Just when you thought risk managers understood and had explored all the opportunities around optimizing the claims management function, next-level opportunities emerge. The first is from a long minimized and largely untapped synergy between casualty claims (risk management) and the benefits world.
Some argue that these worlds are just too different and distinct to bring together, whether through simple alignment or partial to full integration. Managers are often more comfortable in their own line of business, and sometimes crossing over can stretch expertise and focus. Fundamentally, however, claims are claims though subject to the unique rules of processing and resolution, many of which are dictated by third parties as well as statutes and regulations. This may be one reason that workers compensation "option" programs exist today in only a couple states—Texas (for more than 100 years) and Oklahoma (since February 2014). For the record, Tennessee and South Carolina have also introduced their versions of "option" legislation, which could become law as early as 2016.
Shared Goals
On its face, the value of collaboration seems obvious. From both an employee benefits and risk management perspective, providing care for the individual is of the utmost importance. One of the main objectives is ensuring the right outcome. Essentially, this opportunity can be defined as leveraging the basic skill sets of investigation, verification, documentation, and equitable resolution that are common between these two realms. The nuances and distinctions that exist between them are not insignificant, but the key goals are the same: caring for people under medically related distress (regardless of source), minimizing disruptions to workforce productivity, and closing claims efficiently and effectively with mutual fairness to all parties and their respective goals and objectives. The key components of process effectiveness in both worlds include:
- rapid, accurate reporting; timely, complete investigations;
- compassionate and equitable treatment of claimants;
- verification of facts;
- compliance with laws and statutes;
- efficient and effective resolutions; and
- robust cost control tactics.
Although these components have varying levels of impact in each field, they are fundamental to process effectiveness in both. This is not to say that there aren't peculiar and unique aspects of each that require certain expertise and skills to achieve more specific end goals. However, while blending skill requirements among a common group of claims professionals can be challenging, it is not rocket science. Defining and filling positions to enable successful claims handling in both worlds is imminently doable. The biggest hurdle may in fact be the necessary extent of collaboration among and between these typically distinct functional areas and their leaders to secure the best outcomes for injured employees.
Motivations and Hurdles
So what should motivate the pursuit of such an opportunity? Well, make no mistake that the cost of claims, especially when you combine casualty and benefit claim expenses, can be the biggest portion of the budget in both risk management and benefit departments. Clearly, companies can't afford to ignore the size of these direct expenses, which often represent more than 2 percent of gross revenues. 1
Arguably, depending on your industry and the size of your company, employee injury and medical costs are the largest component of employee-related expenses, with the obvious exception of compensation. Since most corporate leaders consider claims expenses material and controllable, it seems logical to look more closely at how they can be specifically controlled. An initial question would be: how do we get key functional leaders to care more about the truly significant leverage possible in managing employee injury and health exposures more collaboratively? A core answer is: by working toward enterprise priorities, not just personal or departmental priorities.
In addition to the medical expenses related to claims, there is the cost of lost productivity from employees not available to perform their jobs, in whole or in part. It's been noted that this "indirect" cost component of injuries and disease represents, by some estimates, four times 2 the "direct" costs that often get the most attention. Translating that into more meaningful dollars, you get 8 cents per revenue dollar on each claim dollar expensed. When you look closely at the possible costs involved, a total absence management view seems as though it should be a natural priority.
Many employers are already effectively managing employee injury and disease exposures. There are discernable trends emerging toward fewer silos and more performance-oriented measurement focused on short- and long-term strategies. Those companies taking a more collaborative approach can benefit from key elements such as:
- integrated reporting across departments,
- integrated measurement across departments,
- robust analytics that result in prescriptive actions with impact,
- innovative tools targeted to specific process opportunity areas,
- a more holistic focus on the care of affected employees, and
- the overarching goal of a healthy, productive workforce.
More Opportunities
Looking more broadly at the evolving strategies around new and best practices in claims handling, other opportunities are emerging that are worthy of further investigation and understanding, including the following.
- Compassionate care: While the traditional casualty claims handling process has been focused on timely reporting, cost control, and closure time, an important part of the next-level paradigm emphasizes compassionate care at the forefront for people who are injured and ill, without losing sight of the more traditional goals. This new focus makes sense when you consider the potential benefits of improved communication and understanding of the individual's needs, which can reduce the possibility of litigation.
- Enhanced communications: This includes changing the way that claimant communication is delivered and ensuring this happens in a consistent, meaningful way. This begins with the insurer/employer and the claims service provider/mechanism used at the center of the resolution process. Critical to this paradigm shift is the adoption of a clear and unambiguous understanding of and communication around the strategies and priorities that would underpin a claimant-focused approach. Once the strategies and priorities are set, however, success is entirely in the execution—in other words, the players doing what they say they will with a dedicated focus on established goals.
- Proactive approach: With the emergence of enterprise and strategic risk management strategies, we are seeing significant benefits from an integrated claims management approach. As documented in the 2014 RIMS executive report, Claims Reporting and Management Practices, "[w]ell-run claims programs contribute to decisions that influence whether: 1) the entity is in compliance with regulatory and insurance program coverage mandates, 2) injured parties are treated respectfully and responded to in a timely fashion, (3) property will be restored as quickly as possible, and 4) the entity's reputation can be damaged or improved through its loss responses." 3 I think this list captures the key outcomes to which many aspire.
Actionable Data
Finally, the last and perhaps most significant emerging opportunity for next-level claims management is leveraging the potential for using the often huge volumes of claim- and risk-related data to dive deep into a robust, analytical capability that was once descriptive and provided facts that were informational but typically not action or decision oriented.
Descriptive analytics evolved into predictive analytics but often provided only more information perhaps a little "nicer to know" than the descriptive approach. This output was more useful to risk managers and other claim stakeholders, but its ability to help entities with forward-focused decision-making was still limited. Now, however, predictive analytics are evolving further toward prescriptive analytics, laser-focused on informing decision-making with the most robust and actionable data. This new realm is a goldmine of opportunity and capability that can have a significant impact on short- and long-term success. This data-reporting evolution feeds directly into a more enterprise or strategic risk management approach that insists on optimal outcomes and ultimately helps enable successful mission delivery.
Key Strategies
To recap, consider deploying these strategies in a form that fits best into your culture and will gain the most support from corporate leadership and employees in the risk management and employee benefit departments. They include the following.
- Drive robust collaboration among and between risk and benefit professionals and their respective functions.
- Recruit claims professionals who have the experience and skills necessary to understand and administer claims-related activities in both realms.
- Support the collaborative opportunity not by simply highlighting cost-reduction opportunities but with a priority emphasis on optimal care for injured and ill employees.
- Clearly articulate the bigger cost impacts of considering both direct and indirect expenses associated with injuries and illnesses in the workplace, including productivity impacts.
- Enhance all claim responses with the recognition that inadequate responses threaten organizational reputation, which is an invaluable asset.
- Elevate and enhance communications among and between all stakeholders in the injury and illness realms.
- Move data analytics to a new level that enables clear identification of significant trends and effectively informs leaders to make the best decisions that underpin organizational strategy and mission.
On the whole, all these elements of next-level claim strategies can provide a clear advantage over traditional approaches and offer a competitive advantage for organizations that effectively deploy them.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
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