Self-insured employers who utilize a third-party administrator (TPA) to administer their workers’ compensation claims frequently feel they do not get everything they bargained for from their TPA in handling the employer’s claims. The issue is usually a difference of opinion between the self-insured employer and the TPA as to what is essential and unnecessary in handling the work comp claims.
Need to Define What is Essential In Claims Handling
The differences in opinion between the self-insured employer and the TPA can be (and should be) minimized by spelling out in the claim servicing agreement what the employer considers to be essential in the claims handling. When the claim servicing agreement has a vague phrase like “the TPA will provide quality claim handling,” the stage is set for unhappiness and disputes between the employer and the TPA.
The self-insured employer, regardless of whether dealing with a small mom & pop TPA operation or with Crawford & Company’s Broadspire division, should insist the servicing agreement include, at the minimum, the following claim handling requirements:
• The servicing agreement should clarify whether the self-insured employer will confirm policy coverage before reporting the claim to the TPA or whether the TPA needs to contact the employer following each assignment to verify coverage on a claim-by-claim basis.
• The TPA will assign all claims to the designated adjuster or dedicated adjuster(s).
• The TPA adjuster will contact every injured employee the same day the claim is reported to the TPA, except that on any claim reported to the TPA after 3 p.m. local time, the injured employee will be contacted by noon of the next business day.
• The TPA adjuster will obtain a recorded statement from an injured employee when the accident causing the injury is not witnessed by another employee.
• The TPA adjuster will interview the employee’s supervisor on any injury claim that was not witnessed by a co-worker or on any questionable injury claim.
• The TPA adjuster will obtain a recorded statement of the employee any time there is subrogation potential.
• The triage nurse or the TPA adjuster (spell out which one) will contact the medical provider within 24 hours of the claim being reported to the TPA and make all necessary medical records arrangements.
• The TPA adjuster will contact the employer within 24 hours of the claim being reported to review the claim, address any issues, and request any employee’s wage records where payment of indemnity is probable.
• The TPA adjuster will complete all aspects of the claim investigation within 14 days of the claim assignment.
• The TPA adjuster will decide on compensability within 14 days. Any claim where the adjuster feels compensability should be denied to advise the employer of the denial of compensability before issuing the denial to the employee.
• The TPA adjuster will maintain ongoing contact with the injured employee and the medical provider, preferably after each doctor’s visit. Still, no less than every 30 days until the doctor visits are more than 30 days apart.
• The TPA adjuster will obtain the light-duty work restrictions from the medical provider and will contact the employer to arrange a transitional duty assignment until the employee can return to work full duty.
• The TPA adjuster will set the initial reserves on the file for medical, indemnity, and expense within 3 business days.
• The servicing agreement should specify whether all workers’ compensation claims will be reported to the Insurance Services Office (ISO) or only indemnity claims will be reported to ISO.
• The TPA adjuster will review and adjust all reserves for accuracy after obtaining the initial medical report(s) and within 60 days of claim assignment.
• On severe claims, reserves for the ultimate value of the claim will be set within 6 months of the claim being reported.
• The TPA claims office will issue all medical bill payments and vendor expense payments within the statutory guidelines or 45 days, whichever is less.
• The servicing agreement should specify how often the adjuster(s) will complete an Action Plan on each claim.
• The servicing agreement should indicate whether the TPA adjuster or a medical management company will be responsible for medical management. This includes identifying who is responsible for:
o assignment of nurse case managers,
o utilization review,
o peer reviews,
O independent medical evaluations.
• The servicing agreement should specify who is responsible for the pursuit of subrogation and who is responsible for the pursuit of subsequent injury fund offsets or recoveries.
• The servicing agreement should specify that the TPA adjuster will document every file with a settlement evaluation before a settlement is completed.
• The selection and management of defense counsel should be spelled out in the servicing agreement.
• The litigation management guidelines should be incorporated into the servicing agreement.
• The TPA adjuster should be required to keep all files on the diary and to complete all possible Action Plan follow-ups before each diary date.
• The servicing agreement should specify the frequency of supervisory reviews of the claim files by the TPA’s management staff.
• The servicing agreement should require that all actions were taken by the TPA adjuster, clerical staff, management, and medical management personnel (if a part of the service agreement) be documented in the file notes.
Annual Independent Claims Handling Audit
Lastly, and possibly the most important agreement in the servicing agreement, is the right of the self-insured employer to have an independent claims handling audit completed, at least annually, to verify the compliance of the TPA with the above requirements incorporated into the servicing agreement.
By clearly delineating the claim handling expectations in the claim servicing agreement, the relationship between the self-insured employer and the TPA will be smoother and more satisfying to both parties.
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:RShafer@ReduceYourWorkersComp.com.
Editor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%. He works as a consultant to large and mid-market clients, is a 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 the founder & lead trainer of Amaxx Workers’ Comp Training Center, which offers the Certified Master of Workers’ Compensation national designation.
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