A Refresher Course in Workers' Comp

A Refresher Course in Workers' Comp
A scathing audit of the workers' compensation system in a Florida school district spotlights the need for tighter employer scrutiny of outsourcers.
David M. Katz, CFO.com | US
July 14, 2005

Finance executives wondering what's wrong with the economics of health care at their organizations — not to mention the nation at large — might learn some lessons from the recently released audit report of the school district of Broward County, Florida. The report spells out the failures of the district's $34 million (in annual operating costs) self-insured workers' compensation system.

The Broward district's brand of workers' comp, while typical of many big employers, is only one piece of the health-benefits puzzle. Yet such programs share with group health insurance two related problems that arguably boost the overall costs of the employer-provided benefit system: an over-reliance on "go-betweens," coupled with a lack of transparency in reports of how company dollars are being spent by intermediaries and services vendors.

In both self-insured workers' comp and group-health benefits, an employer often depends on convoluted payment systems run by a third-party administrator (TPA), which contracts with managed-care vendors and administrative-services providers. If the company's risk and benefits managers aren't keeping close tabs on the TPA, obscure reporting of the voluminous and often confusing data can provide the administrators and other services vendors with ample opportunity to bill too freely. And even when risk managers have the best of intentions, getting their hands on meaningful data can be a tall order.