RISKVUE ARCHIVE | INDUSTRY WATCH > WORKERS' COMP

Shopping For Workers’ Compensation Third-Party Administrators

By George Scherbak, CPCU, ARM

In today’s market place, it can be very difficult to select the third-party administrator (TPA) that will best serve the workers’ compensation claims of injured employees. Every TPA has its strengths and weaknesses, and each client has its unique corporate culture and needs. The following TPA selection guidelines will assist in choosing the best TPA for your organization.

First Stages of TPA Selection

1. Define Objectives

The TPA-selection process should start with the client clearly defining objectives based on the particular services needed. Once the objectives are defined, the client must identify those TPAs that can provide the specified services within the client’s geographical area.

2. Create A Concise RFP

The client needs to prepare a request for proposal (RFP), which describes the company, its objectives and needs, loss experience, and the questions that the client requires the TPA to answer.

3. Prepare For Questions

Once the RFPs have been issued, the client should be available to answer questions from the TPA bidders.

4. Organize And Analyze Proposals

Once the proposals are received, the client should read the proposals and spreadsheet the responses into various categories, including pricing of all the services (individually and in total).

Overview Of The TPA-Selection Process

The client is now in a position to select finalists to make formal presentations. The following are some of the criteria to select the best TPA for clients.

The written proposal speaks volumes about the TPA.

The written proposal is a very good indicator of the quality of the TPA. It is quite evident when a TPA has done his homework: reviewed the annual report, visited the client’s web page, learned the nature of their business in order to gain an understanding of the client’s needs and objectives. Unanswered questions, naming the wrong client, and other careless errors and omissions should make one skeptical about the TPA and often lead to disqualification. A concise, well-written proposal that seeks a partnership through innovative services, solutions, and technology, will usually qualify a TPA as a finalist.

Concentrate on the capabilities and services of the TPA; worry about cost later.

It is extremely important to understand exactly what the TPA’s capabilities are, and what services they must outsource. For example, TPAs may employ their own case management nurses, “outside” adjusters, or they may use firms that provide those services. The industry trend has been to minimize the use of “outside” adjusters. Some proposals do not specifically address this issue. The client may find it preferable for nurses and adjusters (both employed by the TPA) to work together on a claim rather than utilizing different managed care or rehabilitation firms.

Data and technology are much more important than in years past.

Due to the fact that businesses now operate in a rapidly expanding electronic age, the client may want to see that the TPA is utilizing the latest technology, such as:

• 1-800 reporting
• Electronic submission of first report of injury
• Email capabilities to the adjuster right on the claim file
• State of the art claim system
• Integrated disability claims from one system

The above technology plays a very large role in the ease and speed of communication.
It is equally important for the client to know about the TPA’s future system enhancements. Is the TPA planning on continually upgrading its claim system? Is a paperless claim file system important to the client?

Claim data has taken on a greater importance in evaluating disability periods in integrated disability programs and medical costs for injury types and provider networks. The claim system, reporting and entering first reports of injury, profiling of providers, creating custom reports from a data base, and electronic communication on claims are all vital aspects of today’s marketplace. Have the TPA demonstrate the claim system’s features as well as limitations.

Require the TPA to bring claim handling personnel to the finalist presentation.

The client normally will not be working with the corporate staff on a regular basis. Therefore, a decision should not be made based on the corporate staff’s skills, but rather on the skills of the field personnel actually handling the claims.

Having local personnel present during the formal session will give an indication of their personality and expertise. The working relationship between the account executive, the claim representatives and case managers, and the client are critical for successful claim results. It is an added plus if the client can select claim representatives and nurses from a pool of available staff so that the client is comfortable with the staff that will interact with his injured employees.

Formal presentations need to be focused, coordinated, and delivered by local personnel, particularly the account executive.

When the client has narrowed the field to 3-4 finalists, a formal presentation agenda should be prepared. There are four segments to the agenda:

1.  The TPA presentation — Allow the TPA to present a formal presentation about the company, their services, their value, etc. The client can see the key personnel in action, and their priorities.

2.  TPA responses to pre-selected key client questions — The client should identify the most critical issues that govern the final decision. These questions (no more than 10) should be sent to the TPAs prior to the presentation so that they can be addressed during their formal presentation or during this phase.

3.  Demonstration of the claim system — The TPA should be able to walk the client through their claims system as if they were on-line. If the client plans to go on-line, they should look for user-friendly screens, ease of access, ability to create reports, and adjuster log notes.

4.  General question and answer period — The client can either ask questions during the presentation or hold them until the end. This segment can also serve as a clarification of services and pricing by the client with an overall summary by the TPA.

During the finalist presentations, it is important to have presenters from all levels of staff. When corporate staff monopolizes the presentation, it may suggest inadequacies at the local level. It is very obvious when a group of presenters knows their company, can respond to questions, follows instructions, respects each other, and shows the desire to be the client’s long term partner…and when they don’t!

Select a TPA whose account executive has the power to make changes and get issues resolved quickly.

In selecting a TPA, as in all aspects of life, there are going to be obstacles to overcome during the contract period. The client should be able to communicate with the TPA contact, discuss the issue, and be confident that the issue will be handled professionally and to the client’s satisfaction. The TPA should be able to handle the issue immediately and not have to wait for regional or corporate approval. The account executive should be the “quarterback” of the formal presentation.

The TPA should be creative and flexible.

The TPA should be able to work within the client’s corporate framework and culture and complement it. The use of dedicated adjusters or dedicated units, either in the client’s facility or in the TPA’s office, is an example of a way to focus on the client’s program. The days of the client adapting to the TPA structure and process are over! The TPAs that will be successful are the ones that listen and come up with creative, custom-designed programs to address client issues and needs. For example, if a client faces a significant take-over per claim charge when switching TPAs, a TPA bidder may offer a percentage reduction in the per claim charge for each claim that can be closed within 6 months. Another TPA bidder might suggest a thorough review of all claims and any that can be closed would not be billed on a take-over basis.

The client should do reference checks with those accounts that the TPA lost over the past two years.

Reference checks of lost accounts will help the client learn the reasons a former client made a change and expose any weaknesses of the TPA in question. Lost account references are usually honest and objective, especially in comparison to references supplied by the TPA in the proposal, which usually tend to be “glowing”. It is important to call those references too, but the lost client references tend to be more valuable. One can gain greater insight in to the TPA’s operations by speaking with a former customer that will speak freely about the positives and the negatives concerning the TPA. Current clients are often hesitant to say anything negative and, therefore, the client receives a one-sided response.

ABOUT THE AUTHOR

George W. Scherbak, CPCU, ARM is President of Manage Comp Consulting, Inc. located in West Chester, Pennsylvania. He previously served as the Workers’ Compensation National Practice Leader for an international employee benefit consulting firm. For more information on selecting TPAs, contact George at mccgeorge@email.msn.com.

riskVue | The webzine for risk management profesionals
November 1999