There are many programs a self-insured employer can implement to have a positive impact on the cost of their workers compensation. Safety, aggressive transitional duty return-to-work, effective medical cost containment, and solid fraud prevention programs all will have a positive impact on the cost of workers compensation.
The one area of workers compensation cost control that is frequently overlooked is the quality of the third party administrator (TPA) handling the claims. All the savings from the safety, return to work, medical management and fraud prevention programs can be easily lost by the selection and continuation of a poor TPA. If the workers comp adjusters at the TPA do not handle the claims correctly and efficiently, the cost of the claims will be significantly higher and will cost the self-insured employer far more than they might realize.
The skilled workers comp adjusters who followed the established Best Practices for Workers Compensation claims handling will have substantially better outcomes financially then the adjusters who take short cuts. Workers comp adjusters are human and when they are taught by TPA management to meticulously follow the Best Practices, they have great results. When adjusters are taught to give lip service to Best Practices and are assigned too many claims by TPA management, the end result is the overpayment of claims.
If the self-insured employer selects their TPA by the lowest bid to provide their claims handling services, they may or may not get quality claims handling. There are several measurements of quality the self-insured employer should look at in selecting and retaining a TPA from year to year.
Prior to making a decision on the selection of a TPA, ask all the TPAs submitting proposals to handle claims to submit a copy of their Best Practices for review. Eliminate from consideration any TPA who has vague Best Practices. Each of the Best Practices should state precisely what their criteria are and a time frame for accomplishment. For example: If the Best Practices state “will keep in regular contact with the injured employee”, that is marginal. If the Best Practices state “will contact the injured employee the day the claim is assigned and after each doctor’s visit”, that is excellent.
Ask the TPA what is the average experience level of their workers compensation adjusters. Experienced adjusters tend to make fewer mistakes than inexperienced adjusters (and the self-insurer is the one who pays for the mistakes made by the adjusters, regardless of experience level). Experienced adjusters know what to investigate, when to investigate, what to deny and when to settle. They know the doctors, lawyers and workers comp boards. They know how to move claims to a conclusion.
Experience of the adjusters is not the sole criteria. Ask what the tenure is for the staff. If the staff have had a lot of turn-over, there may be underlying problems in adjusters working for the TPA. Also, turn-over and changing adjusters on the claims can have a negative impact on the outcome of the claims.
Ask the TPA for the average number of lost time claims assigned to an adjuster. If the TPA states the adjusters have on average 175 lost time claims, expect a poor outcome in most of the lost time claims. If the TPA states it will vary by jurisdiction, by experience level, and by the number of litigated/board cases, you will have a much more sensible answer. On average, an experienced adjuster can handle approximately 125 claims at a time, in a state with a moderate amount of state forms to process and in an area where most injured employees are not represented by an attorney. If the state has complex forms and is highly litigious, for example, California, the average case load for an experienced adjuster may be only 100 claims. Much depends on practices and staffing within the claim office such as whether each adjuster has administrative support for obtaining medical records and pay bills; The more support provided to adjusters the more claims they can handle.
Ask the TPA what their practice is in assigning claims. If the TPA rotates the assignment of claims, the self-insured employer will end up with multiple adjusters working on the claims. If the TPA uses designated adjusters (where the adjuster handles all the claims for the self-insured employer, plus claims for other employers) or the TPA uses dedicated adjusters (where the adjuster handles claims only for one self-insured employer), the self-insured employer will have a better overall outcome on claims as the adjuster(s) thoroughly learn the requirements of the account and know what is expected of them by the self-insured employer.
Ask the TPA for a list of clients it services in the area. If the TPA is reluctant for you to know its other clients or is reluctant for you to contact its other clients, that is a red flag. If the TPA readily provides you with a list of clients, contact some of them at random and ask what their overall level of satisfaction is with the TPA. Good references from other clients is a definite positive, while a polite refusal to provide any input on the TPA selection should be a negative, especially if other clients are also reluctant to give a positive recommendation.
Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and website publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Manage Your Workers Compensation: Reduce Costs 20-50% www.WCManual.com. Contact: RShafer@ReduceYourWorkersComp.com.
Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: email@example.com.
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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.