The single most important thing a workers’ compensation program can do to reduce costs and improve outcomes for injured workers is also the simplest: Report claims promptly.

Bill Zachry

Prompt reporting enables prompt determination of compensability. Prompt compensability determination enables prompt provision of quality medical care. Prompt care shortens recovery. Shorter recovery reduces litigation. And litigation — not medical costs, not indemnity, not administrative expense — is the largest cost driver in the system.

Every other intervention operates downstream of that chain. Technology, networks, utilization review, return-to-work programs — all of them are more effective when claims are reported and adjudicated quickly, and all of them are undermined when they are not.

This is not a California problem. It is a national one. Claim duration varies widely across jurisdictions, but the structural failure is the same everywhere: No one has defined when a claim should end, and the system performs accordingly.

Time is not neutral

There is a fundamental misunderstanding embedded in the workers’ compensation system. Time is treated as if it were neutral, a passive feature of the process while everything else is sorted out. It is not.

Time drives increased medical utilization, litigation, permanent disability and administrative expense. A claim that remains open for seven years is not seven times more expensive. It is often exponentially more expensive. The financial exposure of an open file compounds with time as utilization increases, litigation deepens and the worker’s condition becomes more entrenched.

But the financial consequences are not the most important ones. The most damaging consequence of prolonged claims duration is psychological. Time changes how an injured worker sees himself. The longer a claim stays open, the more likely the worker is to adopt the identity of being permanently injured — not because of the injury, but because of the system. A worker who reaches maximum medical improvement at month six but does not resolve the claim until year five has spent more than four years inside a process that continuously affirms his injured status. That identity is not easily shed when the claim finally closes. The system created it, sustained it and released the worker carrying it.

Delayed care is care denied. Delayed indemnity is income denied. Delayed resolution is recovery denied. The system was designed to support recovery and return to work. Prolonged delay produces the opposite.

A national problem without a national standard

The California Workers’ Compensation Insurance Rating Bureau has documented that it can take up to seven years to close a claim in the state, among the slowest jurisdictions in the country for reporting, first-year movement and resolution. But California is the most documented example of a common problem, not an isolated one.

Florida has addressed this directly. Claims are required to be resolved within 210 days of MMI, a standard that forces a decision, a negotiation and a conclusion. It is the exception. Most states have statutory timelines for specific actions, but no standard for when the claim as a whole should be resolved.

The workers’ compensation administrative agency in each state has the authority and the data to set and publish resolution goals. They have simply chosen not to.

The regulatory ask

Setting a resolution standard does not require new legislation. A state authority that publishes average time-to-resolution by carrier, TPA, employer and claim type is using the same tool that drives every other improvement in this system: visibility. What is measured gets managed. What is not measured does not.

The absence of a standard is not neutral. It is a design choice, and the system performs accordingly.

What happens when you set a timeline

When I was vice president of claims at CE Heath, I flew to our Irvine claims office and told the examiners that I wanted every claim accepted or denied within 14 days of the date of injury.

The law allowed 14 days to accept, delay or deny a claim, with a hard stop of 90 days to formally deny. In practice, most claims were being decided at 80 to 90 days.

When I made the request, the room went quiet.

After a moment, Greg Snodgrass looked at me and asked if I had done drugs in the 1960s, implying I had lost my mind. It was a fair question. I did spend my high school years in San Francisco in the late 1960s.

The next day, the claims manager called. The goal was impossible — investigations weren’t being completed until day 71. So I called the investigation companies. I told them every investigation had to be back within 12 days. They said the assignments weren’t reaching them until day 15. So I told the claims office that assignments had to go out by day eight or nine. They said the claims weren’t arriving in the office until day 13.

The delay was not in one place. It was in every step of the system. Every step had an explanation. Every explanation sounded reasonable. Together, they produced an unacceptable result.

So we changed one thing. We changed the employer reporting process. We began tracking and reporting to employers the number of days between the date of injury and the date the claim was reported. Our monthly claim reports showed each employer exactly how long it was taking to get claims to us.

No new technology. No new system. No additional staff.

Just visibility.

The HR departments howled. For years, delayed reporting had been invisible — it happened, it had consequences, but no one was measuring it. The moment the number appeared on paper and went up the chain, the dynamic changed. Their CFOs had seen the reports and were pressing them hard to fix the problem.

I called the CFOs directly and thanked them for their support in reducing their claims costs. My call made them feel like they had already decided to champion this. It signaled to HR that the CFO was an informed ally. And it established us as the people solving the problem rather than creating the inconvenience.

The HR department’s howl was not resistance to the goal. It was the sound of accountability arriving unexpectedly.

Within a short period, the office averaged seven days from the date of injury to acceptance or denial. From 80 to 90 days. To seven. And something else happened: We had the lowest litigation rate of any insurance company in California.

Years later, Joe Askins told me that when I made the demand on the investigation companies, he also thought I was crazy — but that the standard had since become the norm throughout the industry.

There is a misplaced incentive worth naming directly. HR departments are not responsible for the cost of late reporting. Their metrics are headcount, turnover and employee relations. Delayed reporting does not appear in any of those numbers — it appears in the workers’ compensation program’s costs, which HR does not own. Until the monthly report put the CFO in the room, late reporting had no consequence for the function responsible for it. That incentive misalignment exists in some form at every step of the claims process.

Where delays accumulate

A workers’ compensation claim is a sequence of decisions, each one dependent on the step before it. No single delay produces a seven-year claim. It is the accumulation of small, reasonable delays at every step — each explained, each justified, together defining the outcome.

