Sometimes a self-insured has a hodgepodge of systems to handle claims. These are often referred to as RMIS – risk management information systems. An auditor recently found, to his dismay, that a self-insured was recently using a 20-year-old version of a computer claims management system with numerous patches, upgrades and revisions. The claims management system often broke down; the claim audit itself was delayed due to one of the breakdowns. Litigation management was kept on a separate computer system. While documents were being scanned into the claims files, a parallel paper file was kept on each claim due to the claims management system’s inadequacies and failures.
The manager was unable to run some basic reports – closings for each month, total new claims per month, total open claims in the office for the month, etc. The IT Department had to help obtain basic claims office management data. Due to the inadequacies of the claims management system, the claims manager could not run his own analytical reports.
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The Cost of an Outdated Claims Management System: Flying by the Seat of the Risk Manager’s Pants
COST was the self-insured’s explanation of why they had such an outdated claims management system. The self-insured thought it cost too much to obtain a better system although it knew the deficiencies of their current system was causing the claims office to waste a lot of time. However, the self-insured had not quantified the cost.
It turns out that the self-insured spent more each month with their vendor to keep the old system going than it would cost to pay for a new claims management system. It was as if the self-insured spent $500 every month to keep an old car going, when they could have spent $500 each month paying for a new car.
The self-insured’s risk manager was at an extreme disadvantage in obtaining data needed to properly manage their claims and exposures. Without information, maintaining claims quality and analyzing progress or declines in the performance of the claims office was, as the claims manager said, “flying by the seat of my pants.”
Both the risk manager and the claims manager were making judgments and decisions based on their gut, rather than verifiable information. They both agreed they needed a better claims management system and hoped that the next revision of their current claims management system was going to make it better, a new transmission in their 20-year-old car.
If the next revision of the 20-year-old claims management system is unsuccessful, if the new transmission doesn’t fix the overall old vehicle’s performance, this self-insured should purchase a modern claims management system. While the process may be scary due to their concerns of making a poor choice, the selection of a claims management system designed to meet their needs can be done. However, as we advise when beginning a workers’ compensation cost reduction analysis –the biggest step is to just START – pick one thing and GO.
Finding the Right Claims Management System
To find a claims management system that will provide for their needs, this self-insured should consider:
- Purchasing or leasing from a vendor as their IT department does not have the resources to develop their own.
- Contacting other large self-insureds (RMIs are a good place to start) to see what systems they use and how they would rate those systems.
- Identifying several options and
- Obtaining detailed information from vendors on how their claims management system is integrated with medical case and litigation management.
- Vendors who have experience at conversion of data from their old system to the new claims management system.
This self-insured should also consider several aspects of how the new system itself works. One of these is what does their claims system need to do? Does it need to enter file notes, create diaries or digital copies of documents, process payments, track reserves, write letters, state form filings, litigation management, medical management, etc.
The next issue the self-insured needs to consider is how the claims system will operate on a daily basis. Is the system:
- Easy to input data, to navigate and for new employees to learn.
- Able to respond immediately – a five second delay to change pages will add up to an extremely large amount of wasted time over millions of page changes during the life of the system.
- Able to encrypt sensitive information like social security numbers, passwords and medical information.
- Able to run sophisticated analytics, both canned reports and ad-hoc reports for data mining.
- Able to keep the reporting database separate from the transactional database to allow for data reports without impacting system performance.
- Complete with a disaster recovery plan with a back-up of all data.
Summary
When moving from an old to a new claims management system, it is important to evaluate your company’s needs, the qualifications of the vendor and the capabilities of the new claims management system. A quality claims management system will improve risk management’s effectiveness, improve claim management and save time for the claims staff while reducing overall operation costs.
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 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, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact: [email protected].
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 protected].
WORKERS COMP MANAGEMENT MANUAL: www.WCManual.com
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.
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