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Claims Management

The Processes and Benefits of Claims Reviews vs. TPA Audits

Claims reviews and TPA audits can provide a necessary “check-up” on internal processes, but they can also unveil where medical costs or reserving may need reevaluation. We break down the expectations and potential outcomes that each provides.

May 20, 2022

Claims reviews and TPA audits can ensure that third-party administrators (TPAs) utilize efficient and accurate practices to prevent long-term costs from developing when processing high-dollar benefits claims. They can resolve a stagnating claim that is holding up closure and increasing exposure by pinpointing more alarming issues, such as under- or over-reserving, injury patterns and improper staffing. While both techniques are highly effective in minimizing cost drivers, their frequency, process and benefits vary in how a carrier decides their necessity.

“The carrier’s goal in both a claims review and TPA audit is to identify and manage those glaring concerns that could lead to costly long-tail claims,” said Angie Roach, Claims Manager at Safety National. “It is important to find red flags that can snowball into a much larger problem, like a large volume of claims, or more specifically, failure to report head injury claims or missed return-to-work releases. We want to advise on the best course of action, whether that be a vendor suggestion, settlement or something as simple as more frequent communication.”

Claims Review Process

Insureds may request a quarterly claim review, but patterns, like an influx of claims or repetitive injuries, may trigger an account review. For example, if an insured has several ladder injuries within a short period, it may be cause for risk management to suggest further training practices. An insurer may also request a review during a renewal period for better insight into claims trends. Reserve funding issues on a claim often require further investigation and may lead to an eventual audit.

An insurer will typically ask the following in a claims review:

  • Does the adjuster understand the details of the claim? Are they being proactive?
  • Is the defense attorney driving the outlook of the claim?
  • Is there a pattern of injuries occurring?
  • Is the adjuster reserving appropriately, or are they stair-stepping to account for claim needs?

Claims reviews require a hands-on approach to ensure that the adjuster is familiar with the claim and not letting the defense attorney drive the outcome. In the event that an adjuster is not managing the claim effectively, it serves as a learning opportunity for them to understand how and when to step in and take control.

Benefits of a Claims Review

A claims review provides a total snapshot of the claim, including medical costs, legal updates and opportunities for settlement. Proper management can prevent long-tail claims and, potentially, fraud from occurring, which can result in inflated, long-term costs. For the TPA, a claims review can help match them with a vendor best suited for their needs, like settlement specialists, durable medical equipment (DME) providers, or other unique requirements. Ultimately, claims reviews can identify the forgotten claims and bring them to closure, minimizing the overall exposure.

TPA Audit Process

Once a year, an insurer will select an account to audit. The selection could be based on injury patterns, reserving issues, funding complications or an increase in the volume of claims. TPAs are not informed of which claims will be audited, but typically receive a 30-day notice of the specific account before meeting to discuss the audit wrap-up results. Four key areas are involved in the auditing process, including investigation, reserves, claim handling and administrative responsibilities, such as ensuring a field case nurse has been assigned. A few of the items insurers may review include whether state forms are being filed in a timely matter, if contact is being made with the injured worker and if the claims are staffed appropriately.

Benefits of a TPA Audit

The benefits of a TPA audit closely mirror those of a claims review, but provide a more comprehensive lens into opportunities for process improvement. An audit can identify whether best practices are being utilized and where an insured may benefit from risk management services to prevent further injuries. It can also ensure that regulations are being closely followed and that there are no compliance issues to address.