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.
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:
- 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.
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.
- 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.
- 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.
- 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.
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