Self-insured employers who utilize a third party administrator (TPA) to administer their workers’ compensation claims frequently feel they do not get everything they bargain for from their TPA in the handling of the employer’s claims. The issue is usually a difference of opinion between the self-insured employer and the TPA as to what is essential and what is unnecessary in the handling of the work comp claims.
Need to Define What is Essential In Claims Handling
The differences in opinion between the self-insured employer and the TPA can be (and should be) minimized by spelling out in the claim servicing agreement what the employer considers to be essential in the claims handling. When the claim servicing agreement has a vague phrase like “the TPA will provide quality claim handling”, the stage is set for unhappiness and disputes between the employer and the TPA.
The self-insured employer, regardless whether dealing with a small mom & pop TPA operation or with Crawford & Company’s Broadspire division, should insist the servicing agreement include, at the minimum, the following claim handling requirements:
• The servicing agreement should clarify whether the self-insured employer will confirm policy coverage prior to reporting the claim to the TPA, or whether the TPA needs to contact the employer following each assignment to verify coverage on a claim-by-claim basis.
• The TPA will assign all claims to the designated adjuster or dedicated adjuster(s).
• The TPA adjuster will contact every injured employee the same day the claim is reported to the TPA, with the exception that on any claim reported to the TPA after 3 p.m. local time, the injured employee will be contacted by noon of the next business day.
• The TPA adjuster will obtain a recorded statement from any injured employee when the accident causing the injury is not witnessed by another employee.
• The TPA adjuster will interview the employee’s supervisor on any injury claim that was not witnessed by co-worker or on any questionable injury claim.
• The TPA adjuster will obtain a recorded statement of the employee any time there is subrogation potential.
• The triage nurse or the TPA adjuster (spell out which one) will contact the medical provider within 24 hours of the claim being reported to the TPA and will make all necessary arrangements for medical records.
• The TPA adjuster will contact the employer within 24 hours of the claim being reported to review the claim and address any issues, and to request the wage records of any employee where payment of indemnity is probable.
• The TPA adjuster will complete all aspects of the investigation of the claim within 14 days of the claim assignment.
• The TPA adjuster will make a decision on compensability within 14 days and on any claim where the adjuster feels compensability should be denied, to advise the employer of the denial of compensability prior to issuing the denial to the employee.
• The TPA adjuster will maintain on-going contact with the injured employee and the medical provider, preferably after each doctor’s visit, but no less than every 30 days until the doctor visits are more than 30 days apart.
• The TPA adjuster will obtain the light-duty work restrictions from the medical provider and will contact the employer to arrange a transitional duty assignment until the employee is able to return to work full duty.
• The TPA adjuster will set the initial reserves on the file for medical, indemnity and expense within 3 business days.
• The servicing agreement should specify whether all workers’ compensation claims will be reported to the Insurance Services Office (ISO) or only indemnity claims will be reported to ISO.
• The TPA adjuster will review and adjust all reserves for accuracy after obtaining the initial medical report(s) and within 60 days of claim assignment.
• On severe claims, reserves for the ultimate value of the claim will be set within 6 months of the claim being reported.
• The TPA claims office will issue all medical bill payments and vendor expense payments within the statutory guidelines or 45 days, whichever is less.
• The servicing agreement should specify how often the adjuster(s) will complete an Action Plan on each claim.
• The servicing agreement should spell out whether the TPA adjuster or a medical management company will be responsible for medical management. This includes identifying who is responsible for:
o assignment of nurse case managers,
o utilization review,
o peer reviews,
o independent medical evaluations.
• The servicing agreement should specify who is responsible for the pursuit of subrogation and who is responsible for the pursuit of subsequent injury fund offsets or recoveries.
• The servicing agreement should specify that the TPA adjuster will document every file with a settlement evaluation before a settlement is completed.
• The selection and management of defense counsel should be spelled out in the servicing agreement.
• The litigation management guidelines should be incorporated into the servicing agreement.
• The TPA adjuster should be required to keep all files on diary and to complete all possible Action Plan follow up prior to each diary date.
• The servicing agreement should specify the frequency of supervisory reviews of the claim files by the TPA’s management staff.
• The servicing agreement should require that all actions taken by the TPA adjuster, clerical staff, management and medical management personnel (if a part of the service agreement) be documented in the file notes.
Annual Independent Claims Handling Audit
Lastly, and possibly the most important agreement in the servicing agreement is the right of the self-insured employer to have an independent claims handling audit completed, at least annually, to verify the compliance of the TPA with the above requirements incorporated into the servicing agreement.
By clearly delineating the claim handling expectations in the claim servicing agreement, the relationship between the self-insured employer and the TPA will be smoother and more satisfying to both parties.
Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact: RShafer@ReduceYourWorkersComp.com.
Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. http://blog.reduceyourworkerscomp.com/. Contact: firstname.lastname@example.org.
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