Canadian Underwriter

New Beginning

July 31, 2010   by Laura Kupcis

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Adjusters will be adjusters again — and not simply claims processors — when the new Statutory Accident Benefits Schedule (SABS) comes in to effect in Ontario.

In the new regime — which comes in to effect Sept. 1, 2010 — adjusters have the autonomy to make decisions on a file -somewhat reminiscent of pre-Bill 59 file-handling. This is markedly different from the current system, in which adjusters are primarily process-driven. Now, post-reform, adjusters will be in the driver’s seat, allowing them to do some medical management and the autonomy to make decisions without having to go to an insurers’ examination, Tammie Norn, president of ProFormance Adjusting Solutions Inc., says.

“There are a lot of good changes, but I think adjusters who entered the industry 2003 and later are going to have a little bit of a struggle . . . They are not going to be familiar with how to handle a claim in this new environment,” she says. “It’s definitely going to be training issues for them and for adjusters who handled it before, because you’ve got to back. It’s a whole mindset change.” Stereotypically, independent adjusters have more years of experience specializing in accident benefits (AB). Where true, this experience will come in “handy” with the new legislative changes, which are reminiscent of a pre-bill 59 environment, Norn points out.

Bill 59 applied to accidents from Nov. 1, 1996 until Sept. 30 2003; this was followed by Bill 198. .

“We’ve lived in that type of environment and we know to manage in that environment and progressively move a file forward,” Norn says. “Whereas, it’s going to be quite a bit of a learning curve for the adjusters who have just come on in the last three to five years. So I think that’s where the advantage may be from an independent adjuster perspective.”

Adjusters, of course, should be well-versed in all areas of the SABS. But certain key areas will be of utmost importance to adjusters. These include changes to timeframes, changes to the basic and optional benefits, changes in claims processes (including medical examinations) and new defined terms (in particular, what constitutes an “incurred expense”).

Given all of the changes to the SABS, information documented during the initial interview will prove to be a key cost-saving measure for insurance companies, Lori Ryther, owner of Claridge Insurance Adjusters Inc., says. “The more information obtained during the initial interview — a thorough initial interview and detailed statement is our best defence — the better able to determine potential exposures, and proceed with a plan of action that works.”

To get around the reformed coverage limits of $50,000, adjusters anticipate claimants and their legal representatives to push the envelope and have their injuries classified as ‘catastrophic,’ thus opening up the $1-million coverage limit. Adjusters need to concentrate on collecting the information necessary to determine benefit entitlement, versus fighting the determination of catastrophic impairment.

Change in timeframes

Currently, an insurance company has three days to respond to a treatment plan. Under the new regulations, this has been increased to 10 business days. “Three days was not really enough time,” James Cameron, president of Cameron & Associates Insurance Consultants Limited, says. “Very often [insurance companies] didn’t even go to the adjusters: companies approved them because they couldn’t do anything in three days.”

Now, in a 10-day period, there is time to investigate whether a treatment plan is valid or not, in addition to whether or not other circumstances surrounding the accident might affect the validity of the claim. It’s still a tight timeframe, however, because the cases need to be investigated and reported back to the insurance company in time for a response to the insured.

“For adjusters, I think there would be more work [post-reform] than there is currently, because [now] they have the time to actually challenge certain treatment plans that otherwise would be paid right now [and] approved,” Cameron says.

The extended timeframes provide much more time to adjust a claim, thus giving an adjuster the opportunity to adjudicate– and not just process — the claim. Even the number of forms has been reduced: the OCF 18 and OCF 22 have been combined. Under the existing legislation, an adjuster was bombarded with treatment plans, assessments and the timeframes. Adjusters really had to be processors; the forms came in and then needed to be dealt with in a short timeframe in order for the claim to not simply, because of a delay, be deemed approved, Debbie Laxton, client service manager of accident benefits at Crawford & Company (Canada) Inc., says. “Combining the two forms together and having 10 days under the new legislation, allows adjusters more time to really take a look at what is being submitted, assess whether or not it is reasonable and necessary, as per the SABS, and then make the decision.”

Having more time to adjudicate a file can also help ensure a claimant remains within the $50,000 medical rehabilitation limit. This post-reform limit is half of the previous $100,000 limit. (Under the reforms, consumers will have an option to buy back up to the $100,000 coverage limit.) The new maximum of $50,000 includes the cost of assessments, which, in some cases, accounted for up to 60 per cent on top of the total paid out by insurers. Over the past five years, assessment costs have skyrocketed, Cameron says.

Med rehab limits — now including assessments

Assessments costs are now being limited to $2,000 — substantially lower than the $15,000 to $20,000 adjusters are often seeing paid out at the request of the claimant, Michelle Baumann, accident benefits adjuster at Crawford & Company (Canada) Inc., says.

Under the new regulations, insurance companies will be required to update claimants continuously on 1) where the money has been spent and 2) the remaining balance up to the $50,000 limit. The claimant is therefore able to have a say in the management of their funds, including whether to spend treatment dollars on further assessments.

