Is Your TPA Recovering Every Subrogation Dollar It Should?

Is Your TPA Recovering Every Subrogation Dollar It Should?Do you ever wonder if the claim handling quality of your insurer or third party administrator (TPA) is as good as it should be?


  • Do you ever find your insurer or TPA making large reserve changes just before it settles a work comp claim?


  • Is your insurer or TPA recovering every subrogation dollar it should?


  • Is your insurer or TPA doing everything it should to resist fraudulent claims?


If you have any of these concerns, you can consider four types of file review for workers’ compensation claim files .



1 – Claim File Quality Audits


Your company’s service agreement with your insurer or TPA should specify the claim handling standards — the Best Practices– that apply to all of your workers’ comp claims. An audit of the work comp claim file quality focuses on the components of claim handling that optimize the claim resolution results.


The work comp claim file review compares your files against the Best Practices standards you agreed to with your insurer or TPA. The experienced auditor reviews and analyzes how the various aspects of the file interrelate to give your company a total picture of how each individual file is/was handled.


When the audit is concluded, your auditor provides you with an Executive Summary Report outlining the audit findings.  The Executive Summary Report outlines your claim handlers strengths and weaknesses. The report provides you with valuable information and recommends solutions allowing your company to avoid future difficulties. The completed claims audit provides your risk management department with peace of mind, or it assists your company to know where your claims are deficient, allowing you to take the appropriate action before you incur extra claim cost.



2- Reserve Audits


When reserves are set too high on your work comp claims, your company’s ability to undertake new business is unnecessarily limited and it may impact your company’s ability to get financing. When reserves are set too low, your company’s available assets are overstated, eventually resulting in unanticipated shortfalls.


Reserves need to be state accurately and they need timely adjustments —  soon as information impacting the reserves becomes available. The independent claims auditor evaluates the reserve accuracy and timeliness of reserves for individual claim files and for the entire work comp claim inventory.


Whether you need a reserve audit for underwriting and renewal, retro premium adjustment, a merger/acquisition, collateral adjustment, the professional claims auditor provides you with the accuracy of reserves you need. The reserve audit gives you an objective analysis of your financial funding needs.



3- Subrogation Audits


Every dollar recovered by subrogation is a dollar added to your firm’s bottom line. Often busy adjusters overlook subrogation opportunities. Subrogation must be looked for in every work comp claim. While your work comp adjuster knows to pursue subrogation on clear-cut automobile accidents, the work comp adjuster often does not have the liability expertise to recognize the potential for recovery when the work comp claim involves elements of general liability or products liability. The professional claim auditor identifies these potential recovery opportunities and maximize your recoveries.


Subrogation audits are considered for all open files and for closed files still within the statute of limitations. Subrogation audits pay for themselves by bringing in otherwise missed recoveries.   When the subrogation audit can be done electronically, your independent work comp claims auditor may often perform the audit for a percentage of the identified file review recoveries.



4- Fraud Audits


Nothing hurts the bottom line of your business more than a fraudulent claim, as it is a theft of the amount of money paid on the claim and, as we all know, the company’s loss history is used as the basis for future premium charges.


Separating the fraudulent claims from the legitimate claims can be difficult. The professional auditor can assist in identifying those claims where more can be done to disprove the fraudulent claim.





The professional claims auditor provides your company with the information you need to determine the claim handling quality of your files. The auditor assists you in verifying or correcting the accuracy of file reserves.   A subrogation audit pays for itself in additional identified recoveries, while a fraud audit save your company from paying fraudulent claims. All four types of audits improve the financial status of your company.




Author Michael Stack, Principal, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center. .



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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

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