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Benchmarking workers compensation claims is a complex business.
Not only do claims vary by industry, state and legal jurisdiction, they vary by company, said Joe Powell, vice president of analytics at Gallagher Bassett Services Inc. in Rolling Meadows, Illinois.
“Each insured is unique,” he said.
As a result, benchmarks that compare employers based on jurisdiction or industry have their shortcomings, Mr. Powell said.
To address the problem, Mr. Powell led a team of data scientists and analysts at Gallagher Bassett and analysts working on MCG Health’s Official Disability Guidelines to develop the severity mix adjusted rating technique benchmark.
Using Gallagher Bassett and ODG data, the SMART Benchmark, a 2018 Business Insurance Innovation Awards winner, provides employers with comparative data based on claims rather than job class or jurisdiction.
“What’s far more important than your industry when it comes to claim outcome is the severity of the claim, so that’s really what we focus on,” Mr. Powell said.
For example, “if you are a hotel worker and you fall off a four-story building, or you are a manufacturer and you fall off a four-story building or you’re a construction worker and you fall off a four-story building, if you have the same diagnosis codes, the same state, you undergo the same procedures, you have the same comorbidities and you are the same age, it doesn’t really matter what industry you are in,” he said.
The benchmark uses a complexity rating algorithm that gauges expected claim severity. Factors used to develop the complexity score include benefit jurisdiction, job classification, litigation indicators, diagnosis codes, comorbidity indicators and narcotics usage.
The benchmark can be used to examine overall performance on key metrics — claims cost and duration — and then drill down deeper to identify areas where employers are substandard to benchmarks, Mr. Powell said.
“For example, if we find that your costs are high in a given state, we can take a look at network penetration in that state, compare it to the benchmark and see whether that’s where we can make an impact,” he said.
For example, the benchmark showed that one client had high medical costs in California. After studying the data, Gallagher Bassett discovered that the employer was not using its medical provider network in California, which can lower costs by 20% to 30%.
“It didn’t cost the client anything, but it allowed us to direct care towards the providers in the MPN and get better results,” he said.
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