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The advantages of filing workers compensation injury data electronically greatly outweigh the disadvantages for both employers and state workers compensation agencies.

Replacing paper document filings with a standardized process for electronic data interchange generally results in faster, more accurate and less costly systems for both parties.

For example, EDI eliminates the time lag involved in transmitting a report of an injured worker's claim by mail, as well as the staff time and training needed to rekey claims data into multiple computer systems. EDI also reduces storage requirements for paper for both parties.

More prompt notification of claims also can speed up the application of managed care techniques to reduce the cost of claims, noted Susan Goodchild, director-government affairs and compliance for Philadelphia-based Intracorp.

The push for EDI is being led by state workers comp administrators, organized under the auspices of the International Assn. of Industrial Accident Boards & Commissions. The IAIABC has spearheaded the development of uniform standards and formats (see story, next page).

The promise of improved efficiency is encouraging employers to cooperate with the EDI initiative.

To employers, especially multistate employers, "the concept of replacing paper transactions with electronic transactions is very attractive," said Larry Holt, who will soon take over as executive director of the National Council of Self-Insurers, which he will operate from his hometown of Murray Hill, N.J. Mr. Holt recently retired as manager of workers compensation and disability benefit policy at Lucent Technologies Inc. in Murray Hill.

"We are all interested in increasing accuracy, reducing transactional costs and leading to a more timely and efficient administrative system," said Robert Steggert, vp-casualty claims with Washington-based Marriott International Inc. He is also president of the National Council of Self-Insurers.

The IAIABC's members increasingly are soliciting employers' voluntary participation in EDI, rather than turning to state lawmakers to mandate that EDI be used, said Melody Cathey, the IAIABC's director of education and research in Lawrence, Kan.

Currently, only four states -- Kentucky, New Mexico, South Carolina and Texas -- mandate that first reports of injury be filed electronically. California is expected to join those ranks beginning July 1, 1999.

Self-insured employers are "optimistic" about the new EDI mandate, which is consistent with other corporate communication practices, said Joseph Markey, manager of the California Self-Insurers Assn. in Sacramento, Calif. In addition, "we hope it will speed up reporting of summaries of injury data so we will have better information on which to base loss prevention efforts," he said.

Once the California mandate becomes effective, about 25% of the total U.S. workers compensation market, including some states with exclusive funds, will be subject to EDI mandates, estimates Ancel Sherrard, president of SAC3 Inc., a workers comp EDI company in Huntsville, Ala.

In addition to the states with mandates, about 16 other states actively encourage employers to make voluntary EDI filings.

For the majority of employers, the most common use of EDI in workers comp is the electronic exchange of first report of injury information from an employer to an intermediary, such as its third-party administrator or insurer, which then transmits the report electronically to the state, said Barbara Scheller, EDI product manager for Corporate Systems Inc. in Amarillo, Texas.

Alternatively, an employer can report the information by phone to its TPA or insurer, which files the information electronically both to its claims-handling office and to the state, said Anne Scialabba, a workers comp claims consultant for Itasca, Ill.-based broker Arthur J. Gallagher & Co. Under this process, a paper copy of the report of injury is then sent to the employer for its files, she said.

Such approaches keep employers' hardware and software costs to a minimum, because the intermediary maintains the needed equipment to exchange information electronically with the state. However, low-priced software -- while it has not yet proved popular -- also can enable employers to perform EDI filings with their own computer equipment.

The Internet may make EDI of workers comp information even simpler.

While most employers typically don't use the Internet in connection with state workers comp filings, clients of CorVel Corp., a provider of managed care services in Irvine, Calif., can use it to produce first reports of injury online. CorVel then links electronically with a state agency to actually file the report, according to Gordon Clemons, president of CorVel.

Making workers comp filings electronically has few disadvantages for employers, apart from any expense associated with setting up electronic reporting systems.

However, one potential risk seen with any reporting of personally identifiable claims information, especially if it is health-related, is confidentiality.

California self-insurers, for example, "are concerned that only necessary information is collected and that any information collected be made public sparingly" under the expected EDI mandate, Mr. Markey said. Specifically, he is concerned that employers not be hurt by the prompt filing of candid information about an injury's causation and medical treatment. Depending on state sunshine laws, such information may then be accessible to outsiders, who then could use it to escalate litigation or treatment costs.

In addition, Mr. Steggert said the NCSI would like to see all self-insurers have to file claims data with only a single state agency, rather than to all workers comp data collection agencies that may be operating within a state.