Workers’ Comp Large Deductibles: Hidden Fees

We’ve shared in prior posts some of the challenges faced by insureds when securing a Large Deductible (LD) policy –  the long tail of insurance can force collateral assets to be tied up for years.   In a nutshell, LD policies ultimately are structured to benefit and protect the carrier.

Indeed most of the focus on LD’s relates to collateral and impacting the indemnity and medical expenses that drive claims (and at times, onerous capitalization).

But what about a quiet revenue stream for the insurer that further drains an insured’s bottom-line?

Employers under a Large Deductible, pay the medical and indemnity costs within the retention and are generally responsible for the allocated loss expenses (ALAE) specifically applicable to the claim.  Common allocated loss adjustment expenses are attorney fees, nurse case management, investigative services, digital searches, and medical bill review services.  Fair enough and to be expected.

So what is the issue?    Carriers and TPAs have found a way to monetize that expected service.

Under ALAE and for each workers’ comp claim – associated medical bills are compared to the applicable State Medical Bill Review Schedule, which sets the maximum allowable charge for a procedure code and reduced to the established guidelines.   In this era of automation – it should be a push of a button to reduce an inflated medical fee to the established baseline fee.

Sounds great – right?   Not really – the insurer or TPA will take a percentage – anywhere between 20%-25% – of that “savings” which will reflect back as a charge to the insured.    In other words, the insurer or TPA is paying medical bills at the amount stipulated by guideline yet calling the reduction in medical fees a savings and charging back that “savings” to the insured.

It’s robbery.  Paying medical fees to the amount stipulated by the State Medical Bill Review Schedule should be the insurer’s job.   Claiming “savings” by paying out the established fee amount and charging the client for what should be proper stewardship is a con.

Have you checked your Program Agreement with your carrier?   Have you reviewed your monthly fee’s from the carrier on the Large Deductible?    Have you negotiated out or down this provision?    We’d be happy to help.

Happy to share more insights and specifics / [email protected]