Why allocation is important to large deductible and self-insured employers

Why is allocation important to large deductible and self-insured employers?

Recently, ESM was successful in assisting an excess carrier reached an amicable agreement with an employer in resolving a pending allocation on multiple claims for an injured employee that was first reported to the excess carrier over a decade ago. 

With the allocation agreement, parties were able to move forward with the settlement of these claims that has been dragging on for the last 15+ years.  Potential cost to the Excess carrier without allocation based on the paid on the “master” file is roughly $85,000.

With the allocation agreement between the 5 open claims and current medical usage and age of the employee, it is unlikely these claims will reach excess layer.

It is not uncommon for an employee to file multiple claims with overlapping body parts against the same employer.  In these situations, the doctor will address apportionment among the claims.  It is common practice for the TPA to designate one claim as the “master” file and pay all costs off the “master” file.  This is done for convenience and ease of management, not necessarily based on medical findings.

The challenge is when these claims pierce the employer’s retention and the Excess carrier becomes involved. We have seen TPAs request reimbursement from the excess carrier based on the amounts paid off the “master” file without any consideration for allocation among the multiple claims with overlapping body parts.  This practice delays the reimbursement and often, claim resolution on claims where settlement concurrence is required from the Excess carrier. No one benefits from an allocation impasse. The injured employee, the employer and the excess carrier are all carrying the burden of the legal battle.  

The takeaway for employers is when you have an injured employee with multiple claims and overlapping body parts is to ensure that the carrier or TPA not only address apportionment to non-industrial causation in order to mitigate the permanent disability exposure, but also ensure claim costs are allocated appropriately to the correct file. Confirm that there is clear documentation in the “master” file of the allocation among the multiple claims.

It is much simpler to address allocation early on rather than when the claim reaches the excess layer because then you are dealing with years and years of records to sort through causing delays with both reimbursement and settlement.