Work Comp Payments: Stuck in the '80s?

The '80s — Bon Jovi's "Livin' on a Prayer" blaring from car stereos; Back to the Future taking the country by storm; and who could forget velour track suits? While most of the world has moved on from big hair and parachute pants, many of today's most widely used workers' compensation payment processes are as outdated as your once-trusty Sony Walkman. Traditional payment methods like checks and electronic funds transfers (EFTs) are leveraged for both indemnity and provider payments by many organizations. However, their shortcomings signal the need to modernize the workers’ compensation revenue cycle and bring it into the 21st century. Checks Check use is gradually declining, but it continues to account for 50% of business-to-business payments in the U.S. Its continued prevalence makes checks the most highly targeted payment method by those committing fraud attacks, making up 77% of all attempted or actual payment fraud in 2014. Checks also accounted for the largest dollar amount of loss because of fraud in 2014. Even when fraud can be avoided, payers are still faced with an expensive payment method. According to an AP automation study, processing alone can cost as much as $8 per transaction (enough to buy eight loaves of Wonder Bread in 1986!).On top of processing and postage fees, the potential for lost or late checks adds to claim costs. Even if a payment is received on time, increasingly complex claims mean more valuable time is spent by providers depositing and processing payments. And if an injured worker receives a late indemnity check, he may not be able pay his mortgage or car payment on time. Electronic Funds Transfers EFTs date back to the advent of the ATM in the mid-1960s. Despite attempts to modernize, EFTs are prone to incorrect distribution, potential duplication of payments and delays in posting and hidden processing fees (sometimes per transaction). Additionally, workers are increasingly reluctant to give out sensitive account information to receive their indemnity payments via EFT. Pair the shortcomings of these traditional payment methods with an increasingly complex workers’ compensation landscape, and payers and providers alike are looking at a detrimental domino effect. Medical payments have increased to $30.8 billion—a staggering increase from years past—and claim severity is experiencing slight, but significant, increases. The more severe the claim, the longer it is open. And the longer the claim is open, the more payments must be pushed through the revenue cycle. Where Do We Go From Here? Simply put, it’s time to say goodbye to the outdated, inefficient payment methods of 1985 and say hello to the future. The good news? Viable alternatives are starting to gain traction. Centralized virtual payment solutions can help workers’ compensation payers streamline the revenue management cycle by automating payment processing, reconciliation and management. With faster reconciliation, reduced paperwork and more transparency, providers also benefit greatly from virtual payment solutions. Card-based solutions provide additional options with unique benefits for both injured workers and payers. A pre-paid, bank-neutral card given to injured workers reduces payment errors, decreases operational expenses and ensures all workers receive accurate, timely payments. Traditional payment processes have had their place in time, but, as with the DeLorean, it’s time to retire.