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Cutting Workers Comp Costs – Self Insured Misnomer

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Cutting Workers Comp Costs Even If You Have TPA

Cutting Workers Comp Costs can be easily misunderstood in certain areas by almost everyone.  Over the past fifteen years, we have analyzed many Self Insureds with a TPA that is paid on a flat fee basis.

Graphic Of Scissor Cutting Workers Comp Costs Word
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The Self Insureds have told us that they are out of the Workers Compensation system as they are paying fee out-of-pocket and are only paying for reinsurance and a TPA fee.  Nothing could be further from the truth.

TPA’s are spending $ directly from your insurance budget. A really bad claims year cannot be reduced by the E-Mod system as with regular insureds. The claims have to actually be monitored MORE closely than with a regular Workers Comp insurance arrangement.

Hands Holding Black Board Cutting Workers Comp Costs With Text Budget
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The term LDF (Loss Development Factor) actually becomes the replacement for the Workers Compensation E-Mod system. As I have pointed out in the last three articles, CONTROL is the most important factor in reducing Workers Comp costs. How can a Self Insured with a TPA reduce their insurance budget by keeping control of the claims? The easiest way is to bring the claims fully in-house, thereby eliminating the TPA. This is not a simple task, but it will pay off a large amount of $ in the long run. With the claims department as part of your company, controlling costs are much easier than hiring a TPA, and control of the claims will increase as there are no outside parties involved in the Workers Compensation claims process.

All overhead expenses, salaries, claims processing systems, and other costs must be compared to the TPA costs to see if this is a worthwhile venture. One of the minimum things to consider is if there are enough claims to make a claims load for at least one adjuster.

I skipped over Captives and will discuss that next time.

Next Up – Captives for Workers Comp

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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