Automating the Workers’ Compensation payment process is a greatway for payers to control costs and streamline processes whilemitigating risk.

What payers may not realize, however, is that if the automationprocess involves multiple parties, they may actually be exposingthemselves to a host of new risks and complications.

In its most basic form, the Workers’ Compensation paymentprocess involves only three parties: The payer, the provider andthe injured worker. The payer reimburses theprovider for medical services rendered to the insured. As claimshave become more complex, payers have incorporated additionalentities into the revenue cycle, further complicating the paymentprocess.

Today, you typically see more parties involved in the paymentprocess, with money and data exchanged multiple times over thecourse of an insurance payment from payer to provider. For example,in the current Workers’ Compensation revenue cycle, insurancecarriers and self-insured organizations commonly outsource paymentprocessing to a third-party administrator. The third-partyadministrator may then contract out the financial portion of thepayment process to a payment company, which often hires a cardcompany to execute the payment.

While the insurance payment process may begin as a fairly simpleexchange, the reality is much more complicated and involvesmultiple entities that transfer information many times, each withits own set of processes and structures. As the series of corporatehandshakes increases, so does the potential for risk.

Related: Is your Workers' Comp programaward-worthy?

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When you increase the number of parties that processWorkers' Compensation claims and payments, you increase thelikelihood of errors and fraud. (Photo: iStock)

Effects on cost and efficiency

When involving multiple parties in the insurance paymentprocess, a number of logistical considerations must be taken intoaccount.

For example, each entity has its own set of processes, workflowsand guidelines. Adding in another set of processes not only slowsdown the payment, but adds overhead and operational costs, whichincrease the cumulative total of the transaction.

It also creates more opportunity for errors, further complicatescommunication and makes accountability harder to establish,impacting the accuracy and timeliness of payments to providers andinjured workers.

Ensuring accurate and timely payments is more important thanever when considering today’s widespread use of social media. Adelay in payment could quickly put your organization in thespotlight, and indemnity payments are especially susceptible. Withmore than 74% of online adults using social media, complaints froman injured worker who receives inaccurate or untimely indemnitypayments can quickly spiral into public criticism.

Fraud and compliance issues

The biggest risk of involving multiple parties in paymentprocessing is the effect on security.

Every time personal information is transferred from one party toanother, it increases the potential of a data breach, which couldlead to fraud and monetary loss. The more parties involved in therevenue cycle, the more vulnerable the payer’s personal informationbecomes. This is huge for payers when you consider that 73% of allU.S. companies experienced payments fraud in 2015, according to the2016 AFPPayments Fraud and Control Survey. This percentage increasedfrom the 62% reported in 2014, proving that the risk of fraud is aserious and growing issue.

Another important concern to take into account is compliance.Payers must ensure all that parties involved in the insurancepayment process are fully compliant with Health InsurancePortability and Accountability Act, the Payment Card Industry DataSecurity Standard and all other associated regulatory stipulations.This is a crucial, yet daunting, task that only gets more difficultwith each new party involved.

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Using an end-to-end card processor is one option forcontrolling the risks of automated workers' compensation payments.(Photo: iStock)

Mitigating risks and challenges

The good news is that there is a way for insurance carriers,self-insured organizations and third-party administrators toovercome these potential payment processing risks: Limit the numberof parties involved by using an end-to-end card processer, run by asingle company.

An end-to-end processor is capable of handling every aspect ofthe Workers’ Compensation payment process, from receiving the datafile to disbursement of funds. This ability eliminates the need toinvolve multiple parties which, in turn, mitigates many of thehidden risks.

Involving fewer entities results in greater efficiency and loweroperational costs, as doing so eliminates additional workflows andguidelines from the insurance payment process. Payments can beissued more quickly, which decreases transaction costs.Furthermore, an end-to-end card processor can produce moreaccurate, real-time reporting and analytics within a single report,whereas a multiple-party relationship means assimilating severalreports into a single coherent, comprehensive document.

The biggest benefit of using an end-to-end card processor isstronger privacy and security. Because a single processor managesthe entire revenue cycle, the number of times personal data andmoney changes hands is greatly reduced. This increases flexibilityand speed of processing, while reducing the potential for securityand privacy risks like data breaches and fraud. In addition, theprocessor maintains a relationship with the payer and the bank,guaranteeing full HIPAA and regulatory compliance. This saves yourteam time and money by eliminating the need to monitor parties andensure they are following guidelines.

Whether an insurance carrier, self-insured organization, orthird-party administrator, establishing a secure, efficient andcost-effective payment process is crucial to protect yourorganization and control operational costs. Partnering with asingle entity allows payers to take advantage of the many benefitsthat come from automating the workers’ compensation paymentprocess, including the promise of greater efficiency, security andcost savings.

Bryce Teater is product manager for insurance paymentsolutions for Little Rock, Ark.-based DataPath. E-mail himat [email protected].

Related: 10 ways in which Workers' Compensation needs toevolve

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