Understanding Workers' Compensation Insurance

189 Pages·2008·2.717 MB·English

by  Sandy D. Moore

Understanding
Workers’
Compensation
Insurance
This page intentionally left blank
Understanding
Workers’
Compensation
Insurance
C.D. Moore
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Understanding Workers’ © 2009 Delmar, Cengage Learning
Compensation Insurance
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Contents
PREFACE vii
CHAPTER 1 HISTORY OF WORKERS’ COMPENSATION 1
Introduction 1
What Is Workers’ Compensation Insurance? 2
State and Federal Jurisdiction Over Workers’ Compensation 6
CHAPTER 2 PRICING A WORKERS’ COMPENSATION INSURANCE POLICY 15
Introduction 15
Underwriting a Workers’ Compensation Policy 15
Pricing a Workers’ Compensation Policy 16
Purchasing a Workers’ Compensation Policy 20
Policy Audits 30
Employers’ Liability 36
Reinsurance 37
CHAPTER 3 WHAT WORKERS’ COMPENSATION PAYS 45
Introduction 45
Major Benefi ts Available to Injured Workers 46
CHAPTER 4 CREATING A CLAIM 73
Introduction 73
Filing a New Claim 73
Determining Coverage 80
Claims Department 81
Creating a Claims File 82
CHAPTER 5 CLAIMS HANDLING 87
Introduction 87
Claims Investigation 88
Setting Reserves 89
Medical Management of the Claim 92
Indemnity Payments on a Claim 93
Recovery Department 97
v
vi Contents
Loss Prevention/Safety 98
Fraud Investigation 99
Closing the Claim 100
Legal Actions 100
CHAPTER 6 WORKERS’ COMPENSATION MEDICAL BILLING 105
Introduction 105
Reviewing and Paying Workers’ Compensation Medical Bills 105
CMS-1500 (HCFA) and UB-04 Forms 116
CHAPTER 7 PAYMENT OF WORKERS’ COMPENSATION MEDICAL BILLS 135
Introduction 135
Bill Payment Department 136
Th e Bill Payer 136
Bill Payment Process 137
Evaluation and Management 142
Negotiated Discount 147
Explanation of Benefi ts/Explanation of Review 148
Reconsideration/Appeal 154

