text: "Using Performance Guarantees to Contain Workers' Compensation Costs" by Sauer, Susan M. - Risk Management, Vol. 41, Issue 4, April 1994 | Questia, Your Online Research Library
  Magazines » General Business Magazines » Risk Management » Article details, "Using Performance Guarantees to Contain..." Using Performance Guarantees to Contain Workers' Compensation Costs By Sauer, Susan M.
  Successfully administering a workers' compensation program can be challenging. At one time or another, many risk managers have to deal with a carrier, third-party administrator (TPA) or other provider that isn't performing up to expectations. And although improving the administrator's performance is vital to ensuring a successful workers' compensation program, achieving these improvements requires an organized, well-planned approach.
  One of the best methods for improving the services provided by administrators is through the use of performance guarantees. By implementing guarantees, risk managers can increase their satisfaction with vendors, reduce administrative errors, improve service quality and continue long-term relationships with proficient vendors. And, most importantly, performance guarantees will enable risk managers to contain their workers' compensation costs.
  Performance guarantees enable risk managers to work with providers and staff to establish benchmark service standards for rewarding good performance and penalizing poor performance. he risk manager uses the guarantees to improve a process such as claims handling by providing financial incentives for performance that exceeds the standard and exacting financial penalties if the service does not meet the standard.
  Although performance guarantees provide numerous ways to improve administrative effectiveness and efficiency, their use in workers' compensation is still in its infancy. However, performance guarantees are widely used -- and successfully -- on the employee benefits side. According to the Foster Higgins Health Care Benefits Survey of 1991, some 38 percent of employers surveyed indicated they negotiate performance standards with group health administrators. Most often, they negotiated guarantees that involved increased turnaround time of claims, improved financial and administrative error rates, and a reduction in the percentage of benefits paid in error. Consequently, risk managers who work with their organization's human resources manager or employee benefits expert should talk to them about how they have used performance guarantees to improve the administration of benefits.
  THE CLAIMS AUDIT
  In the workers' compensation arena, the risk manager may consider a claims audit as a tool to help determine what to pursue for performance guarantees. Typically, these audits include a performance assessment of areas such as case reserving, claims resolution, litigation management, accident investigation, subrogation, fee schedules, medical and disability management, claim payment accuracy and adjuster case loads. On the benefits side, human resources executives might perform an employee benefits audit of group health claims that would include checks on whether claims are paid on time, are accurate, and provide the appropriate type of benefits listed under the plan.
  However, in the employee benefits arena, some human resources executives supplement claim audits with employee surveys. These surveys ask workers if they believe that the health care coverage they receive from the employer is of high quality. The surveys have been used to help employers evaluate the performance of heir providers, establish realistic performance standards, monitor the administrator's performance, identify problems and demonstrate management's commitment to provide quality service for employees.
  Employee surveys offer many opportunities for improving administrator's services in employee benefits. For example, many group health audits assess the timeliness of payments to take advantage of prompt-payment discounts and to find out how quickly employees are reimbursed. They also evaluate the accuracy of payments, not only because employers pay administrative fees to readjust incorrect payments, but also because errors affect service providers as well as employees. In addition, employers use the surveys to ensure that benefit payments … Read the full-text article, try us out FREE today