The process of setting case reserves for workers’ compensation (WC) claims varies depending on many factors, including injury type, jurisdiction, and claimant-specific information. For some WC claims, reserving can be as simple as estimating medical costs and lost wages for a relatively minor injury or applying a life expectancy to an annual benefit amount. Efficient case reserving combines accuracy and timeliness, which are key to financial stability for insurers and organizations. Generally, WC case reserves are separated into three categories: indemnity (lost wages, settlements), medical (office visits, prescriptions, surgery), and expenses (legal fees, nurse case management, administrative costs). While the process of reserving any WC claim involves some similarities (e.g., reserves should always be adjusted upon receipt of new information), establishing case reserves for a unique kind of WC claim—federal black lung (FBL) claims—involves legal complexities and requires specific expertise.

Federal black lung claims are subject to federal regulations and benefits that are different from other types of WC claims (which are governed by individual states). Claims professionals estimating a federal black lung case reserve should be intimately familiar with these federal requirements. Moreover, changes in legislation can occur suddenly and apply retroactively, further increasing the uncertainty surrounding the case reserves for these claims.

Why are federal black lung claims so complicated? Coal miners with long-term exposure to coal dust can develop a medical condition known as coal workers’ pneumoconiosis (CWP), or black lung disease. This long-term, latent condition often takes years or decades to manifest. It is difficult to diagnose, and the medical community is divided on how much exposure is needed to cause CWP. The litigation process is complex as there are several federal adjudication status levels (FASLs) where determinations of denied or entitled black lung benefits are rendered. Throughout the adjudication process, parties may appeal decisions that lead to additional hearings or referrals to other levels through administrative law judges or Benefits Review Boards, making litigation a lengthy process. A coal miner with CWP can also file a state WC claim (i.e., a state black lung claim). Statutes of limitations, indemnity benefits, and medical coverage differ from state to state, making it difficult when applying offsets that may reduce indemnity benefits on the FBL claim.

Although the federal mechanism has been in place for many decades, over the past 10-15 years legislation greatly expanded benefits and simplified the application process. The current benefits paid for federal black lung claims and the process for obtaining those benefits deviate significantly from the past and from the “run of the mill” WC claims—including state black lung claims. Even constructing the actuarial triangles requires a different way of grouping and labeling than the traditional reported and paid claim count triangles typically used in WC reserving work. What follows is a partial (and simplified) list of key features of federal black lung claims:

• They are regulated by the Federal Black Lung program and administered by the U.S. Department of Labor.
• Coal workers cannot file a claim for black lung until after the date of last employment in a coal mine (i.e., upon retirement or termination).
• The last coal mine employer, deemed the “responsible operator,” is required to pay benefits (assuming the miner worked there for at least one year).
• If the responsible operator is no longer viable, the Federal Black Lung Disability Trust Fund assumes payment of the benefits.
• If a claimant is being paid federal black lung benefits, when that person dies the benefits automatically continue to be paid to the surviving spouse—regardless of cause of death.
• All applicants who worked in a coal mine for 15 years or more and have a respiratory condition are presumed to be entitled to federal black lung benefits.
• Indemnity benefits are not based on wages, but rather are set by the federal government and are reviewed and changed annually.
• Indemnity rates are based on the number of beneficiaries, or dependents, associated with the miner.
• In 2024, the monthly rates range from $772.60 to $1,545.20 per month
• Indemnity benefits may be reduced or offset by previously awarded state black lung awards
• The largest risk in estimated future medical costs involves miners who require lung transplants.
• There is no statute of limitations—miners have no deadline to file a claim. Claims have been filed as late as 26 years after leaving employment.
• Workers can file both state and federal black lung claims simultaneously.
• Claimants can be denied benefits if there is no evidence of CWP. Those who are denied benefits can refile their claims and there are no limits on the number of times in which they can refile.
• The adjudication process for federal black lung claims has several levels. The likelihood of being awarded or denied can vary depending upon the adjudication level. Moreover, the likelihood of entitlement at each level varies by state.
• Because the indemnity benefit scheme for federal black lung claims operates similarly to pension benefits, coal companies must also establish “reserves” for coal workers who are still actively employed—even though they are not eligible to file a claim until the date of last employment.
• Benefits are paid for the life of the claimant—and the claimant’s surviving spouse—regardless of the severity of the medical condition. The miner’s disability is deemed to be “permanent and total.”
• Because a claim can be awarded many years after leaving employment, and because benefits are paid for the life of the claimant or surviving dependents, federal black lung liabilities are very long-tailed, triggering issues for consideration such as:
• Discounting and selection of long-term interest rates
• Escalation of indemnity and medical benefits
• Determining the life expectancy of the beneficiary

These differences make reserving federal black lung claims much more complex than other WC claims, requiring different case reserving processes and actuarial methodologies.

For more information, please contact Milliman at [email protected]

About Milliman AccuCase

Federal black lung case reserving requires an advanced analytic valuation solution that combines the accuracy of a detailed claim analysis with actuarial assumptions about mortality as well as knowledge of entitlement probabilities to generate cash flows that can be discounted to present value. Milliman’s proprietary software, AccuCase, was developed to reserve federal black lung and other WC claims. AccuCase has the ability to overlay complex, multilevel reinsurance programs, incorporate inflation, apply varying escalation rates to different medical treatments, prorate expenses, and utilize black lung-specific mortality tables to generate accurate future expected costs.