By PETER ROUSMANIERE, an expert on the workers' compensation industry
Workers' compensation loss trends may be up or down, but the potential for employers to complain about their insurer or third-party administrators (TPAs) appears never to waver.
An employer may get upset about the way in which a claims adjuster handles a specific claim, for instance, by accepting a claim that the employer is convinced in fraudulent. The employer may object to a pattern of performance by the claims staff that appears to repeatedly violate standards of best practice. Or a flare-up could occur over the appropriate use of medical case managers.
Expertise in addressing both the presented and underlying factors in a dispute is often hard to come by. The employer's broker, for one, should presumably be alert to the potential for disputes and take the initiative to either prevent or resolve them.
But Frank Pennachio, a Tampa, Fla.-based consultant for insurance brokers through the WorkComp Advisory Group, doesn't like what he sees.
"Most brokers spend the majority of their time getting the lowest price for the client's policy. More time needs to be invested in bridging the gap between the carrier or TPA and the employer," he said.
He knows of one employer who installed a drug-free workplace policy with the expectation that, if an injured employee were to test positive, the claim would be denied. Its insurer decided on one case otherwise, however, saying that it was not confident it would prevail in litigation. The broker could have counseled its client up front when it designed its workplace policy.
Joe Boures, president of the Hartford, Conn.-based third-party administrator Special Risk Services (SRS), finds that the relationship between an employer and its broker varies so much that his associates must customize each account to address related issues.
Quite often a dispute may lead to both the employer and the claims staff modifying their practices to reach an improved outcome.
One of Boures' clients thought that his firm should be settling claims older than two years at faster rate, for instance.
"The rub for us was that our closing ratios for the client were much better than our book of business and industry averages," he explained.
But that was not the end of it. SRS revised its strategy with an action plan that included a change in settlement policy by the employer. Closing rates improved, and SRS extended the new strategy to other accounts.
Key to his finding a solution to a dispute, Boures said, is to think through the problem from the employer's perspective.
Another case--again involving an employer that was very dissatisfied with its TPA--shows how a specific problem needs to be put into this perspective. Rebecca Shafer, president of Hartford-based Amaxx Risk Solutions, which advises employers often at the behest of brokers, recalled a clients that was very critical of the claims-handling by its third-party administrator. It turned out that, in one of the TPA's three servicing claims offices, three-point contact was late, indemnity benefits were miscalculated and case managers were assigned too late to be effective, among other evident deficiencies.
The employer, however, had drastically underinvested in managing its workers' compensation exposure, assigning only one person to oversee 3,000 annual claims. Its claims costs were twice the national average for the industry.
Both the third-party administrator and the employer subsequently reformed their practices.
What this case illustrates, and what both Boures and Shafer suggest, is that a dispute needs first to be put into a broader context. Boures draws upon extensive, proprietary claims data. Shafer wants to see how the employer's experience stacks up against national cost averages and best practice benchmarks. (She recommended the Risk and Insurance Management Society Benchmark Survey, which is published annually with the help of Advisen.) Shafer went on to also recommend setting up baselines for current practices under dispute and using numeric scores to measure improvements from those baselines.
And all three professionals urge face-to-face contact. Too often, employers and claims staffs fail to create a venue to communicate fully.
Read more at the WorkersComp Forum homepage.
September 16, 2010
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