Glossary 165
Index 171
Preface
Understanding Workers’ Compensation Insurance was written because there is not, to
my knowledge, a book that dedicates itself strictly to workers’ compensation for educa-
tion and training purposes. Th ere are books covering particular areas of the subject,
but not one that looks at workers’ compensation as a whole. Over my many years of
hiring and training employees, even those that have come out of medical coding pro-
grams, I have found there is a defi nite lack of knowledge about workers’ compensation
insurance and a particular need to look at the process through the eyes of the workers’
compensation carrier and not just the provider. Having served on an advisory board for
a large career college that included medical coding training as part of its curriculum,
I learned fi rsthand that students were not getting all the training they needed in the area
of workers’ compensation. Most of the courses focused on health insurance, and workers’
compensation was not addressed at all or was addressed very little in these courses.
Because of this lack of training, students were not prepared for jobs in the workers’
compensation insurance fi eld. Th ey did not know how workers’ compensation bills
were paid, what was needed for the proper payment of medical bills, or how the claims
handling process operates, nor did they even have a general understanding of what
workers’ compensation really is. Without this basic knowledge, it is a hard transition
from the classroom to the workforce. A basic understanding of workers’ compensation,
in addition to medical coding, can be a benefi cial part of the training of billing staff in
a physician’s offi ce, a hospital, or any of the other medical specialties. New hires in any
insurance company or agency would also greatly benefi t from a basic understanding of
workers’ compensation since it is a large part of the insurance market. Having a practi-
cal knowledge of workers’ compensation insurance and an understanding of what it is
and why it was created can help anyone in the medical insurance arena.
Th e book is meant to assist with all areas of workers’ compensation. It covers how
a policy is written, what a policy covers, the basics of premium calculations, proof of
coverage, changes to policies, Current Procedural Terminology (CPT) and Interna-
tional Classifi cation of Diseases, 9th Revision, Clinical Modifi cation (ICD9 CM) codes,
medical terminology, calculating indemnity payments, paying medical bills, and un-
derstanding the explanation of benefi ts (EOB) form.
AUDIENCE
Th e text is meant to be a working text that the student can take to the job site when he
or she completes the course and can refer to for assistance with general workers’ com-
pensation questions. Th e book will be helpful for anyone working in a provider’s billing
offi ce as well as for a new employee in a workers’ compensation insurance company who
needs an overview of the industry. Anyone needing or wanting to have a simple, straight-
forward knowledge of workers’ compensation insurance would benefi t from the text.
vii
viii Preface
ORGANIZATION OF THIS TEXT
Th e book is organized in specifi c stages to take the reader from the beginning to the
end of the workers’ compensation process in order to give a global overview of work-
ers’ compensation.
Th e areas covered in this book are as follows:
Chapter 1 addresses the history of workers’ compensation, explaining why it was
created and when it was created, and includes timelines of the creation of workers’
compensation as we know it today.
Chapter 2 discusses how a workers’ compensation policy is priced. It allows the
student to begin to learn the basics of National Council on Compensation Insurance
(NCCI) classifi cation codes, how to calculate policy premiums, and how to complete a
workers’ compensation application. Th e chapter also covers policy endorsements, cer-
tifi cates of insurance, and policy audits.
Chapter 3 covers benefi ts the injured worker is entitled to, including medical and
indemnity payments. It also looks at the diff erent types of indemnity payments, includ-
ing temporary and permanent benefi ts, as well as death benefi ts.
Chapter 4 addresses the role of the claims department in an insurance company
and looks at the job of a claims adjuster. In this chapter, the fi rst report of injury is dis-
cussed, along with the structure and importance of the claims fi le.
Chapter 5 is dedicated to claims handling, which includes setting reserves, third-
party investigations, loss prevention, and fraud. It also discusses claims closing and
claims settlements.
Chapter 6 talks about medical billing for workers’ compensation. This chapter
looks at state fee schedules and introduces at a basic level CPT codes, ICD9 codes,
medical terminology, and medical abbreviations, which are all a part of the medical
billing process.
Chapter 7 takes a closer look at the process of workers’ compensation medical bill
payment. This chapter addresses proper payment of medical bills and includes ad-
ditional information on medical reports, preferred provider organization (PPO) net-
works, negotiated discounts, EOBs, and reconsiderations.
FEATURES
Each chapter of the book encompasses the following:
Objectives—Lets the student know what will be addressed and learned in each
chapter.
Key Terms—Identifi es important vocabulary that will be presented in the chapter.
Introduction—Provides a brief overview of the chapter.
Case Studies—Give the student hands-on practice with areas covered in the
chapter.
Summary—Reviews major areas covered in the chapter.
Chapter Review—Tests the student’s knowledge of each area covered in the
chapter.
SUPPLEMENTS
The instructor’s manual for this textbook was created to help the instructor work
through the review exercises at the end of each chapter. In addition, each chapter of the
instructor’s manual includes lecture notes, case studies, and class work suggestions.
Preface ix
ABOUT THE AUTHOR
C.D. Moore has worked in the insurance arena for more than 35 years, with empha-
sis on workers’ compensation. Most of her time has been spent in management roles
in the areas of bill payment, customer service, and offi ce administration. During this
35-year period she was employed for 25 years by one of the leading writers of work-
ers’ compensation insurance. She has spent the last ten years with a company devoted
exclusively to workers’ compensation. Th e author has worked closely with both pro-
viders and payers in the workers’ compensation arena and has a broad perspective on
the needs of both. She has been responsible for hiring and training personnel and has
written in-house procedure manuals for her employers.