Workers' Compensation

Cost Containment Strategy: Lump Sum Settlement

Chelsea Bikner
Cost Containment Strategy: Lump Sum Settlement
Reading time 4 Mins
Published on Oct 23
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The Ohio Bureau of Workers’ Compensation (BWC) works to protect the best interests of workers injured on the job. Under Ohio law, injured workers have the right to pursue benefits through the BWC for medical treatments and lost wages. The BWC also allows employers to offer injured workers an agreed upon sum of money to resolve all past, present, or future medical and compensation issues and liabilities related to the claim. In some cases, a lump sum settlement (LSS) may be in an injured workers’ best interest, and the BWC works to establish a fair and equitable settlement that is in the best interest of all parties. Read on to learn more about how LSSs can be a viable cost containment strategy for some companies, particularly if an injury and the associated BWC payments will continue for a lengthy period of time, driving up premiums in the process.

What is a lump sum settlement

An LSS is an agreement between the BWC, the employer, and the injured worker for a lump sum payment, to settle one or more claims. When a claim is settled no future costs can be added to the claim and the current costs plus the settlement amount are fixed. Settling a claim allows for the removal of the claim’s reserve, helping to keep the employer’s premium costs lower.

The BWC administers and approves all settlements. Within 30 days of a settlement agreement, the Industrial Commission of Ohio reviews the settlement to ensure that it is fair to all parties.

What happens when claims are settled

When a claim is settled, the injured worker receives a lump sum payment from the BWC. This allows the injured worker to manage their own treatment, on their own timeline and schedule. Since each claim has an indemnity and a medical portion, your settlement offer may cover one or both portions of the claim. If your settlement covers both portions, the injured worker will receive no additional compensation from the BWC. If the settlement only covered one portion of the claim, the injured worker may still receive the benefit type that was not part of the settlement.

How settlement affect your premiums

Settlements can help you manage the costs of a claim and bring about a swift closure for both your company and your injured employee. By settling, you remove the reserves associated with the claim for all future rate-making. The costs paid on the claim plus the settlement amount will be charged to and affect your premium rate. Settling allows you to know the total amount that the claim will cost and can allow you to be better positioned to limit the impact on your premium.

Advocating for you

Your Ohio third -party administrator (TPA) is your advocate in the workers’ compensation process. Your TPA will look for claims where settlement may be the best option for you to take to limit your premium increase and will advise you on next steps.

While the Ohio Bureau of Workers’ Compensation doesn’t require employers to work with a TPA, a successful TPA partnership not only leads to less stress for you when a claim is filed, it can also provide significant annual premium cost-savings for your company. By allowing your business greater access to cost containment strategies, your partnership with a TPA can often pay for itself. While the Bureau of Workers’ Compensation looks out for the interests of your injured employees, your TPA will help you save money and provide assistance with claims.

Learn more about Workers’ Compensation today by contacting a Sheakley WC professional. Stay up-to-date on all things Sheakley by subscribing to our blog and following us on social media. Join in the discussion by commenting below.


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