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Self Insurers Can Ruin Their Programs – 12 Hidden Ways


Self Insurers Can Ruin Their Programs Without Realizing It

The first 12 ways self insurers ruin their Workers Comp programs are below.  Workers Compensation self insurance can be more complicated than paying for a regular policy. I have received many emails asking me to comment on how self insureds can save on their Workers Comp payouts.

Picture of Hand Holding Jar Full Of Coins Self Insurers With Plant

I often hear that being self insured has removed an employer or public entity from the E-Mod system. Nothing could be further from the truth. The following are 12 ways Workers Comp self insureds can harm their programs.

    1. Ignore your reserve figures. Your Third Party Administrator (TPA) analyzes the claim and tallies the total lifetime cost of the file. I often see the reserve figures not taken into account fully when a self insured is budgeting for their WC expenditures. Online loss run access is critical in following your reserves.
    2. Consider a large deductible as being self insured. There are a number of differences between a large deductible and a self-insured. For example, large deductibles still have an E-Mod calculated every year and it is posted to the rating bureaus.
    3. Not having a Loss Development Factor (LDF) calculated every year. See the intro paragraphs – your organization needs to have a figure that reflects your safety measures. The LDF, in my opinion, is superior to an E-Mod. The LDF examines many more years than the E-Mod.
    4. Forgetting the close fiduciary relationship with your TPA. TPA’s are spending directly out of your bank accounts. There is no buffer as there is with an E-Mod system.

      Woman Self Insurers Holding Piggy Bank
    5. Not reviewing your TPA’s claims performance. Most (but not all) TPA’s perform at an acceptable or better level. Your claims are only as good as the Workers Comp claims staff working on your files. Adjuster turnover should be a large concern.
    6. Not sending out RFP’s often enough. Sending out RFP’s is an arduous task. From what I have seen, it is very well worth it. I often see companies/entities extend an RFP contract for very long periods. If that is occurring, see #5.
    7. Leaving the ancillary services to the TPA’s discretion. Services such as bill review, rehabilitation nurses, and PPO network fees
      Picture of Planting Self Insurers Can Ruin Their Programs
      (c) 123rf.com

      can easily cost more than the TPA processing fee. These fees should not be bundled into a TPA contract without a cost itemization.

    8. Not Monitoring Large Medical Only Claims.This is a major cost factor that flies under the radar. You will usually know more about the current medical condition of an employee. I wrote this post on Medical Only claims last year. If their medical only claim continues for a long period of time and increases in cost, you could have a very costly claim on your hands.
    9. Not requiring the TPA to call you before putting up a large reserve. I usually recommend this not be done by email. If you are setting a July 1 Workers Comp budget and the adjuster increases a reserve by $100,000, where does that fit into your budget?
    10. Not following the Five Keys to Cutting Your WC Costs, click on the title for coverage of the keys.
    11. Not pursuing the recoverables. Subrogation, bill overpayments, etc. are the small things that add up to a large total. This is pure $$ left on the table. The amount of effort to collect on these is often minimal.
    12. Fighting claims that should be settled. If emotions rule the day, you may as well get out the checkbook. If the TPA claims staff or defense attorney can justifiably recommend a settlement, then keeping it out of court may be the best decision. The % of claims won by the defense is very small.

I could have listed more as there are so many areas where self insureds can inadvertently harm their program. Reading this article is the first step. Putting it into action is the next one for self insurers.

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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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