“If they are kept in the loop a little bit more, they will say: ‘Hey I don’t need this $2,000 orthopedic assessment, I would like my $1,500 worth of treatment’,” Norn says.

The feasibility of upholding a $2,000 limit on assessments remains to be seen. It is reasonable in situations where there is just one modality, such as a chiropractic assessment. But it becomes more problematic when there are multiple assessments such as, for example, a chiropractor, a physiotherapist and a general practitioner, plus an executive summary. “That’s the type of report — when it’s a multidisciplinary assessment — that can easily exceed the $2,000,” Laxton says, adding that certain specialties, such as neuropsychological or paediatric assessments, can far exceed the limits. “Putting the limit on it from a cost perspective is a good thing, but how it’s going to affect 1) the quality of the person you are getting to do the report, and 2) the necessary reports that are required to medically handle the claim [is something] we’re going to have to wait and see what happens.”

A lot of claims will either come close to or exceed the $50,000. Insurance companies will have to be careful how they approve the funds. They will have to make sure the claimant knows when their limits are being threatened. “In order to achieve that, they may require more intervention by adjusters actually sitting down with the insured and talking to them about the treatment,” Cameron says. Adjusters will be required to assist in the explanation of the $50,000 and ensure the treatments provided are reasonable, necessary and the best use of the remaining funds.

The reduced limit does not apply if a claimant is found to have suffered from a catastrophic injury, leaving many to believe there will be an increase in applications for catastrophic determinations. If dec
lared catastrophic, the limits increase to $1 million.

Unless a claimant obviously fits within the catastrophic criteria — paraplegia and quadriplegia, amputation, loss of vision in both eyes, brain impairment with a score of nine or less on the Glasgow Coma Scale or two or three on the Glasgow Outcome Score — a two-year waiting period comes in to effect. During this period, a claimant cannot bring forth an application for catastrophic determination. During this time, a claim could be adjusted under the premise that the injured party is entitled to a maximum of $50,000 of med rehab benefits. If the injury is ultimately deemed to be catastrophic, the claimant would be entitled to housekeeping and caregiver benefits (among other benefits) up to $1 million, Franca Reale, Ontario accident benefits manager at Cunningham Lindsey Canada, says. “This just reinforces the fact that we have to adjust and document our claims for worst case scenario,” Reale says.

Optional benefits

Prior to Sept. 1, 2010, every claimant was entitled to the same benefits, which included such things as housekeeping and attendant care. These benefits often generated hot-button issues. For example, is a family member qualified to care for the injured? Should insurance companies be paying a spouse to clean the house? There is a sense within the industry that people are pushing the envelope to receive these entitlements. Under the new regulations, unless a claimant has paid for optional benefits or is found to have had a catastrophic injury, housekeeping — included with the optional caregiving benefit — is no longer available.

Attendant care benefits have been reduced from $72,000 to $36,000 for non-catastrophic claimants (unless the claimant has purchased optional benefits to keep this at $72,000), up to a maximum of $3,000 for 104 weeks. Only a registered nurse or an occupational therapist can complete the Form 1 for attendant care benefits.

Because there will be differences between each claimant’s entitlement, adjusters should request more information at the onset of a claim to determine if the individual has purchased certain optional benefits. In order to ensure adjusters are delivering the right level of insurance to a person, they should see the deck page and the optional benefits to help determine available coverage.

“Definitely the exclusion on housekeeping and caregiving will have a significant impact on loss ratios,” Norn says. “Right now that is a huge portion of claim payment. It’s not as big as the cost of exams, obviously, but for specified benefits, it is a huge portion of it. And it was pretty much a ‘give me.’ As much as the caregiving [benefit had] a maximum of $250, and housekeeping was to a maximum of $100, very seldom did we ever see anything come in under that.”

Norn observes that at mediation and arbitration, a statement from a service provider would accurately document the number of hours of care, and yet the rate would be adjusted to ensure it hit the maximum recoverable, Norn adds. The new SABS, she says, will result in “a huge savings.”

Incurred expenses

Compounding the problem for insurers related to optional benefits, the term “incurred costs” in the SABS was frequently interpreted to mean payment for services never received.

Now, however, when a claimant is entitled to certain benefits, the definition of incurred expense has been changed. An expense is only deemed incurred if the individual has received the goods and services, paid the expense, and the person providing the goods and services did so in the course of employed, and/or has suffered an economic loss, Reale says.

“If the expense submitted is not provided by a person that was in their course of employment, occupation or profession in which they normally engaged, but for the accident, or there was no economic loss sustained by the provider, the expense may not be considered incurred,” Laurie Walker, director of Ontario auto accident benefits at McLarens Canada, says. “For example, a family member providing cleaning services may have actually performed the duties, but because this was not their employment, occupation or profession or they did not sustain an economic loss to provide the service, an insurer is within their rights to determine this expense is not payable. In this example, a cleaning company or someone in that profession may be a choice to provide the services in order to get the coverage.”

According to Walker, lawyers already realize there are benefits to be claimed if these theoretical stay-at-home mothers open up housecleaning services, specializing in snow removal, to get around this clause. “Incurred expenses is one that can be abused and tricky,” Walker says. “That will be an area that will be contested.”

