Renewal Evaluator
Published: 11-Aug- 2011 | Product Category: Risk Consulting | Comments: 0 
Renewing a workers’ compensation program and re-negotiating program costs can be difficult to—especially when a company has a trusted relationship with its service provider. During a renewal, a risk manager will want to determine if its third-party administrator (TPA) is offering a price that is fair and reasonable while also offering top level account servicing. New price structures may also be introduced that are difficult to evaluate without detailed analysis of a company’s claim history and loss profile.
The Renewal Evaluator, a new proprietary tool designed by Marsh Risk Consulting’s Claim Consulting Practice, allows Marsh to specify how a new price option may affect a company’s annual medical cost and helps a risk manager make the right price choice for its program. The analysis is done specifically for each company, using actual medical bill history, instead of an estimate of medical charges.
How Does the Renewal Evaluator Work?
There are two costs that are evaluated by Marsh’s new tool:
1. Medical Costs
As workers’ compensation medical costs and the utilization of medical services continue to increase, the charges incurred for the re-pricing of medical bills to fee schedule and network negotiated rates continues to be a significant expense. In recent years, the industry has seen a shift from a percent of savings pricing model (for fee schedule and usual, customary and reasonable or UCR charges) to a per-bill or per-line option.
When a TPA offers these new price options at renewal time, it is difficult to know which price option you should choose. The Renewal Evaluator captures your medical bill history, which includes the state of services and the type of bills (hospital, pharmacy, provider, etc.). The tool further evaluates how those same bills would be charged in each of the price scenarios proposed by your vendor and identifies which price structure will yield the best outcome for you.
2. Claim Administration Costs
Recent years have brought about changes in the definition of how claims are classified. The rate of medical inflation has resulted in some TPAs raising their indemnity claim trigger to a higher medical incurred rate. The presence of subrogation, investigation, medical management, and other services has also found its way into the definition of an indemnity claim. If your TPA has changed its “indemnity” definition, it also has changed the cost to you for handling those claims. The change in cost outcomes can be evaluated accurately by the Renewal Evaluator Tool.
Savings Through Reduced Bill Review Pricing
As an example, below is a projected savings opportunity identified through the use of the Renewal Evaluator.
Case Study
Estimated ultimate workers’ compensation loss pick: $23,000,000
Charges remained the same except for the fee schedule/UCR charges
Current and suggested bill repricing capped at $10,000
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Savings Type
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Current Pricing
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Suggested Pricing
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Duplicate Savings
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No charge
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No charge
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Fee Schedule/UCR charges
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20% of savings
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$12 per bill
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PPO
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30% of savings
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30% of savings
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Utilization and Clinical Review
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20% of savings
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20% of savings
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Denials
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20% of savings
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20% of savings
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Other Bill Review
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No charge
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No charge
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Bill review charges with current pricing: $1,379,566
Bill review charges with suggested pricing: $ 923,455
Projected savings per policy year: $ 456,111
The Renewal Evaluator analysis found that by switching the bill review service fee from 20 percent of savings for fee schedule and UCR to $12 per bill, an estimated projected savings of over $450,000 per policy year can be expected.
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