How Well Are Your Claims Performing?

Keeping tabs on your financial books is probably the utmost important task for any business owner and/or organization.

In the event you are “loose” so to speak with the books, you can quickly find you and your company or organization in quite a financial pickle. With that said, not only should you be measuring the financial performance of the business you oversee, but also that of your employees and quite frankly yourself. On way to go about making sure you’re properly self-measuring your performance in the workers’ compensation arena is by setting a number of benchmarks.

In the event you hit or surpass those benchmarks, things should be in good hands for you. If not, you certainly by all means have some work to do.

Review Your Efforts

As part of what should be in an annual “review process” for your business or organization, review your financial numbers and overall work performance. If things are not where they need to be then set a goal by the time your next review arrives to get them there or beyond.

Among the benchmarks to look at:

• Claim Financial Benchmarks – With this, review the changes in the average claim expense. Use a comparison of the typical expense for medical benefits, indemnity benefits and claim expenses. The data should not be hard to obtain, and it gives you the ability to compare your claim expense with the prior month and quarter, along with the previous year among other time periods;

• Average Claim Expenses Within the Industry – One facet you want to key in on is your typical claim cost is representative of others in your business sector. When looking for relative data, keep in mind that a number of bigger TPAs and sizable workers comp insurers have a portion of data available. The National Council on Compensation Insurance (NCCI) does gather payment statistics in the 35-plus/minus states wherein they are active;

• Ratio for reserves and payments (three months before closing) to final claim expense – When you compare what the adjuster has compiled for reserves along with claim payments made three months before the claim closing date, with the final figure paid for the claim, you can better determine the accuracy for your large claim reserve. [Exclude the claims closed in less than 180 days]. The ratio of reserves along with the dollars previously paid on the claim, to the final claim cost should be about 1.0. In the event the ratio is below 1.0, the overall claims are under reserved. If the ratio is higher than 1.0, there is on average additional funds sitting in reserves.

Claim Handling Process Benchmarks

While there are a variety of options to gauge your claim handling, here are some suggestions for measuring claim-handling performance:

• Average bill process time –Here you will have a comparison of days between the date the medical bill, legal services bill or other cost was obtained in the claims office, and the date the payment in fact was processed. This permits you to measure the timeliness of your bill payment process and gauge the progress provided by your staff.

• Closing ratios – This is the ratio of files open during each month, quarter or year in comparison to the files closed during the same time frame. The goal here is for a figure of 1.0 or better.

• Percentage of closed files with payments higher than $1,000 – This indicator is set to make the claim office honest on the closing ratios. Unfortunately, it is too easy to manipulate closing ratios, so this gives you the claim office close files prematurely when the number of closed claims with payment increases.

• Average time to input initial reserve – Even though different claim offices have different standards as to how quickly the initial reserve should be in the computer system, by comparing the present average length of time to a previous month, quarter or year, you can gauge how soon the adjusters are inputting initial reserves.

• Files on diary – This involves measuring the files that are being actively worked on the diary. Ideally, the claim office has every file on diary to prevent the files from stagnating.

• Files with missed diary – This benchmark can in turn be a list of the files where the diary has not been updated the diary due date has passed, or it can be a percentage of the files for a claim handling due date that has since expired. This provides you with insight into how current the claims office is in when it comes to handling of the claims.

Your company’s claims’ performance should always be of importance to you. If you are falling behind in this arena, you very well could see your financial books go from black to red in a short amount of time, something no business owner or organization will want.

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 co-author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:.

Contact: RShafer@ReduceYourWorkersComp.com.

Workers’ Comp Roundup Blog: https://blog.reduceyourworkerscomp.com/

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