500 each. For these outliers, it is critical to have both reporting and decision-support tools to help flag higher complexity claims. Equally important on the front end is having robust and accurate claim coding in place to ensure any relevant data and information that may be required in the future is available when needed. For example, since the long-term implications of COVID-19 are still unknown, it's important to consider more specific coding than the usual and customary coding for an occupational disease.
The foundation of any claims management operation is the reporting and analytics platform, or Risk Management Information System (RMIS), used to house claim information, generate loss data and claims-related reports and type and, ultimately, key insights.
Carriers should have an RMIS platform in place that provides automated reports on incident and claim volumes related to COVID-19. This includes metrics around average cost, closure, duration and status, with comparisons to prior years, and one that allows for customizable dashboards to visually represent such data.
Additionally, stewardship reporting can help carriers analyze COVID-19 and non-COVID-19 claim outcomes separately and create at-a-glance benchmark comparisons on these claims.
Industry claims benchmarking
Accurate claims benchmarking helps carriers continuously improve their outcomes by finding opportunities in their programs relative to historical experience and against meaningful benchmarks. Understanding performance relative to an apples-to-apples benchmark is important both for COVID-19 and non-COVID-19 claims.
Carriers can utilize precise, algorithmically derived claim benchmarking data to enhance analysis across dozens of variables, including jurisdiction, accident type, age of claimant, medical procedures and diagnoses. While it is common in our industry to see benchmarks rely on industry slices of data to generate comparisons, often those benchmarks don't take into account the unique nature of the actual injuries and accidents, which can result in apples-to-oranges comparisons and misleading conclusions.
Precise benchmarking also reduces the amount of confusion between claim types, allowing carriers to focus on areas of opportunity, which is particularly important for those looking to expand into new regions, industries or lines of coverage.
Triangle metrics
Often, new carriers in a market or startup carriers do not have the historical experience or data to accurately determine how the development of long-tail lines may impact their business in the future. Long-tail lines, including workers' compensation, general liability and specialty liability claims, can significantly impact experience assumptions, especially when considering different jurisdictions and state-specific legislation. Understanding loss development trends relative to longer-tailed lines can also help with reserve accuracy and allocation.
Incorporating triangle views of metrics for core KPIs like cost, closure, duration, litigation rates, lost work days and more, can add clarity, transparency on development patterns and a valuable dimension of insight for carrier business decisions. For example, it's critical to know how outcomes compare to prior years at the same maturity to understand if a particular metric is improving when normalized for claim age.
While we all hope that COVID-19 subsides into the past as quickly as possible, for now, it remains a persistent presence in managing workers' compensation claims. Whether your objective is to properly triage COVID-19 claims from non-COVID-19 claims, understand the outcomes of those claims relative to meaningful benchmarks, or look for opportunities to improve operationally, leveraging the right tools for analysis can provide carriers with the insight necessary to improve business decisions in the ever-evolving COVID-19 environment.
Dan Link, ([email protected]) vice president, analytics, at Gallagher Bassett, specializes in structuring, analyzing and executing strategic initiatives that result in profitability improvement and revenue growth.
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