Decentralized Claim Processing

In 2008, as the economy grew more uncertain, and concerns about rising claim costs and other issues grew, Knight's management recognized that a new approach to workers' comp was necessary. Making the move was not an easy task, the company says. It had an established relationship with a leading TPA and a primary adjuster contact that worked diligently on its behalf to settle claims.

However, because of the nature of the trucking industry and Knight's vast exposures, the TPA struggled. Virtually every state had its own set of regulations and a distinct workers' compensation environment, which meant added considerations for Knight's claims. Some allowed employers to direct claimants to network providers, while some did not. Most had varying guidelines for benefit cut-offs and coverage requirements. Despite best efforts, our company was often paying benefits over the recommended guidelines because the TPA was handling claims from a centralized location outside of the jurisdiction of loss. The TPA often did not know the best attorneys, networks, or medical providers in a specific local market.

As the TPA's single point of contact was stretched more to not only handle the claims, but also to keep up with varying state rules and regulations, Knight found that it took more of its internal resources to fill in the gaps. The TPA also recognized problems with its centralized approach and began to decentralize its claims. However, the company decided that it could not wait for a vendor to catch up to its growing needs to control costs, avoid fines and create an effective program strategy.

The Selection Process

While recognizing the potential value of a decentralized approach, the company still had concerns regarding the cost of moving hundreds of claims and the time required to oversee a team of decentralized adjusters. Moreover, some within the team worried that with a decentralized approach, the company ran the risk of the TPA constantly losing and adding new adjusters. This would potentially entail retraining a new team. However, ultimately Knight's team believed that a decentralized approach would provide the desired control and cost savings.

Working with an experienced consultant, it moved forward with a request for proposal (RFP). Criteria for the TPA business included:

• Network of tenured adjusters and a low turnover rate.
• Knowledge of local jurisdictions, medical networks, and resources.
• Solid experience in the transportation industry.
• Flexible reporting — a company that did what was asked of them — and did not force the company to fit into its system.
• Reputation for excellence.
• Track record of success.
• Highly competitive pricing consistent with market expectations.
• State-of-the-art technology.

Based on the rigorous RFP process, Knight selected Avizent, a national claim and risk management service provider. The company said the first six months were challenging for its internal staff, as new systems, procedures, and responsibilities had to be learned. While the new TPA appointed a single point of contact, there were still multiple adjusters with whom to speak with about individual claims. In addition, instead of monthly claim reviews with a single local team, the internal staff held multiple quarterly meetings with claim teams in different regions throughout the country.

Data had to be pulled from three separate sources into the new claim management system. What's more, medical notes and other relevant data were missing from many previous claims, meaning that the new TPA had to take more time than anticipated to clean the old claims inventory while also managing new ones.

Local Contacts Help Close Claims

Even so, within a few months, Knight recognized that the move to a decentralized approach was right for its organization. The turning point came after the closure of a particularly complex and troublesome claim. The case involved a (still open) three-year-old medical-only claim. Under the past centralized approach, the adjuster did not have the right connections to have the claim favorably reviewed by the courts. Thus, Knight continued to pay benefits long after the mandated time period expired. Because of her knowledge of the market, Avizent's adjuster found a local attorney who called the judge every day for two weeks, and even stood in the judge's chambers and waited for the new (favorable) ruling to be issued. In the end, the adjuster not only closed the file, but also secured a credit for Knight.

From the company's perspective, the decentralized approach not only has brought greater understanding of the jurisdictional issues, but also that adjusters have a better handle on other local claim-handling resources, such as attorneys, IME panels, and nurse case managers.

Questions to Ask

While the transportation industry faces unique challenges, other businesses may have similar, complex issues to address. For companies considering moving to a decentralized approach to workers' comp claims management, consider the following questions:

• Where are your company's operations? If they are in multiple states or areas with a range of jurisdictional guidelines, then a decentralized approach may offer benefits.

• What is the risk and exposure of your organization? Companies with greater geographic exposure may secure the greatest benefits from a decentralized approach because of more localized contacts and knowledge.

• What is the turnover rate of adjusters in a centralized versus decentralized model? Can the TPA in either model provide assurances that there will not be high turnover on your account?

• What will the TPA do to streamline operations and create efficiencies for your internal staff? Dealing with adjusters in multiple states does create more information and oversight responsibilities. Make sure the TPA has systems in place to make the job easier — not more cumbersome — on your internal staff. For example, Knight's new TPA took over the responsibility of filing individual state-required forms for its self-insured company, producing significant time savings for internal staff.

• Does the TPA understand the unique subtleties of your industry? Does the TPA have the necessary connections in local markets to close those claims? TPAs must be motivated to close claims quickly in a manner that benefits their clients. Some companies may want to consider building incentive programs to encourage the right claims closure rate.

An honest look at company operations, a review of key questions, and a thorough search for a strong TPA partner can help any organization determine whether a centralized or decentralized approach to workers' comp claims is most appropriate for the business.