The information adjusters collect during the investigation stage of the accident benefit claim is paramount, Reale says. More thorough investigations are required to determine whether or not the expenses are warranted. “When we are taking the initial signed statement from the claimant, we go through any expenses that they have incurred, be they for attendant care or whatever the case may be,” she says. Adjusters must make sure to ask the standard questions: “Have you paid? Who is it that provided the goods and services to you?” In addition, says Reale, they need to go one step further and ask: ” Did the individual do so in the course of their employment? Did they suffer an economic loss?”

Ryther agrees that, as a result of the new definition of what constitutes an incurred expense, obtaining information during the initial interview is absolutely crucial. “Obtain all the necessary facts in order to be able to determine whether or not they are eligible for that before [the claim] runs away from us,” she says. She adds independent adjusters can help insurers quantify their exposure related to incurred expenses.

It is critical to document in an adjuster file why an expense is approved or not, especially in an area that can so easily be abused, Walker says. “Counsel may be able to convince a judge or an arbitrator that this ought to have been paid,” she says. “And if we have been found not to have paid something that ought to have been paid, then we have a direct correlation to the unfair and deceptive practices for which we become at risk. My concern is that it is so easy to say: ‘No, this is not payable.’ My best advice is that the notes should reflect a full decision.”

While adjusting and documenting the file, adjusters must bear in mind the possibility that after two years, the claimant’s injury might be deemed to be catastrophic and thus the claimant becomes entitled to additional benefits. “We need to be able to document our file properly and adjust it as a worst case scenario,” Reale says.

However, if a person is deemed to be catastrophically injured after two years, and if he or she has been incurring expenses for housekeeping and caregiving out of their own pocket during this time, will those benefits be paid retroactively? “I think most people would say yes, but if a person can’t afford to incur them as expenses, what happens to that person?” Laxton asks.

Picking up the slack: Tort and bodily injury

to have to be recovery somewhere. “I do think that we are going to see a lot more claims trying to push the threshold or meet the threshold in order to recover these things that they are not getting under the first party now,” she says. “It will be good for the first party [accident benefits] claim; not so good for the third party [tort] claim.”

Cameron says he believes there will be more activity on the BI side because the shortfall items that are not covered by the SABS will be going to the BI claim and have to be dealt with by the BI adjusters.

He cites the example of a claimant with multiple fractures who is likely going to be off work for six months to a year. It is probable they will require more treatment than the $50,000 will cover. If the claimant has a tort
claim, the counsel will ask the BI insurer for an advance to help fund medical treatment.

“The current situation is sometimes with BI claims you may get a letter from a lawyer and not hear anything for years,” Cameron says. “But now they are going to be much more active earlier on in the case. BI adjusters are going to be asked to make a decision on funding the shortfall in SABS benefits available for rehabilitation and medical.”

Insurer Examinations

The new SABS provides adjusters with discretion in the use of insurer examinations (IE). Insurer’s examinations are no longer required in order to make a determination related to a treatment plan, the applicability of the minor injury guideline, entitlement incomf replacement benefits or catastrophic impairment, according to Philippa Samworth, partner at Dutton Brock LLP.

It is now up to adjusters to determine whether or not they have enough medical documentation on file to decide whether to continue with benefits or to terminate, Reale says. “It certainly gives the adjuster the added responsibility to be able to substantiate what decision they’ve made,” she says. “It’s even more so that the adjuster needs to be knowledgeable and experienced enough to know when an IE is warranted or not.”

If there is any doubt about the medical status of a claimant, adjusters should err on the side of caution and arrange for an IE, Norn says. But it means adjusters are not going to have to run to an IE every time they receive a duplicate or triplicate treatment plan.

As Uncle Ben cautions Peter Parker in Spider-Man, “Remember, with great power, comes great responsibility.”

Adjusters must continuously document their files, including the receipt of clinical notes, hospital records, and pre-existing medicals. Adjusters must have a solid file to to back up their decisions. “If anybody comes back and questions our decision, we can show them we are acting in good faith and this is why we made the decisions that we have on the file,” Reale says.

Independent adjusters should mirror whatever decisions are being made within the insurance company they represent, Laxton says. Some companies say adjusters should not be forced to make that medical decision, so they may choose to proceed with an IE at their expense. Others say if the file warrants it, the claim can be denied without the use of the IE.

“Independent adjusters that have been doing this a long time are going to remember the days when we used to seek instruction on just about every procedure,” Walker says. “There was a lot more communication, [with the adjusters] saying: ‘This is the documentation I have in the file. This is what I think we should do — this is the justification of the next step and the decision.’ Whereas the insurer examination processes were so much more stringent that you just had to do things in certain timeframes.” Now, avid note-taking will be crucial. Walker says. Adjusters will constantly be forced to justify their decisions. “Why did we decide to do something? Why did we proceed with this determination? Why did we not ask for something else?”

Claims Canada will be taking a look at the new Minor Injury Guideline in the October/November issue.