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Leaders of major workers' comp third-party administrators are divided over the effectiveness of sending workers' comp claims functions offshore as a way to ease the burden on the shortage of experienced administrators.

Richard J. McKenna, president of Gallagher Bassett Services Inc., and David Patterson, president of ESIS Inc., said that although they don't plan to use outsourcing for any core activities as a way to ease the burden, they would entertain the possibility of sending some back-office work offshore.

"I refuse to abandon the thought that we have high-quality work forces in the United States that can deliver services that United States-based customers can expect," he said.

The executives delivered their comments at the 15th annual National Workers' Comp and Disability Conference & Expo in Las Vegas in November.

Offshoring is a way for carriers and their TPAs to cut costs and increase their claims-processing capacity. The issue has emerged as one of the most divisive in the claims industry.

Surveys show that while many managers by and large support outsourcing of workers' comp claims functions, they're reticent about outsourcing the jobs offshore.

Managers who have sent their claims-administration functions offshore said the service doesn't measure up compared with services offered in the United States, according to a survey conducted earlier this year by Maddy Bowling & Associates Consulting Inc. The more complex the claim, the less managers believed the function can be processed offshore, the surveys found.

Among the most common ways for companies to fill the shortage of claims personnel is to increase the caseload for existing adjusters, hire temporary adjusting staff and recruit staff from other payers, according to Bowling's research.

The pressure on TPAs to find qualified claims expertise is expected to increase as administrators retire and regulators exert more pressure to comply with reporting requirements.

January 1, 2007

Copyright 2007© LRP Publications