The employer who waits three weeks explains that the supervisor wasn’t sure it was work-related. The examiner who delays to 90 days explains that the investigation was incomplete. The physician who takes six months to declare MMI explains the complexity of the case. The attorney who delays the medical-legal evaluation explains a crowded calendar. The negotiation that extends 18 months after P&S explains the gap between the parties.

None of these explanations is fabricated. Most are accurate. That is precisely the problem. A system built on individually reasonable delays produces a collectively unreasonable outcome.

The accumulation principle

No single step produces a seven-year claim. Every step contributes to it. Each delay is explained. Each delay is justified. Together, they define the outcome — and the system tolerates every one of them because it has never defined what the outcome should be.

The answer is not to attack any single step. It is to define the endpoint and hold all participants accountable for their contributions to reaching it.

Settlement philosophy and closure patterns

The rate at which claims close is not determined solely by timeline standards. It is also determined by the settlement philosophy that the carrier, TPA or self-insured employer applies to its inventory.

A program built on stipulations — agreements that resolve indemnity but leave lifetime medical benefits open — will carry permanent open inventory regardless of how promptly claims are reported. The math is simple: If you close exactly as many claims as you open each year and your average file stays open seven years, you carry 700 open files for every 100 annual claims. That's claims stasis, and stipulation-based programs are structurally designed to achieve it.

A program committed to full and final resolution removes files from the system, releases collateral, eliminates the ongoing litigation exposure that accumulates on every open file, and returns the worker to a life outside the claims process. The Safeway program demonstrated this directly: 15,500 open files under a stipulation culture, nearly $1 billion in collateral. Change the philosophy, and within a few years, the inventory was 5,000 files.

Settlement philosophy is the subject of a companion paper. What belongs here is the principle: No timeline standard and no engagement program will close claims that a stipulation philosophy is designed to keep open.

Claims office accountability: the closure percentage goal

State-level standards are necessary but not sufficient. The claims office must also set its own internal goals and measure performance against them.

The most effective mechanism I have used is the closure percentage goal applied across every accident year simultaneously. Measure the percentage of indemnity claims closed for each accident year in the inventory, then set the following year’s target one percentage point higher than the prior year’s rate for that same accident year. If the office closed 45% of its second-year claims this year, next year’s target is 46%. If it closed 62% of its fourth-year claims, next year’s target is 63%. Every accident year. Every cohort. One point higher than last time.

Improving closure by one point across every accident year simultaneously moves the entire inventory. An office carrying claims from multiple accident years sees improvement in every layer of its portfolio at once. The total pending count drops faster than any single-year metric could produce, and the improvement compounds year over year. The closure rate matrix — accident years across the top, calendar years down the side — shows immediately whether the office is moving its inventory or holding it, and where the stagnation lives.

But the most important effect operates at the examiner level. It answers the question every examiner faces every morning: Which of my open files should I work on today?

Without a target, the answer defaults to whoever called last. The oldest and most complex files — the ones most likely to become seven-year claims — sit undisturbed because nothing is making them urgent. With a per-accident-year closure target, the examiner can do the math herself. Four open files from a prior accident year. Need to close two to hit the one-point improvement. Which two are closest to resolution? Which ones need a phone call, a demand package, an authority request? The target converts an undifferentiated open inventory into a prioritized action list.

It also surfaces what is actually blocking closure. When an examiner concludes that none of the prior-year files are closeable — all in litigation, all waiting on medical, all genuinely stuck — that is actionable information. It tells the supervisor where to intervene, what authority to provide and what barriers cannot be cleared at the examiner level. The target exposes real obstacles rather than allowing them to disappear inside a general sense that the workload is heavy.

The question to ask of every claims organization is not how many files did you close. It is: For every accident year in your inventory, is this year’s closure rate better than last year’s — and by how much?

Engagement closes the loop

One of the most effective ways to shorten claim duration is to improve the injured worker’s engagement in her own recovery. In many claims, treatment is prescribed and physical therapy initiated, but no one knows whether the worker is following the plan. When engagement drops quietly, recovery slows, complications increase, and surgery becomes more likely.

The frozen shoulder illustrates the cost. Adhesive capsulitis develops when a recovering worker stops using the shoulder, and the joint stiffens. Surgery costs $75,000 or more per claim and is almost entirely avoidable if non-engagement is caught early. The signal is available at week two. The surgery happens at month eight. The connection is almost never made because no one is looking for it.

When engagement is visible and actively managed, noncompliance is identified early, complications are prevented and MMI is reached sooner. The timeline defined on paper becomes achievable in practice.

Defined timelines create expectation. Engagement makes those expectations achievable. Without engagement, timelines are aspirational. With engagement, timelines become operational.

A three-level accountability framework

The tools to fix this problem exist. They require defined expectations and visible performance — at three levels simultaneously.

At the state level, state authorities should publish time-to-resolution standards and track performance by carrier, TPA, employer and claim type. The data already exists. Publishing it is an administrative decision, not a legislative one.

At the carrier and TPA level, claims organizations should set annual closure percentage goals calibrated to prior year performance across every accident year and report results to their clients.

At the claim level, prompt reporting drives everything downstream. Prompt decisions enable prompt care. Prompt care shortens recovery. Shorter recovery reduces litigation. Reduced litigation — the largest cost driver in the system — is the financial consequence of getting the first step right.

Responsibility for delay does not rest in one place. Employers delay reporting. Claims administrators delay decisions. Medical providers delay diagnosis. Attorneys delay resolution. The system tolerates — and at times rewards — every one of them. The answer is not to assign blame. It is to define the expectation, make performance visible and hold every party accountable to it.

Because what is not expected, what is not measured, and what is not enforced will not happen.

Time is not just cost in this system.

It is care.

Bill Zachry is a former board member of the California State Compensation Insurance Fund.