Should Threshold Limitations Apply to EDI Reporting?

Typically, state workers compensation organizations require carriers to submit first reports of injury (FROI) claims that exceed a specified lost-time threshold and medical-only claims that exceed a certain dollar threshold. But they will not accept any claims that fall short of their minimum threshold.

In the paper-reporting world, imposing such limitations appeared to be a cost-effective way for states to selectively monitor claim activity, without the administrative burden of receiving every paper report.

However, in the world of electronic data interchange (EDI), imposing these reporting conventions is not only burdening carriers, but stripping the state workers compensation organizations of the many benefits offered by EDI technology.

Applying threshold limitations to EDI reporting means that insurance carriers need to program “triggers” into their reporting processes for each jurisdiction in which they are licensed to do business. These triggers identify when and where FROI submissions need to be sent. As states phase in various releases of EDI requirements, carriers need to reprogram accordingly so they are in compliance with the most current mandates. Maintaining and reprogramming tables of requirements to submit claims with different lost-time thresholds is expensive and time-consuming.

When considering EDI for FROI, states need to look at the short- and long-term implications from both a monetary and statistical-management perspective. States currently accepting paper FROI for specified thresholds should consider modifying their existing requirements to allow for the EDI submission of all FROI submissions, regardless of whether a claim is below the minimum threshold for compensation. This change would:

• reduce costs to the workers compensation community by significantly reducing the trigger programming burden on the carriers, third-party administrators, and self-insureds
• improve data quality by providing all reports for statistical analysis needed to monitor the effectiveness of a jurisdiction’s workers compensation programs

Additionally, states considering electronic acceptance of medical (MED) transactions in the future should move to accepting all electronic FROI submissions now. Some states are already accepting medical information electronically, whether in a proprietary format or in the IAIABC-suggested ANSI X12 format, and more state workers compensation organizations are planning to move to MED EDI.

Accurately evaluate effectiveness of cost-containment programs
In general, when states want to evaluate the effectiveness of their cost-containment programs, they hire outside vendors to gather a sampling of data and perform the analysis. These statistical studies are always subject to scrutiny and thus allow for doubt of their credibility.

The tools for necessary quality assurance are already in place and quality assurance can be accomplished by matching the incoming medical data with existing claims already on file. To match medical data back to claims data, there must be a “key” within the medical data submitted to link back with the original claim. The state-assigned claim number is typically the most useful key. This unique number, which is assigned by the state for each FROI received, is returned to the carrier through electronic acknowledgment. This number is used in all subsequent electronic submissions, including MED, as a method of matching back to previously submitted FROI. The key is also helpful in the detection of duplicate or erroneous submissions. This same key is used on all paper correspondence as a reference for linking all of the information together accurately. If only selected, triggered FROI are sent to and received by the state, the record that would include the key would be missing, and there would be no way to match medical data back to claims not previously reported.

If all FROI are submitted, each one would have the state-assigned claim number to be used as a matching key for all future transactions, including medical.

Allowing carriers and TPAs to submit all workers compensation claims regardless of the length of lost time would provide the following benefits:

• Carriers will find the EDI process to be more streamlined and less costly to implement, thus creating significant good will and support among carriers for the EDI process.

• States will get a fuller collection of claims from which they can conduct more robust and sophisticated analysis. For example, states can measure the number of claims that fall under their waiting periods or develop improved accident incidence reports.

• States will no longer have to set up screening requirements for claims to be reported by carriers and edit checks for compliance. They will only need to concern themselves with which claims to store in their administrative databases.

Is there a downside to receiving claims that are not compensable?

The historic case for limiting reports is the cost of storage. However, with the cost of mass storage and retrieval plummeting, this is no longer a consideration. In fact, mass storage of data is so economical that agencies are imaging entire claims files, which is an order of magnitude more data-intensive than storing EDI injury reports.

EDI holds great promise in reducing administrative costs and creating new and more accurate information that state agencies can use to monitor claims. The promise of EDI can be realized faster if states agree on streamlined and simplified rules of application. To date, the inconsistent application of EDI releases has created costs that offset some of the gains from eliminating paper reporting. Reducing administrative costs for carriers is not simply a matter of doing a favor for business. Lowering expenses tends to reduce the cost of workers compensation insurance and generates management support for the expanded use of electronic reporting.

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