By Colleen F. Slyngstad, Head of Customer Experience, CLARA analytics
Over the past several years, attorney involvement in workers’ compensation claims has escalated dramatically. In fact, a Workers Compensation Research Institute (WCRI) study released last year showed that lawyers were involved in more than 50 percent of claims in New Jersey in cases where employees missed more than seven days of work. Of the 18 states the WCRI measured, the median of attorney involvement was nearly 30 percent. When you consider that the workers’ comp system was designed to eliminate attorney involvement rather than encourage it, this was pretty staggering news.
But what are the real costs; where’s the real impact felt as our culture becomes increasingly litigious? A new study from CLARA analytics lays it out, showcasing just how much costs have increased based on attorney involvement since the last major impact study1 was conducted ten years ago. CLARA’s research also assessed costs related to crucial non-financial factors like lost time, underscoring the degree to which attorney involvement negatively disrupts business.
The CLARA study looked at data from a single national payer for injury years 2007-2017, focusing on closed indemnity claims across multiple states. It analyzed roughly 50,000 claims that were controlled for numerous case mix factors (covariates) known to affect costs, temporary disability (TD) days, and/or claim duration.
Here’s how the overall findings break down:
- The mean cost of claims in which attorneys were involved increased by 388 percent, while the median values were 739 percent higher.
- Claims that involved lawyers took 195 percent times longer to resolve.
- Injured workers who engaged attorneys missed 284 percent more days of work.
If you want to see it spelled out in cash, the average cost per claim without an attorney involved was $15,936, compared to $77,807 with an attorney. The CLARA study also concluded that each claim that was steered away from a lawyer saved roughly $42,617 from direct claims costs, based on the difference in median values. This is no small amount of change!
Takeaways from individual states include:
- Virginia was the state with the highest average total claim paid, with an average cost of $28,761 for claims without attorney involvement and $140,374 for claims with attorney involvement.
- The state with the lowest average total claim paid for claims without attorney involvement was Minnesota ($10,928). For claims with attorney involvement, the state with the lowest average total claim paid was Montana ($26,198).
- Only 1 percent of Montana’s 889 claims included attorneys.
- California, by contrast, had the highest total number of claims in this sample with 20,108 claims, 35 percent of which involved attorneys.
- California also set the bar for the longest claim duration among claims with attorney involvement, where the average claim took an astonishing 1,138.9 days to settle.
- In terms of temporary disability (TD), Virginia stood out again — having the second highest multiple in TD days associated with attorney involvement. What made its numbers pop is just how many days injured workers were out once a lawyer was involved. The number of days increased from a couple of months (76.1 days) without attorney involvement to well over a year (437.2 days!) with a lawyer.
In short, what the myriad data points collected by CLARA shows is that the costs of attorney involvement are quite substantial. Not only do they drive up claims costs overall, but claims linger for months — and in some cases, years. Additionally, employees who need a paycheck are missing more work than necessary without getting their care needs met or paid for efficiently. The extended loss of workers due to litigation also affects how organizations run, how their workforce is impacted by absences, and how their respective businesses cope with lost productivity.
Where do we go from here?
The CLARA analytics study paints a pretty bleak picture of the state of workers’ comp when attorneys are involved. Companies simply can’t afford to keep going down this path. Fortunately, artificial intelligence and machine learning solutions are being developed that can identify claims at risk of attorney involvement before that first call to a lawyer is made. Signals trigger proactive involvement from claims teams, often cutting off the need for costly litigation.
If that doesn’t work, a well-trained claims representative can step in to help steer the injured worker to the most efficient doctor for their case, based on past outcomes, getting the employee back to work faster, reducing the need for a court case, and still decreasing the overall claim cost.
Organizations can also make use of smart software to optimize settlement costs. By analyzing thousands of data points and outcomes, companies can be well informed to engage in realistic settlement discussions in order to reach a resolution faster.
And if all else fails, perhaps consider a move to Montana.
Click here for the free study: CLARA analytics: The Impact of Attorney Involvement on Injured Workers
1Bernacki, EJ and Tao X. (September 2008). The Relationship Between Attorney Involvement, Claim Duration, and Workers’ Compensation Costs. JOEM 50(9):1013-1018.
About Colleen Slyngstad
Colleen Slyngstad is vice president, head of customer experience at CLARA analytics, a leading predictive analytics company for workers’ compensation. Prior to joining CLARA analytics, Colleen worked for Sedgwick, Kemper and Fireman’s Fund Insurance Cos, in several roles including VP of Carrier Client Services; Claims Operations, Product Development, and Strategic Initiatives. In her most recent role as a product director, she was tasked with leading the effort to build predictive analytics models, focused on claim severity and reserving for workers compensation. Colleen holds a Bachelor of Science from the University of San Francisco in Organizational Development as well as Senior Claim Law Associate. For more information, visit www.claraanalytics.com/ and follow CLARA analytics on LinkedIn, Facebook and Twitter.