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Self Insured Edition – 5 Ways Workers Comp Programs Fail


Self Insured Edition – Workers Compensation Program

Our readership on the 10 Ways To Tell If Your Workers Compensation Program Is In A Failure Spiral spiked very heavily last week. Some of our self insured clients asked if there were any differences for the self insureds than the regular first dollar insurance that I referred to in my last three posts.

Picture Of Calculator Self Insured Workers Compensation Program With Money

I thought I would begin with how to tell if a self insureds Workers Comp program is failing. Reading over the list of 10 for first dollar insureds may also be beneficial.

The five ways to tell are:

  1. Your company or organization has not had a Loss Development Factor (LDF) calculated with a benchmark comparison to similar companies. How can your Workers Comp program be analyzed without knowing how well you are performing presently? There are many organizations (including ours) that calculate LDF’s for our clients. Most businesses and organizations that pay first dollar insurance have an E-Mod to use for comparison purposes. You should have one calculated ASAP if you do not have one in your possession. One caveat is that unlike the E-Mod, there are various inputs that may need to be altered before calculating the LDF.
  2. Woman Working Out Workers Self Insured Compensation Program Calculations

    You do not have a check limit or reserve limit in place for your TPA. This keeps your Workers Comp program from sustaining a major adversity without your knowledge. Without a limit in place, you may not realize you are paying for very large bills or have a huge reserve increase until your receive your loss run. There is no one set number to put in place. An email from the claims adjuster or supervisor can save your company many surprises now and in the future.

  3. Your Request For Proposal (RFP) allows prospective bidders to bundle costs. Many self insureds including our clients are now unbundling costs such as rehabilitation nurses, bill review, and other costs. I have seen public employers bid each function out separately with an RFP for each TPA function or have each TPA function listed separately and allow companies to bid on one or a mix of the various functions. This may seem like a large task. The cost savings will pay for the effort in the long run.

    Hand Man Workers Compensation Program Signing Document
  4. Not auditing your TPA’s claims processing function per each contract. I was very surprised to learn how many self insureds are not having their Workers Comp claims reviewed by an outside auditor such as us or having a claims audit performed sporadically. How can you guarantee Senior Management that all is well with the TPA that you have chosen and are administrating over the TPA’s claims handling abilities? One of the most critical variables that you need to know is reserve adequacy.
  5. Not recovering any subrogation funds. Check here for an article I wrote on subrogation. If your company or organization is large enough to be self insured, you are almost 100% likely to have claims where another party is fully or partially responsible. We call this at J&L – leaving cash on the table and walking away. You do not have to hire a battery of attorneys to recover the funds. Quite often, a few well placed letters and a few negotiations can result in having money recovered on the files. Unlike first dollar insurance, this is your $ that can go right back into your Workers Comp program.

#5 has reminded me of the largest area of concern that we have with our self insured clients. I will post on that next time.

Also Read: What Is A Guaranteed Cost Program In Workers Compensation?

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management 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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