Organizations working with complex risk issues may find they lack the expertise and/or manpower to manage and pay claims effectively. They know there are TPA services that can help, but may hesitate to turn over such critical functions to an outside agency. However, if they create a good working relationship that includes periodic claims auditing of the TPA, services can be usually delegated with little worry.
Why Use TPA Services?
A growing number of companies are getting into the risk management business in order to reduce the cost of insurance to the organization. Once the domain of specialized businesses such as insurance companies, today any business can reduce insurance costs by assuming liability through programs like self-insured retentions (SIRs). However, these organizations may quickly realize that administering policies and paying claims is not as simple as it may have seemed.
The benefit of turning management over to TPA services is that claims are handled by risk management professionals with years and perhaps decades of experience. These organizations not only handle claims more efficiently, but also are more likely to spot invalid charges or unreasonable liability claims. If properly managed, clients of third party administrators typically find their overall expenses go down, even considering the third party fees, because of the reduced claim payment amounts and reduced costs of overhead and staffing.
Claims Auditing Services
Clients shouldn't simply turn their risk management issues over to TPA services and walk away. The client is still ultimately responsible for correct payment of claims and is the source of funding. It's a good idea to regularly employ claims auditing services to take an objective view of the process and ensure services are being administered as originally agreed upon and in accordance with industry recognized standards.
Self insured clients probably should not provide their own claims auditing services. After all, if they had the expertise to audit the claims, then they would have had the expertise to process them in the first place. Auditors need highly specialized experience not only with insurance and liability but also with accounting practices. An outside auditor ensures an objective and unbiased audit that will favor neither side - simply a fact finding process.
Do Audits Damage Company Relationships?
Clients may hesitate to engage claims auditing services for fear of offending the TPA services involved. However, audits are a normal part of financial dealings. Although nobody enjoys an audit, the administrator should not be reluctant or insulted when one is scheduled. TPAs that do resist audits may have something to hide. An experienced claims professional will be well prepared to handle any adverse situation that may be presented by a reluctant audit target.
Claims auditing services can benefit everyone involved. The client wants to be sure claims are being paid according to the contract and industry standards so no money is wasted. The TPA receives benefits as well. Auditors provide valuable insight into operational efficiency which can help the third party administrator work with other clients. Finally, audits ensure both parties are interpreting the claims agreement in the same way. No third party administrator wants a client who is unhappy about the way payments are being handled.
Clients using TPA services retain full control over their company's risk management. Although some companies hesitate to turn risk management over to TPA services, a healthy working relationship, including regular claims auditing services, ensures the partnership benefits all parties involved.
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